Annual Report 2021
VEON Ltd.
Claude Debussylaan 88,
1082 MD Amsterdam
The Financial Statements are
approved by the Audit Committee
on behalf of the Board
on April 29, 2022
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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This document is the PDF/printed version of the Annual Report 2021 of VEON Ltd. and has been prepared for ease
of use. The Annual Report 2021 was made publicly available pursuant to section 5:25c of the Dutch Financial
Supervision Act (Wet op het financieel toezicht), and was filed with the Netherlands Authority for the Financial
Markets in European single electronic reporting format (the "ESEF package"). The ESEF package is available on
VEON Ltd.'s website at https://www.veon.com/media/3307/esef.zip and includes a human readable XHTML version
of the Annual Report 2021 of VEON Ltd. In any case of discrepancies between this PDF version and the ESEF
package, the latter prevails.
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Directors’ Report
INFORMATION ON THE COMPANY
References in this Annual Report to “VEON” as well as references to “our company,” “the company,” “our group,” “the group,”
“we,” “us,” “our” and similar pronouns, are references to VEON Ltd., an exempted company limited by shares registered in
Bermuda, and its consolidated subsidiaries. References to VEON Ltd. are to VEON Ltd. alone.
Overview
VEON is a leading global provider of connectivity and internet services. Present in some of the world’s most dynamic
markets, VEON currently provides more than 220 million customers with voice, fixed broadband, data and digital services. VEON
currently offers services to customers in several countries: Russia, Ukraine, Pakistan, Kazakhstan, Algeria, Uzbekistan,
Bangladesh, Kyrgyzstan and Georgia. VEON’s reportable segments currently consist of the following six segments: Russia,
Pakistan, Ukraine, Kazakhstan, Uzbekistan and Bangladesh. We provide services under the “Beeline,” “Kyivstar,” “Banglalink,”
“Jazz” and “Djezzy” brands. As of December 31, 2021, we had 44,585 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 late 2019, we announced a new strategic framework at the Group level to boost long-term growth beyond traditional
fixed
connectivity services. This
line connectivity services and the drive of 4G adoption; “Digital Operator” - a portfolio of new services built around digital
technologies with the active involvement of big data and artificial intelligence; and “Ventures” - future assets which seeks to
identify, acquire and develop ‘’know-how” and technologies that open up adjacent growth opportunities.
fundamental mobile and
laid out over
three vectors:
“Infrastructure”
its
is
-
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 2021 and Operating and Financial Review and Prospects—Recent Developments after year end 2021.
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 Global Telecom Holding (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 consolidated 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
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Egyptian Exchange in September 2019. In late 2020, we sold our operating subsidiary in Armenia. In March 2021, the group
successfully completed its acquisition of the 15% minority stake in PMCL, its Pakistan operating business, from the Dhabi Group
for US$273 million. In July 2021, VEON exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary,
Omnium Telecom Algérie SpA, which owns Algerian mobile network operator, Djezzy, to the Algerian National Investment Fund,
Fonds National d’Investissement (FNI). Following the exercise of the put option for our stake in Algeria on July 1, 2021, the
Algerian business has, in line with the IFRS 5 requirements, become a discontinued operation, and accounted for as “Asset held
for sale.” The result is that the Algerian operations do not contribute to both the comparison base and the actual reported
numbers of VEON, without any change in the net economic value of this business.
Key Developments
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 are no longer
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.
VEON completes the acquisition of minority shareholding in Pakistan Mobile Communications Limited
In March 2021, VEON successfully concluded the acquisition of the 15% minority stake in Pakistan Mobile
Communications Limited ("PMCL"), the operating company of Pakistan’s leading mobile operator, Jazz, from the Dhabi Group for
USD 273 million.
This transaction follows the Dhabi Group’s exercise of its put option announced on September 28, 2020 and gives
VEON 100% ownership of PMCL. This simplifies and streamlines the Group’s governance over its Pakistani assets and enables
VEON to capture the full value of this growing business, including future dividends paid by PMCL. The transaction is presented
within 'Acquisition of non-controlling interest' within the Consolidated Statement of Cash Flows.
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 Bangladesh
Telecommunication Regulatory Commission (“BTRC”). The newly acquired spectrum will see Banglalink increase its total
spectrum holding from 30.6MHz to 40MHz. Banglalink total investment will amount to BDT 10 billion (US$115 million equivalent)
to purchase the spectrum.
VEON completes the acquisition of majority shareholding in OTM
In June 2021, VEON successfully acquired a majority stake in OTM, a technology platform for automating and planning
online advertising purchases in Russia. VEON's investments in OTM will significantly strengthen Beeline's position in the
advertising technology market and enable VEON to expand OTM's operations into other markets served by VEON’s mobile
operators. The acquisition builds on VEON’s ongoing transformation into a digital operator.
VEON announced the exercise of its put option to sell its stake in Djezzy
On July 1, 2021, VEON exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary, Omnium
Telecom Algérie SpA ("Omnium") to the Algerian National Investment Fund, Fonds National d’Investissement ("FNI"). Omnium
owns Algerian mobile network operator, Djezzy. The exercise of the option initiates a process under which a third-party valuation
will be undertaken to determine the fair market value at which the transfer shall take place. Under the terms of the shareholders’
agreement with FNI, the transaction is expected to be completed in the second quarter of 2022 for a sale price of US$682
million.
Agreement between VEON and Service Telecom regarding the sale of its Russian tower assets
On September 5, 2021, the Company and VEON Holdings B.V., a subsidiary of the Company, signed an agreement for
the sale of its mobile network towers in Russia to Service Telecom Group of Companies LLC ("Service Telecom"). The sale
reflects VEON's continued focus on active portfolio management and the pursuit of opportunities to realize the value of its
infrastructure portfolio. On December 1, 2021, VEON announced the successful conclusion of the sale of its Russian tower
assets to Service-Telecom for RUB 70.65 billion (US$957 million equivalent), paving the way for the establishment of a long-term
partnership pursuant to a master tower agreement that has been entered into between PJSC VimpelCom and Service Telecom.
VEON aligns executive compensation with total shareholder returns
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On December 7, 2021, VEON announced a new incentive plan for its Group executive leadership. The purpose of the
new compensation scheme is to reward long-term value creation and ensure the alignment of management and shareholder
interests.
Management changes
In April 2021, VEON announced changes to its leadership structure. Co-CEO Sergi Herrero, who joined the company in
September 2019, stepped down as co-CEO effective June 30, 2021. Kaan Terzioglu continues in his role as CEO of VEON Ltd.
with overall responsibility for corporate matters and the Group’s general operations.
In addition, in April 2021, VEON announced the appointment of two new members of the Group’s leadership team. Alex
Bolis joined VEON as Group Head of Corporate Strategy, Communications and Investor Relations while Dmitry Shvets joined as
Group Head of Portfolio and Performance Management, a new role that includes oversight of VEON’s Performance Management
and M&A teams. Mr. Bolis joined VEON on April 1, 2021 and Mr. Shvets on April 15, 2021.
On August 17, 2021, VEON announced the appointment of Michael Schulz as VEON’s Group Chief People Officer.
On October 21, 2021, VEON announced that its Group General Counsel, Scott Dresser, would be leaving VEON
effective on December 31, 2021.
On December 18, 2021, VEON announced that Victor Biryukov had been appointed as its Group General Counsel
effective January 1, 2022, succeeding Scott Dresser.
Board of Director changes
In June 2021, VEON Ltd. announced the results of the elections conducted at its Annual General Meeting of
Shareholders. Shareholders elected three new members to the Company’s Board of Directors: Vasily Sidorov, Irene Shvakman
and Sergi Herrero, who previously served as co-CEO of VEON. Shareholders also elected nine previously serving directors:
Hans-Holger Albrecht, Leonid Boguslavsky, Mikhail Fridman, Gennady Gazin, Yaroslav Glazunov, Andrei Gusev, Gunnar Holt,
Stephen Pusey and Robert Jan van de Kraats.
On July 15, 2021, VEON announced that Stephen Pusey decided to step down from its Board of Directors.
See —Recent Developments after year end 2021 below for further information on changes to our Board of Directors in
2022.
Financing activities
In March 2021, VEON Holdings B.V. successfully entered into a new multi-currency revolving credit facility agreement of
US$1,250 million. The RCF replaced the revolving credit facility signed in February 2017, which was cancelled. The RCF has an
initial tenor of three years, with VEON having the right to request two one-year extensions, subject to lender consent.
International banks from Asia, Europe and the United States 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. VEON will have the option to make
each drawdown in either U.S. dollars or euro.
In March 2021, PMCL successfully entered into a new PKR 15 billion (US$98 million equivalent) syndicated facility with
MCB Bank as agent and PKR 5 billion (US$33 million equivalent) bilateral term loan facility with United Bank Limited. Both these
floating rate facilities have a tenor of seven years.
In March 2021, VEON Holdings B.V. successfully amended and restated its existing RUB 30 billion (US$396 million
equivalent) bilateral term loan agreement with Alfa Bank and increased the total facility size to RUB 45 billion (US$594 million
equivalent), by adding a new floating rate tranche of RUB 15 billion (US$198 million equivalent). The new tranche has a five year
term. In April 2021, the proceeds from Alfa Bank new tranche of RUB15 billion (US$198 million equivalent) were used to early
repay RUB 15 billion (US$198 million equivalent) of loans from Sberbank, originally maturing in June 2023.
In June 2021, PMCL secured a PKR 50 billion (US$320 million equivalent) syndicated credit facility from a banking
consortium led by Habib Bank Limited. This ten years facility will be used to finance the company’s ongoing 4G network rollouts
and technology upgrades, as well as to address upcoming maturities.
In September 2021, VEON Holdings B.V. issued senior unsecured notes of RUB 20 billion (US$273 million equivalent),
maturing in September 2026. The notes were issued under its existing Global Medium Term Note Programme with a Programme
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limit of US$6.5 billion, or the equivalent thereof in other currencies. The proceeds were used for early repayment of RUB 20
billion (US$273 million equivalent) of outstanding loans to Sberbank that were originally maturing in June 2023.
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$612 million
equivalent) Term Facilities Agreement with Alfa Bank which includes a RUB 30 billion (US$408 million equivalent) fixed rate
tranche and a RUB 15 billion (US$204 million equivalent) floating rate tranche, both with a maturity date of December 2026. The
facilities are guaranteed by VEON Holdings B.V.. The proceeds from the Alfa Bank facilities have been used to finance
intercompany loans to PJSC Vimpel-Com. See —Recent Developments after year end 2021—Novation of Loans for a
discussion of the novation of this loan in 2022.
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$611 million
equivalent) Term Facility Agreement with Sberbank with a floating rate. Maturity date of the facility is December 2026 and it is
guaranteed by VEON Holdings B.V.. The proceeds from the Sberbank facility have been used to finance an intercompany loan to
PJSC Vimpel-Com. See —Recent Developments after year end 2021.—Novation of Loans for a discussion of the novation of
this loan in 2022.
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$611 million equivalent) of outstanding loans to Alfa
Bank, comprising of a RUB 30 billion loan (US$407 million equivalent) originally maturing in March 2025 and a RUB 15 billion
(US$204 million equivalent) loan originally maturing in March 2026.
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$612 million equivalent) of outstanding loans to
Sberbank, comprising of a RUB 15 billion (US$204 million equivalent) loan originally maturing in June 2023 and a RUB 30 billion
(US$408 million equivalent) loan originally maturing in June 2024.
VEON concludes comment letter process with the AFM
On November 25, 2020, we received a letter from the AFM asserting that the goodwill impairment tests for the cash-
generating units in Russia and Algeria had not been applied correctly in the first half of 2020 because our goodwill impairment
tests did not take into account all aspects that market participants would take into account in determining the fair value less cost
of disposal. The AFM comment process began in November 2020, when we received an initial comment letter from the AFM
seeking additional information regarding our goodwill impairment testing performed in the first half of 2020 as disclosed in the
2020 Interim Financial Report. The AFM had asserted that they did not agree with our assumptions regarding the discount rate
and projected cash flows used in our discounted cash flow model.
We responded to these requests from the AFM during 2020 and 2021 and met several times with the AFM to discuss
our goodwill impairment testing. We maintained that our goodwill impairment tests were performed correctly and that no re-
performance of the past impairment tests is necessary. These discussions with the AFM have now been resolved without a
restatement of previously issued financial statements or other changes to our goodwill impairment testing being imposed.
Recent Developments after year end 2021
Karen Linehan joins VEON board as a non-executive director
On January 5, 2022, VEON announced the appointment of Karen Linehan to the Board of Directors as a non-executive
director, following the resignation of Steve Pusey in 2021.
VEON announces its intention to establish a new parent holding company in the United Kingdom
On February 3, 2022, VEON announced its intention to move its group parent company to the United Kingdom, with the
introduction of a newly formed UK incorporated public limited company (the “new UK Parent Company”) as the top holding
company of the VEON Group. It is expected that the new UK Parent Company will replace VEON Ltd. as the VEON Group’s
ultimate parent company by way of a Bermuda court-approved scheme of arrangement. VEON has since suspended all activities
related to the previously proposed re-domiciliation of VEON Ltd. to the United Kingdom and will continue to consider the optimal
corporate structure for the Group.
The Conflict between Russia and Ukraine
In response to the ongoing conflict between Russia and Ukraine, the United States, European Union (including individual E.U.
member states), the United Kingdom, as well as other countries (such as, Japan, Canada, Switzerland) have imposed wide-
ranging economic sanctions and trade restrictions which have targeted individuals and entities, as well as large swaths of the
Russian (and Belarussian) economy. The United States, the European Union and the United Kingdom have also imposed
sanctions on a number of individuals and entities from both Russia and Belarus (including many Russian and Belarussian
financial institutions), including measures that prohibit dealings with these individuals and entities and/or freezing their assets
and measures that prohibit dealing with newly issued securities or extending credit to designated entities and, in the case of the
United Kingdom, persons connected with Russia. In addition, certain Russian banks have been removed from the SWIFT
payment messaging system, which facilitates transfers of funds between financial institutions and across borders. In addition to
economic sanctions, the United States, the European Union and the United Kingdom have expanded export and import
prohibitions on items destined for or from Russia or Belarus, including, among other things, restrictions on the export to or for use
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in Russia certain commodities, critical-industry software and technology, iron and steel products, and luxury goods. Ukraine has
also enacted sanctions with respect to certain Russian entities and individuals, such as MOEX on which VEON Ltd.’s shares are
listed and traded on an unsponsored basis. The sanctions and trade restrictions have been frequently updated as events have
unfolded and are subject to ongoing change.
Furthermore, as a response to the new sanctions Russia recently introduced a number of counter-sanctions and
measures aimed at stabilizing domestic financial markets. These, among others, include new restrictions related to capital and
foreign exchange controls, restrictions on lending to foreign (non-Russian) persons, restrictions on foreign persons’ transactions
with Russian securities and real estate, and limitations on export and import of certain goods into and outside Russia. The
introduction of certain of these measures may significantly harm our business. For example, we are limited in our ability to pay
and receive dividends, including interest payments on intercompany loans and dividends from our subsidiary PJSC VimpelCom,
we may also be limited in issuing or repaying intra-group loans, completing corporate restructurings or planned M&A
transactions. Moreover, new Russian counter-sanctions may affect our ability to service our indebtedness towards non-Russian
creditors as Russian counter-sanctions introduce new rules related to debt repayment towards foreign creditors.
As of the date on this Annual Report, the conflict between Russia and Ukraine is still ongoing. For a discussion of the
potential impact of the conflict on our business, see—Risk Factors and —Factors Affecting Comparability and Results of
Operations—The Conflict Between Russia and Ukraine.
Mikhail Fridman steps down from VEON board
On March 1, 2022, VEON announced the resignation of Mikhail Fridman from the Board of Directors, effective from
February 28, 2022.
Liquidity and financing update
On March 2, 2022, VEON announced that as of February 27, 2022, it had approximately US$2.1 billion of cash and
deposits, including US$1.5 billion of U.S. dollars and euro-denominated cash and deposits held at the level of its HQ in
Amsterdam. The HQ cash and deposits are held in bank accounts, money market funds and on-demand deposits at a diversified
group of international banks from the European Union, the United States and Japan. In addition, VEON utilized US$430 million
under its RCF on February 28, 2022 to repay the principal and accrued interest of its US$417 million notes due March 1, 2022.
On March 11, 2022, a subsidiary of VEON prepaid its RUB 30 billion interest-bearing loan with VTB Bank, which had
been entered into on February 17, 2021, in accordance with its terms, and the facility was cancelled. The repayment and
cancellation was in compliance with applicable sanctions. In February 2022, VEON requested a one-year extension to the RCF,
which was approved by eight lenders, and in March 2022, commitments of two Russia-based banks under the RCF were
cancelled as it is no longer possible for them to fund drawings under the RCF given the recently introduced Russian currency
controls. As a result, the commitments under the RCF will be reduced from US$1,250 million to US$1,055 million.
On April 13, 2022, VEON announced that it had approximately US$1.3 billion of cash held at the level of its HQ in
Amsterdam, which was deposited with international banks and fully accessible at HQ, with approximately US$700 million
available under its RCF. In addition, VEON’s operating companies had a total cash position equivalent to over US$500 million. As
of the date of this Annual Report 20-F,VEON Holdings B.V. is in the process of drawing down the remaining committed amounts
under the RCF, with a portion of the related utilization request having been received as of such date. Once the drawdown is
complete, the RCF will be fully drawn. The proceeds of this drawing will be used for general corporate purposes.
In February 2022, PMCL fully utilized the remaining PKR 40 billion that it had available under its existing line of credit
and in April 2022, PMCL entered into a PKR 40 billion syndicated loan with a ten year maturity and Banglalink entered into a BDT
12 billion syndicated loan with a five year maturity. In addition, in April, Kyivstar prepaid a UAH 1,350 million loan with JSC
CitiBank, prepaid a portion of a UAH 1,677 million loan with Alfa Bank (UAH 1,003 million) and prepaid a portion of a UAD 1,275
million loan with JSC Credit Agricole (UAH 940 million prepaid).
Robert Jan van de Kraats steps down from VEON Board
On March 8, 2022, VEON announced the resignation of Robert Jan van de Kraats from the Board of Directors, effective
from March 7, 2022.
U.S., EU and UK Sanctions not applicable to VEON
On March 15, 2022 and April 13, 2022, we announced our conclusion that, on the basis of information available to us,
VEON is not the subject of any sanctions imposed by the United States, the European Union or the United Kingdom. Bermuda
adopts UK sanctions by operation of law.
VEON has no ultimate controlling shareholder. As disclosed in this Annual Report, LetterOne holds 47.85% of our
common and voting shares. Mr. Mikhail Fridman and Mr. Peter Aven, upon whom sanctions have been imposed on by the
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European Union and the United Kingdom, hold in the aggregate a less than 50% interest in the LetterOne group, the ultimate
shareholding entity of LetterOne, and both have stepped down from the LetterOne group board. All of our shareholders have
identical voting rights. None have ‘special’ voting rights (either through the bye-laws or as a matter of agreement between VEON
and any shareholder). On the basis of public filings, there are no agreements in place between LetterOne and any other
shareholders relating to the voting of VEON shares, and neither Mr. Fridman nor Mr. Aven directly or indirectly own any voting
interests in VEON shares or ADSs outside of their interest in LetterOne. As we announced on 1 March 2022, Mr. Fridman
stepped down as a director of VEON effective 28 February 2022. Mr. Aven is not a director of VEON or of any company within
our Group.
Michiel Soeting joins the VEON Board as a non-executive Director
On March 16, 2022, VEON announced the appointment of Michiel Soeting to the Board of Directors as a non-executive
director and Chairman of the Audit and Risk Committee, following the resignation of Robert Jan van de Kraats on March 7, 2022.
VEON confirms notification from NASDAQ on minimum share price requirement
On April 12, 2022, VEON confirmed that on 7 April 2022 VEON received notification from the Listing Qualifications
Department of NASDAQ that VEON is not in compliance with the minimum bid price requirement set forth in NASDAQ’s Listing
Rule 5550(a)(2). This does not impact current NASDAQ listing and trading, and VEON will evaluate options to return to
compliance.
Spectrum Acquisition in Bangladesh and Pakistan
On March 31, 2022, Banglalink acquired new spectrum for a fee o US$205 million payable in installments over eleven
years, which doubles its spectrum holding in Bangladesh. Banglalink acquired 40 MHz of spectrum from the 2300 MHz band. On
April 12, 2022, Jazz signed a 4G license renewal with the PTA for a fee of US$486 million for 15 years, of which 50% has been
settled, and the remaining amount will be paid in five equal annual installments.
Novation of Loans
As a result of current economic sanctions affecting Russian banks, in April 2022, VEON novated two group-level loans,
with Sberbank and Alfa Bank respectively, and totaling RUB 90 billion, to PJSC VimpelCom. This resulted in the release of the
former borrower, VEON Finance Ireland DAC and the former guarantor, VEON Holdings B.V. from their obligations. In addition,
the novation of these loans has allowed VEON to ensure that the majority of the Group’s RUB liabilities are held within Russia
and as such are matched to the market where RUB revenues are generated, enabling further review of the capital structure of
PJSC VimpelCom.
First Quarter 2022 Trading Update
On April 28, 2022, VEON announced a trading update for the first quarter period ended March 31, 2022 (unaudited),
including selected financial and operational details.
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 six geographic segments: Russia, Pakistan, Ukraine,
Kazakhstan, Uzbekistan and Bangladesh. We also present our results of operations for “Others” and “HQ” separately, although
these are not reportable segments. “Others” represents our operations in Kyrgyzstan and Georgia and “HQ” 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.
This section - Information on the Company provides a description of our business that is current as of December 31,
2021, but is not updated to reflect the uncertainty of our business operations and prospects in Russia and Ukraine in light of the
ongoing conflict. Important aspects of our business operations are subject to change, including licensing, our product offering,
our market position and contractual arrangements with governments and key third parties. For a further discussion on the
potential impact of the ongoing conflict between Russia and Ukraine on our business, see Risk Factors and Operating and
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Financial Review and Prospects—Factors Affecting Comparability and Results of Operations—The Conflict between Russia and
Ukraine.
Subsidiaries
The table below sets forth our significant subsidiaries as of December 31, 2021. 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”
VEON Finance Ireland Designated Activity Company
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
Ireland
Kyrgyzstan
Luxembourg
Luxembourg
Luxembourg
Egypt
Algeria
Algeria
Pakistan
Bangladesh
Holding
Holding
Operating
Operating
Operating
Operating
Operating
Holding
Operating
Holding
Holding
Holding
Holding
Holding
Operating
Operating
Operating
100.0 %
100.0 %
100.0 %
100.0 %
75.0 %
100.0 %
100.0 %
100.0 %
50.1 %
100.0 %
100.0 %
100.0 %
99.6 %
45.6 %
45.6 %
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 in Note 14—
Investments in Subsidiaries of the Audited Consolidated Financial Statements for further details. For discussion of our Algeria interests as a discontinued operation
see Note 10—Held for Sale and Discontinued Operations of the Audited Consolidated Financial Statements.
10
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, Ukraine,
Kazakhstan, Uzbekistan, and Bangladesh:
Russia
Pakistan
Bangladesh
Ukraine
Uzbekistan
Kazakhstan
We have interconnection agreements with mobile and fixed-line operators in Russia. During 2021, we had the following
MTRs in Russia: average cost per minute of national traffic at RUB 0.9541 and average price per minute of national
traffic at RUB 0.9853, which were broadly stable as compared to average cost per minute at RUB 0.9483 and average
price per minute of national traffic at RUB 0.9827 in 2020 and average cost per minute at RUB 0.9480 and average
price per minute of national traffic at RUB 0.9861 in 2019.
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 2019 and 2020, were at PKR 0.8 and
PKR 0.7, respectively, and in 2021 it was PKR 0.70.
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 (terminating mobile operator receives BDT 0.10 and
ICX receives BDT 0.04). In July 2020, the BTRC imposed asymmetric mobile termination rates on SMP operators.
We have interconnection agreements with various mobile and fixed-line operators. As of December 31, 2021, in
Ukraine, the effective MTR was UAH 0.10/min and effective IMTR equaled US$ 0.053/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 the Uzbek courts. Our MTR for 2021 was UZS 0.05/
minute as established by the court decision.
We have interconnection agreements with mobile and fixed operators. Our MTR for 2021 for local mobile operators
was KZT 5.60/min and for fixed operators was KZT 14.80/min, except for those with Kazakh telecom. For
Kazakhtelecom, our MTR is KZT 16.66/min and our IMTR is KZT 53.76/min.
11
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, 2021.
Mobile Service Description
Russia
Pakistan Bangladesh
Ukraine
Uzbekistan Kazakhstan Others(3)
Value added and call completion services (1)
Yes
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(4)
Yes(5)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes(6)
Yes(7)
(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).
Only reflects services offered in Kyrgyzstan.
Only reflects mobile bundles provided in Kyrgyzstan.
12
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, 2021, approximately 86.8% 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
voice traffic and roaming fees for airtime charges when customers travel abroad
Internet and Data Access
• GPRS/EDGE; 3G/HSPA; 4G/LTE; special wireless “Plug&Play” USB modems
• active roaming agreements with 700 GSM networks in 213 countries
• GPRS roaming with 647 networks in 195 countries
• 4G/LTE roaming with 441 networks in 157 countries
Roaming
• 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
• 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
Content/infotainment
• 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
2024 - 2027 (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
2026 (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.
13
PJSC VimpelCom must pay an annual fee for the use of radio frequency spectrum. These fees were RUB 3,794 million and RUB 3,952 million for the years
ended December 31, 2021 and 2020, 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 2,138 million and RUB 2,152 million for the years ended December 31, 2021 and 2020, respectively. PJSC VimpelCom is also
subject to certain other license fees on a case-by-case basis.
LICENSE FEES
Mobile bundles
In 2021, our products focused on the needs of our customers by simplifying offers and maintaining competitive prices
with transparent conditions. In October 2021, we released a new product “Your Decision,” which allowed subscribers to purchase
telecommunication and non-telecommunication services and customize their tariff, which is managed in the My Beeline app. The
features of our new customizable tariff include unlimited access to messengers and unlimited use of certain popular streaming
television, video and music services. This product was part of a rebranding exercise - “On your side,” which intends to convey
the idea that we are ready to provide our customers with our support and assistance in achieving their goals through the speed
and convenience of our services and products. In addition, in the fourth quarter of 2021, we also updated our bundle tariffs and
removed unlimited data in all our tariffs and switched from a daily write-off to a “smart” (monthly) write-off for our customers. We
also continued to attract customers through shared bundle product and convergence offers.
Distribution
In 2021, we optimized the number of our stores by closing unprofitable locations. Compared to December 31, 2020, as
of December 31, 2021 the number of owned retail monobrand stores was 2,184 compared to 2,284; the number of franchise
stores was 1,544 compared to 1,658; the number of “Know How” stores was 80 compared to 94; and the total number of owned
retail monobrand stores was 3,808 stores compared to 4,036. We have continued to increase the efficiency of retail stores and
have closed more than 1,100 stores over the last three years.
In 2021, we were able to maintain high availability for our high ARPU generating customers in all of our contact centers,
while also simplifying a number of service procedures and business processes, which we believed helped to improve the quality
of our customer service. We were able to achieve this through the launch of various initiatives, such as the launch of several
remote contact centers that provides us with staffing flexibility, text messenger support in several regions, the continued
development of self-service systems, and the enhancement of our interactive voice responses to encourage the conversion from
traditional voice channels to digital text and self-service systems.
Competition
The following table shows our and our primary mobile competitors’ respective customer numbers in Russia as of
December 31, 2021:
Operator
MTS
MegaFon
PJSC VimpelCom
Tele2
Source: Operators’ reports, GSMA.
Customers in Russia
(in millions)
80.4
74.4
49.4
47.5
According to GSMA, there were approximately 265.6 million mobile cellular customers in Russia as of December 31,
2021, compared to approximately 257.1.4 million mobile cellular customers as of December 31, 2020, representing a mobile
cellular penetration rate of approximately 182.1%, compared to approximately 176.2% as of December 31, 2020.
14
Mobile Business in Pakistan
We operate in Pakistan through our operating company, Pakistan Mobile Communication Limited (“PMCL”) and our
brand, “Jazz,” which is the historic Mobilink brand together with the merged Warid brand. In 2021, customers continued to
migrate to 4G/LTE services following its launch in 2017 and PMCL provided 3G services in over 300 towns and cities and 4G/
LTE services in 263 cities.
In Pakistan, we offer our customers mobile telecommunications services under postpaid and prepaid plans. As of
December 31, 2021, approximately 97.2% of our customers in Pakistan were on prepaid plans.
The table below presents the primary mobile telecommunications services we offer in Pakistan.
• 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 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
• CAMEL roaming through 125 networks in 70 countries
• LTE roaming through 55 networks in 40 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
2G(4)
3G
4G/LTE (NGMS)
License(1)(3)
Nationwide
Nationwide
Nationwide
Nationwide
Nationwide
Expiration
2022
2034 (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
15
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, May 2020, and May 2021 Jazz deposited approximately
US$225 million, US$58 million, and US$51.5 million respectively, 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 appeal in Islamabad High Court was dismissed on
July 19, 2021 upholding the PTA order. The Islamabad High Court order has been challenged in the Supreme Court. Last hearing in this regard was conducted
on November 25, 2021. The matter has been adjourned and next date of hearing is awaited. The ex-Warid 2019 license was renewed by signing under protest
on October 18, 2021.
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 one 15-year license for provision of cellular mobile 2G services in AJK and Gilgit-Baltistan.
(3)
(4)
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$24.6
million, US$23.7 million, and US$24.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. PMCL’s total spectrum
administrative fee payments, including for Warid’s spectrum, were US$1.7 million, US$1.9 million and US$1.6 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
Mobile bundles
We continue to focus on a technology agnostic mobile internet portfolio, which means that we offer the same pricing
across our 2G, 3G and 4G/LTE technologies. In 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. In addition to our core products and services, we have also started developing
and offering digital solutions and products to our corporate customers, as well as offering dedicated account management to our
large corporate customers and a 24x7 business support helpline.
Distribution
As of December 31, 2021, our sales channels in Pakistan included 10 business centers, a direct sales force of 550
employees looking after indirect sales channels, 430 exclusive franchise stores currently active and over 199,000 non-exclusive
third-party retailers. For top-up services, we offer prepaid scratch cards and electronic recharge options, which are distributed
through the same channels. As of December 31, 2021, Jazz brand SIMs are sold through more than 47,650 retailers, supported
by biometric verification devices.
Competition
The following table shows our and our competitors’ respective customer numbers in Pakistan as of December 31, 2021:
Operator
PMCL (“Jazz”)
Telenor Pakistan
Zong
Ufone
Source: The Pakistan Telecommunications Authority.
Customers in
Pakistan
(in millions)
72.6
49.5
42.3
22.7
According to the PTA, there were approximately 187.1 million mobile customers in Pakistan as of December 31, 2021,
compared to approximately 175.6 million mobile customers in Pakistan as of December 31, 2020, representing a mobile
penetration rate of approximately 85.9% compared to approximately 82.3% as of December 31, 2020.
16
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, 2021, approximately 82% 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 497 networks in 189 countries
• GPRS roaming on 439 networks in 167 countries
• 3G roaming on 331 networks in 131 countries
• 4G/LTE roaming on 140 networks in 83 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, however the spectrum needs of our operations
and intentions may change.
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). In addition, on March 6, 2018, Kyivstar secured the following spectrum
through auction in the 1800MHz band: 25MHz (paired) for UAH 1.325 billion and two lots of 5MHz (paired) for UAH 1.512 billion.
(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 2021, Kyivstar PJSC made spectrum and license payments as follows: annual fee for the use of radio frequency spectrum - UAH 961.1
million (paid to the State Budget); EMC and monitoring - UAH 290.3 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
17
Kyivstar has a range of regional and national licenses for the use of radio frequency resources in both radio-relay and
WiMax standards. Our network coverage was as follows: 2G network – 27,518 localities (91.46% of territory controlled by
Ukrainian state as of December 31, 2021); 3G network – 7,686 localities (18.7% of territory controlled by Ukrainian state as of
December 31, 2021); and 4G network - 16,675 localities (68% of territory controlled by Ukrainian state as of December 31,
2021).
Mobile bundles
Kyivstar offers bundles including combinations of voice, SMS, mobile data, OTT services and swappable benefits
(telecommunications and non-telecommunications).
Distribution
Kyivstar’s strategy is to maintain a leadership position by using the following distribution channels: distributors (33% of
all connections), monobranded stores (24%), local chains (16%), direct sales (11%), active sales (8%) and national chains (7%).
Competition
The following table shows our and our primary mobile competitors’ respective customer numbers in Ukraine as of
September 30, 2021:
Operator
Kyivstar
“VF Ukraine” JSC
“lifecell” LLC
Customers
(in millions)
26.3
19.0
8.9
Source: National Commission for the State Regulation of Communication and Informatization (“NCCIR”)
According to GSMA, as of December 31, 2021, there were approximately 55.2 million customers in Ukraine,
representing a mobile penetration rate of approximately 127.5% compared to approximately 54.2 million customers and a mobile
penetration rate of approximately 124.3% as of December 31, 2020.
18
Mobile Business in Kazakhstan
In Kazakhstan, we operate as Beeline Kazakhstan, the country’s largest independent mobile operator. As of December
31, 2021, approximately 91.9% 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
• VoLTE services
Voice
• 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 service
• technology neutral licenses
Internet and data access
Roaming
• voice roaming with 577 networks in 195 countries
• 4G/LTE roaming with 285 networks in 107 countries
• 3G roaming with 413 networks in 139 countries
• GPRS roaming with 499 networks in 160 countries
• CAMEL roaming through 429 networks in 168 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 inform, free phone (Voice CPA)
• 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)
Mobile financial services
• mobile payments (including Kazeuromobile and Woopay payment organizations
• mobile transfers (including Sim2Sim, Sim2Card, Sim2IBAN, Sim2ATM, Sim2post)
• digital wallet, card “Simply”
• 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, 2021)
Expiration
Mobile services (GSM900/1800, UMTS/WCDMA2100, 4G/
LTE800/1800)(1)(2)(3)
Unlimited term
•
•
•
License received on August 24, 1998.
KaR-Tel has permission to use 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 2021 KaR-Tel was required to pay: (i) an annual fee for the use of radio frequency spectrum amounting
to KZT 1,247,232,473 for mobile and KZT 224,736,182 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 2,248,250,484.
19
Mobile bundles
Our bundles are designed for active mobile data users and we have different options for our customers from data
bundles, to customized and family plans. We also promote data services with unlimited access to popular resources: social
networks, instant messaging, video hosting, allowance exchange and data package sharing with friends. In 2022, we plan to
focus on the promotion of our own digital products and the development of subscription projects for our customers and
customers on other networks. All of our bundles are billed using a mixed payment system and there is an automatic switch to a
daily payment schedule if there is an insufficient balance in the customer’s account for full payment. In addition, from time to
time, we run promotions to encourage early and on time payments, such as by offering to double the customer’s monthly
allowance or allowing the rollover of unused data to the following month. As of December 31, 2021, the penetration of bundles
into our active base is 87.1%.
Distribution
We distribute our products in Kazakhstan through owned monobranded stores, franchises and other distribution
channels. As of December 31, 2021, we had 57 total stores in Kazakhstan, as well as 8,052 other points of sale and 632
electronics stores).
Competition
The following table shows our and our primary mobile competitors’ respective customers in Kazakhstan as of December
31, 2021:
Operator
Beeline Kazakhstan
Kcell
Tele2/Altel
Customers
(in millions)
9.9
8.0
6.6
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 2021 public disclosure.
According to the Ministry of National Economy of the Republic of Kazakhstan, Statistics Committee and other data
sources noted above, as of December 31, 2021, there were approximately 24.5 million mobile customers in Kazakhstan,
representing a mobile penetration rate of approximately 128.7% compared to approximately 24.3 million customers and a mobile
penetration rate of approximately 129.0% in 2020.
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, 2021, approximately
97.7% 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 in Uzbekistan 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 404 networks in 163 countries
• CAMEL roaming through 306 networks in 126 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
VAS
• 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
• 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-
commerce
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.
21
In 2021, 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$4,667,659.63 and renewal of existing licenses (7 licenses in total) in the total amount of US$3,235,067.76 paid to
the state budget of Ministry for Development of Information Technologies and Communications.
LICENSE FEES
Mobile bundles
We offer bundled tariff plans, which may differ by types or volume of traffic, duration (daily 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.
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. In addition,
we have the following four segments in our postpaid system: large accounts, business to government, SME and SOHO. As of
December 31, 2021, our sales channels in Uzbekistan include 32 owned offices, 650 exclusive stores and 2,350 multi-brand
stores.
Competition
The following table shows our and our primary mobile competitors’ respective customers in Uzbekistan as of
December 31, 2021:
Operator
LLC “Unitel”
Ucell
UzMobile (Uzbektelecom)
UMS
Perfectum
Source: GSMA
Customers
(in millions)
7.1
10.7
8.6
3.4
0.1
According to GSMA, as of December 31, 2021, there were approximately 29.9 million mobile customers in Uzbekistan,
representing a mobile penetration rate of approximately 89.7% compared to approximately 27.6 million customers and a mobile
penetration rate of approximately 84.0% as of December 31, 2020.
22
Mobile Business in Bangladesh
We operate through our operating company, Banglalink Digital Communications Limited (“BDCL” or “Banglalink”) 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 the 4G/LTE network, BDCL’s data customers as well as data usage
have grown rapidly, which has contributed to an increase in BDCL’s data revenue and ARPU. As of December 31, 2021,
Banglalink had a 4G population coverage of 69.0% and is recognized by Ookla Speedtest as the nation’s fastest 4G network
provider.
The telecommunications market in Bangladesh is largely comprised of prepaid customers. As of December 31, 2021,
approximately 94.4% 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 304 GSM networks in 164 countries
• GPRS roaming with 204 networks in 126 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
• call forwarding; conference calling; call waiting; caller line identification presentation; voicemail; and missed call alert
VAS
Messaging
• 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
• SMS and data network is provided to Bangladesh Post Office for their Electronic Money Transfer Service (EMTS)
Mobile financial services
Content/infotainment
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)(4)(5)
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, Banglalink was awarded a 15-year license to use 5 MHz of technology neutral spectrum in the
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, Banglalink acquired a 4G/LTE license for US$1.2 million. Banglalink also acquired the right to use 10.6 MHz technology neutral
spectrum in the 1800 MHz (5.6) and 2100 MHz bands 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 into 4G spectrum..
(4)
(5)
In March 2021, Banglalink acquired the right to use 4.4 MHz of technology neutral spectrum in the 1800 MHz band and 5 MHz technology neutral spectrum in the 2100 MHz
band effective from April 9, 2021.
The BTRC is planning on carrying out an auction of further technology neutral spectrum in the 2.3 GHz and 2.6 GHz bands by the first quarter of 2022. The BTRC intends to
release this spectrum to enhance 4G data speed, which could be used at a later date to deploy 5G technology.
23
LICENSE FEES
Under the terms of its 2G, 3G and 4G/LTE mobile licenses, Banglalink 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, 2021) for each mobile
license; (ii) 5.5% of Banglalink’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.
Banglalink’s total license fees (annual license fees plus revenue sharing) in Bangladesh were equivalent to US$38.6 million,
US$36.8 million, and US$36.9 million for the years ended December 31, 2021, 2020, and 2019, respectively. In addition to
license fees, Banglalink pays annual spectrum charges to the BTRC, calculated according to the size of BDCL’s network, its
frequencies, the number of its customers and its bandwidth. The annual spectrum charges are payable on a quarterly basis and
reconciled at the end of each year. The BTRC has recently started to revise the formula for annual spectrum charges with the
intention to apply a single formula to calculate the charge for all of the different licenses. A proposal has been sent to the PTD
for approval.
BDCL’s annual spectrum charges were equivalent to US$ 13.7 million, US$10.3 million, and US$11.8 million for the years
ended December 31, 2021, 2020, and 2019, respectively.
Distribution
As of December 31, 2021, 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), 60,060 retail SIM
outlets, 298,979 top-up selling outlets, online sales channels, and 1,052 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 several 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, 2021.
Operator
Grameenphone
Robi Axiata
Banglalink
Teletalk
Source: Bangladesh Telecommunication Regulatory Commission.
Customers in
Bangladesh
(in millions)
83.5
53.7
37.2
6.7
to
According
the Bangladesh Telecommunication Regulatory Commission,
three mobile operators,
Grameenphone, Robi Axiata and Banglalink, collectively held approximately 96.3% of the mobile market which consisted of
approximately 174.4 million customers as of December 31, 2021, compared to approximately 170.1 million customers as
of .December 31, 2020. According to GSMA, as of December 31, 2021, Bangladesh had a mobile penetration rate of
approximately 107.0% compared to 101.6% as of December 31, 2020.
the
top
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, 2021, we had the following percentages of prepaid and postpaid customers:
Payment Plan
Prepaid
Postpaid
Kyrgyzstan
93.7%
6.3%
Georgia
100%
—
The table below presents the primary mobile telecommunications services we offer in Kyrgyzstan and Georgia.
standard voice services
Voice
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: 439 networks in 130 countries
GPRS: 292 networks in 105 countries
4G/LTE:179 networks in 75 countries
CAMEL: 223 networks in 92 countries
Voice: 243 networks in 91 countries
GPRS: 225 networks in 84 countries
CAMEL: 173 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 Kyrgyzstan and Georgia.
Unless noted otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Country
Licenses (as of December 31, 2021)
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)
December 2026
October 2024
Unlimited term
December 2024
Unlimited term
May 2023
Radio spectrum of 2360 - 2400 MHz (technology TDD) for Bishkek city October 2031
Georgia
GSM1800 10 MHz frequency
GSM900 5.49 MHz frequency
LTE 800 10 MHz frequency
10 MHz 3G frequency
February 2030
February 2030
February 2030
December 2031
Wireless internet services
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. In 2022, we are
aiming to focus on improving network capacity in the north of Kyrgyzstan and completed spectrum refarming in the south of
Kyrgyzstan.
Distribution
We distribute our products in Kyrgyzstan and Georgia through owned monobranded stores, franchises and other
distribution channels. As of December 31, 2021, we had 81 stores in Kyrgyzstan (as well as 6,648 other points of sale) and 41
stores in Georgia (28 own monobranded stores and 13 franchises).
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 each of Kyrgyzstan as of December 31, 2021 and December 31, 2020 and Georgia as of October 31, 2021 and
December 31, 2020.
2021
(millions of customers)
10.6
1.3
Mobile Penetration
160.2%
138.0%
2020
(millions of customers)
10.2
1.3
Mobile Penetration
156.9%
116%
Kyrgyzstan(1)
Georgia(2)
Source: GSMA.
(2)
respectively
Source: Georgian National Communications Commission as of October 31, 2021 and December 31, 2020,
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 data connectivity services over a wide range of access media, covering major cities of Pakistan. We do not
offer fixed-line telecommunications services in 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 and TVE services (for FTTB/FMC users, 2.1 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) (approximately 19,500 customers)
• OTT TV (TVE)
• FMC product services (1,674,021 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 (18 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 use a direct sales force, operating both with fixed-line and mobile 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 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
• TransTelecom
Voice Services
• OJSC “Multiregional
TransitTelecom” (acquired by MTS in
2021)
• Rostelecom
• Rostelecom
• MegaFon
Data Services
• TransTelecom
Fixed-line Broadband
• ER-Telecom
• MegaFon
• MTS
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. Unless noted
otherwise, we plan to apply for renewal of these licenses prior to their expiration.
Services
Leased
Services
Communications
Circuits
Telematic Services
License
Expiration
St. Petersburg
Krasnodar
Nizhny Novgorod
Khabarovsk
Novosibirsk
Rostov
St. Petersburg
October 4, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
August 1, 2022
Data Transmission Services License
Krasnodar
St. Petersburg
Communications Services for the Purposes
of Cable Broadcasting
Nizhny Novgorod
August 1, 2022
Novosibirsk
Rostov
Krasnodar
Moscow
St. Petersburg
Yekaterinburg
Khabarovsk
August 1, 2022
August 1, 2022
December 6, 2022
December 6, 2022
December 6, 2022
December 6, 2022
December 6, 2022
Nizhny Novgorod
December 6, 2022
Novosibirsk
Rostov
December 6, 2022
December 6, 2022
29
Fixed-line Business in Pakistan
The table below presents a description of the fixed-line telecommunications services we offer in Pakistan.
• data and voice services over a wide range of access media, covering more than 225 locations, including all the major cities
• data services being provided to the enterprise customers include: dedicated internet access, VPN (virtual private networking),
leased lines & fixed telephony
• domestic and international leased lines, domestic and international MPLS, and IP transit services through our access
Services
network
• 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 13,000 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. Keeping in view the growing shift towards digitization we have enabled a new sales team
specifically targeting all digital solutions led by a Digital Sales head. 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 126 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 43,486 residential buildings in 125
cities, providing over 60,442 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. In addition, we have been able to benefit from cross-selling
our products. As of December 31, 2021, our penetration of fixed-mobile convergence (“FMC”) in fixed broadband was 75%, due to a
high level of migration of mobile customers to FMC.
Competition
There is a high level of competition with more than 3,000 internet service providers in Ukraine. According to the NCCIR,
as of September 30, 2021, Kyivstar led the fixed broadband market with 1.2 million customers, which corresponds to a 14.5%
market share. The table below presents our competitors in Ukraine in the services indicated.
31
• Ukrtelecom
Voice Services(1) and Data Services(2)
• Data Group
Retail Internet Services
• Farlep-Invest (Vega)
• Kyivstar
• Ukrtelecom
• Data Group and Volia
•
•
Kyivstar (14.5%)
Freenet (2.0%)
•
•
Top 5 ISPs (market share)(3)
Ukrtelecom (10.6%)
•
Data Group and Volia (9.6%)
Lanet (1.2%)
(1) Voice services market for business customers only.
(2) Data services for corporate market only.
(3) Source: NCCIR as of September 30, 2021
Licenses
Following legislative changes, including the changes to the Law “On Telecommunications” made in 2019 by the
Ukrainian Parliament, state licensing of fixed-line telecommunications services has now been abolished. Accordingly, our fixed-
line business in Ukraine no longer requires licensing in order to operate. However, licensing of radio frequency resource (RFR)
use remains unchanged.
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, Jusan mobile (Kcell own a 20% share)
• Alma TV
• TransTelecom (owned by Kazakhstan Temir Zholy, the
national railway company)
• Astel (a leader in the provision of satellite services)
Licenses
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
32
Fixed-line Business in Uzbekistan
The table below presents a description of the fixed-line telecommunications services we offer in Uzbekistan.
• 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
Services
• 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
Coverage
• provided services in Tashkent and other regions such as Navoi, Smarkand, Uchkuduk and Zaravshan
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.
• Uztelecom
• East Telecom
• Sarkor Telecom
Licenses
Fixed-line Services
• 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, long distance and international
Data
License
Nationwide
Nationwide
Expiration
Unlimited
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 —Risk Factors—Regulatory, Compliance and Legal Risks—Violations of and changes to applicable sanctions and embargo
laws, including export control restrictions, 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 2021, these trends were less pronounced due to the COVID-19 pandemic, which resulted in associated restrictions
imposed by governments across the world that impacted international travel and led to an increase in remote working
arrangements, as well as disruption to supply chains. 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
As part of the execution of our digital operator strategy, in 2021, we devoted considerable resources to the
maintenance, development and improvement of our IT systems. For example, in 2021, we completed the enhancement of the
digital business support systems (“DBSS”) of our operating companies in Pakistan and Ukraine, and completed the DBSS
modernization across Algeria, Bangladesh, Pakistan, Ukraine, Georgia and Kyrgyzstan. DBSS enhancements are currently
ongoing in Russia, Uzbekistan and Kazakhstan.
The enhancement of our IT capabilities optimizes the experience of our customers as they use our core services, and
also enables our operators to offer IT and big data / artificial intelligence-based products as a part of their B2B portfolios. Our
portfolio of advance IT/big data services includes data-driven marketing (AdTech), scoring models, geo-analytics, video/audio
analytics, cyber security as a service, private industrial networks, integration and cloud infrastructure services. Key developments
in this area in 2021 include Beeline Russia’s acquisition of a majority stake in OTM, a major AdTech provider in Russia and the
100% acquisition of IBS DataFort, a cloud IT infrastructure provider. Jazz, our operating company in Pakistan, completed and
unveiled Pakistan’s largest Tier III certified data center on January 25, 2022, which serves the business needs of our Pakistan
operations, as well as the broader business community in Pakistan.
Cybersecurity and compliance with data protection regulations remain our key priorities. We have established a Group-
wide horizontal experience exchange mechanism to share best practices in cybersecurity as well as cross-operating companies
alarm channels enabling us to respond to cyber threats of global scale. Our updated cybersecurity policy came into effect on
January 1, 2021, requiring each of our operating companies to meet international best practice standards including ISO 27001.
In addition to the onboarding of fully dedicated cyber security teams, each operating company has appointed a chief cyber
security officer to ensure operational focus and consistency of our cyber security function.
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—The loss of important intellectual property rights as well as third-party claims that we have infringed on their
intellectual property rights could significantly harm our business.
34
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 parts of our Amsterdam office since February 2020. Our London office at 15 Bonhill Street,
London EC2A 4DN has been fully subleased since January 2019, and our London-based staff now utilize an alternative space
located in central London. 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.
Since late 2019, as part of our “infrastructure” strategy, we have been focused on optimizing our tower portfolio by
selling certain mobile tower assets and concurrently entering into lease arrangements with the buyer for the same assets,
thereby monetizing our assets base while increasing operating costs. See Operating and Financial Review and Prospects—Key
Developments during 2021—Agreement between VEON and Service Telecom regarding the sale of its Russian tower assets.
For the mobile network structure that we do not own, 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 12—Property and Equipment to our Audited
Consolidated Financial Statements.
35
Sustainability
The Group Head of Corporate Strategy, Communications and Investor Relations oversees the corporate sustainability
program and confers with our management in connection with executing its duties.
Our approach to sustainability goes beyond corporate philanthropy, and is centered around the idea of using technology
to empower communities. The approach consists of two important elements: our “license to grow” and our “license to operate”
initiatives, and reflects our desire to forge valuable partnerships that benefit all our stakeholders. The first element, our license to
grow initiative, is supported by our digital entrepreneurship and digital skills and literacy programs, which help us to contribute
long-term socioeconomic value to the communities we serve. Through promoting digital inclusion and creating new opportunities
for participants, these programs also contribute to the demand for digital products and services, which in turn creates new
opportunities for our business. In parallel, the second element of our approach to sustainability, the license to operate initiative is
focused on efforts aimed at improving and sustaining our global operations. It emphasizes services that provide long-term
benefits to the societies we operate in, as well as good corporate citizenship, ethical behavior and operational performance.
VEON is committed to creating social and business value by making impactful investments that help create new services,
partnerships and forums, which in turn enable and empower the people we serve across our markets.
Our Integrated Annual Report 2020 describes this approach to sustainability and meets Global Reporting Initiative
standards at the “core” level, follow the guidance in the AA1000 Accountability Principles Standard and is influenced by
International Integrated Reporting Council guidance.
The Integrated Annual Report 2020 has also 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 sustainability strategy and revise it when needed.
Our approach to the identification, management and evaluation of sustainability 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 materiality 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
sustainability-related developments and our sustainability performance.
MSCI ESG Ratings rated VEON 'BBB' in its most recent assessment of our resilience to long-term environmental, social
and governance risks. The assessment, dated April 2022, cited our performance in corporate governance as a particular area of
strength relative to its industry peers. We are also proud to be a member of the GSM Association’s (GSMA) climate action
taskforce and are planning to align with the organization’s goal of achieving net-zero GHG emissions for the industry by 2050. By
taking this step, we are working towards setting climate action targets for our business that help our industry meet its emissions
objectives.
Our support for the GSMA’s ambitions corresponds with a variety of existing initiatives to reduce the energy intensity of
our business. We are committed to mitigating our carbon footprint and the rollout of 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 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.
Our operating companies continue to develop 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 training on
renewable energy solutions to ensure stakeholders are aware of our carbon- and cost-saving benefits. Across our organization,
we continued working on reducing the carbon footprint of our offices, with a variety of initiatives including switching to LED
lighting. Additionally, our recent decision to encourage home-working as a permanent change to our HR policy at our Amsterdam
headquarters will enable us to make an additional contribution to reducing the carbon footprint of our headquarters function.
EU Taxonomy Regulation
As of 2021, the Company started applying the EU Taxonomy regulation (EU) 2020/852 of the European Parliament and of the
Council on the establishment of a framework to facilitate sustainable investment.
After a thorough review, we concluded that our core economic activities are not covered by the Climate Delegated Act and
consequently are Taxonomy-non-eligible, considering the evolving character of the European regulatory framework, the level of
36
complexity of the available legislation and the lack of clarity around how to interpret and apply it, we expect that reporting will
evolve and, over time, with more scoping to be done in coming periods.
It is concluded that VEON Group with its core business activities is not identified as a relevant source of GHG emissions.
Our assessment of Taxonomy-eligibility is focused on economic activities defined as the provision of goods or services on a
market, thus (potentially) generating revenues. In this context, we, as a telecommunications group, define voice, fixed
broadband, data and digital services as the core of our business activities. We define activities such as the acquisition/
construction of new buildings (for our shops, front and back offices, warehouses, data centers) and towers or the transport for
our administrative and engineering staff as underlying activities necessary to conduct our core business activities. They are not
reported as Taxonomy-eligible activities and not included in our turnover KPI as they are not generating external turnover on a
standalone basis.
Our turnover is Taxonomy-non-eligible because our economic activities are not covered by the Climate Delegated Act to date.
Consequently, the capital and operating expenditure related with these activities are Taxonomy-non-eligible.
In addition, the capital and operating expenditure to be reported also include those that are related to the purchase of output from
Taxonomy-aligned economic activities and certain individual measures enabling the target activities to become low-carbon or to
lead to greenhouse gas reductions. Due to our accounting policy regarding these individually Taxonomy-eligible Capex/Opex (cf.
section “Capex KPI and Opex KPI” in the description of our accounting policies), we report our total KPIs as follows:
Table 1 - Proportion of Taxonomy-eligible and Taxonomy-non-eligible economic activities in total turnover, Capex and Opex
Total (USD million)
Proportion of Taxonomy-
eligible economic activit
(in %
Proportion of Taxonomy-non-
eligible economic activities (
Turnover
Capital expenditure
(Capex
Operating expenditure
(Opex
7,788
3,052
4,460
0%
2.4%
0.1%
100%
97.6%
99.9%
Accounting Policies
The key performance indicators (“KPIs”) include the turnover KPI, the Capex KPI and the Opex KPI. For the reporting period
2021, the KPIs have to be disclosed in relation to Taxonomy-eligible economic activities and Taxonomy-non-eligible economic
activities
The specification of the KPIs is determined in accordance with Annex I of the Art. 8 Delegated Act. We determine the Taxonomy-
eligible KPIs in accordance with the legal requirements and describe our accounting policy in this regard as follows:
Turnover KPI
Definition The proportion of Taxonomy-eligible economic activities in our total turnover has been calculated as the part of net
turnover derived from products and services associated with Taxonomy-eligible economic activities (numerator) divided by the
net turnover (denominator). The denominator of the turnover KPI is based on our consolidated net turnover in accordance with
IAS 1.82(a). For further details on our accounting policies regarding our consolidated net turnover, please refer to Note 3 of our
Annual Report 2021.
With regard to the numerator, we have not identified any Taxonomy-eligible activities as explained above.
Capex KPI
The Capex KPI is defined as Taxonomy-eligible Capex (numerator) divided by our total Capex (denominator). With regard to the
numerator, we refer to our explanations below.
Total Capex consists of additions to Property and Equipment and Intangible assets during the financial year. Total Capex can be
reconciled to our consolidated financial statements as the reference to the sum of total Additions line of Note 12 and Note 13.
Opex KPI
The Opex KPI is defined as Taxonomy-eligible Opex (numerator) divided by our total Opex (denominator). With regard to the
numerator, we refer to our explanations below.
The Taxonomy-eligible Opex consists of Opex related to purchase of renewable energy. Apart from that we have not identified
any other Opex in our business stream that is Taxonomy-eligible.
Explanations on the numerator of the Capex KPI and the Opex KPI
As we have not identified Taxonomy-eligible economic activities, we do not record Capex/Opex related to assets or processes
that are associated with Taxonomy-eligible economic activities in the numerator of the Capex KPI and the Opex. Only “category
c” Capex and Opex can therefore qualify as Taxonomy-eligible, and considered for calculating of the proportion of Taxonomy-
37
eligible and Taxonomy-non-eligible economic activities in Capex and Opex (Table 1), i.e., Capex/Opex related to the purchase of
output from Taxonomy-eligible economic activities and individual measures enabling certain target activities (our non-eligible
activities) to become low-carbon or to lead to greenhouse gas reductions (Sect. 1.1.2.2. (c) of Annex I to the Art. 8 Delegated
Act). As the disclosure requirements for the 2021 financial year relate exclusively to Taxonomy-eligible Capex/Opex, we consider
as Taxonomy-eligible, Capex/Opex related to this category when the purchased output/individual measure fulfills at least the
substantial contribution criteria of its respective economic activity .
We have identified the following economic activities in the Climate Delegated Act resulting in Capex/Opex which can be
considered as individually Taxonomy-eligible purchased output/measures:
Table 2 - Individually Taxonomy-eligible Capex/Opex and the respective economic activities
Description of the individually Taxonomy-eligible
purchased output/measure
Respective economic activity (Annex I to Climate
Delegated Act)
All our vehicle fleet (leasing)
6.5. Transport by motorbikes, passenger cars and light
commercial vehicles
All renovation measures of our existing buildings
including own shops,
front and back offices,
warehouses and towers
7.2. Renovation of existing buildings
Maintenance and
repair of
equipment for our base stations
the energy efficient
7.3. Installation, maintenance and repair of energy
efficiency equipment
Installation, maintenance and repair of renewable
energy technologies for our base stations
7.6. Installation, maintenance and repair of renewable
energy technologies
Our acquisition of buildings (i.e. eligibility of all
buildings taking into account the legal or economic
ownership, including the right of use from a lease of a
building) including shops, front and back offices,
warehouses and towers
Our data centers
7.7. Acquisition and ownership of buildings
8.1. Data processing, hosting and related activities
For the allocation of Capex and Opex we have identified the relevant purchases and measures and identified the primarily
related economic activity in the Climate Delegated Act. In this way, we ensure that no Capex or Opex is considered more than
once.
38
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
As of April 15, 2022, 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
Leonid Boguslavsky
Yaroslav Glazunov
Andrei Gusev
Sergi Herrero
Gunnar Holt
Karen Linehan
Irene Shvakman
Vasily Sidorov
Michiel Soeting
57
58
70
42
49
41
67
63
54
51
59
Chairman of Board of Directors
2020 (as Chairman);
2015 (as member)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
2020
2021
2020
2014
2021
2015
2021
2021
2021
2022
x
x
x
x
x
x
x
x
The board of directors of VEON (“Board of Directors”) consists of eleven members, eight 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 (“NCGC”), which is
led by Gunnar Holt, whom we deem to be an independent member of the Board of Directors. The NCGC looks to ensure that the
membership of the Board of Directors consists of individuals with sufficiently diverse and independent backgrounds, who
possess experience, knowledge, and expertise most relevant to our strategic priorities and challenges. 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 Ms. Linehan and Mr. Soeting, were elected at the
June 10, 2021 annual general meeting of shareholders in accordance with our bye-laws. Ms. Linehan was appointed as a
director on January 5, 2022 to fill the casual vacancy created when Steve Pusey stepped down from the Board of Directors in
July 2021. Mikhail M. Fridman stepped down from the Board of Directors, effective on February 28, 2022. Mr. Soeting was
appointed on March 16, 2022 to fill the vacancy created when Robert-Jan van de Kraats stepped down from the Board of
Directors in March 2022. All members of our Board of Directors, including Ms. Linehan and Mr. Soeting, 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
(“GEC”).
Our bye-laws empower the Board of Directors to direct the management of VEON Ltd.’s business and affairs, 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 our matters.
The GEC is currently comprised of the Group Chief Executive Officer, the Group Chief Financial Officer, the Group
General Counsel, the Group Chief People Officer, the Group Chief Internal Audit & Compliance Officer, the Group Head of
Corporate Strategy, Communications and Investor Relations, the Group Head of Portfolio Management and the Chief Executive
39
Officer, VEON Ventures. The GEC is focused on the management of the business affairs of VEON Ltd. and its subsidiaries as a
whole, including execution of our competitive strategy, driving financial performance and overseeing and coordinating Group-
wide initiatives. On an annual basis, the GEC, the audit and risk committee (the “Audit and Risk Committee”) and the 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.
As of April 15, 2022, the members of our GEC, their respective ages, positions and dates of appointment were as
follows:
Name
Age
Position
First Appointed
Kaan Terzioğlu
Serkan Okandan
Victor Biryukov
Michael Schulz
Joop Brakenhoff
Alex Bolis
Dmitry Shvets
Khairil Abdullah
Board of Directors
53
51
46
55
56
61
49
50
Group Chief Executive Officer
March 2020 (as co-CEO)
Group Chief Financial Officer
Group General Counsel
Group Chief People Officer
Group Chief Internal Audit &
Compliance Officer
Group Head of Corporate
Strategy, Communications and
Investor Relations
Group Head of Portfolio
Management
Chief Executive Officer, VEON
Ventures
May 2020
January 2022
July 2021
July 2020
April 2021
April 2021
March 2022
Mr. 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. We deem Mr. Gazin to be an independent director. Mr. Gazin is
a member of the NCGC and the Audit and Risk Committee, and served as a member of the finance committee (the “Finance
Committee”) until June 2021. Mr. Gazin has served as the chairman of the board at Genesis Philanthropy Group since 2014, a
member of the advisory board of DVO Private Equity since 2018, a member of the board of Greenscreens.ai since 2018, a
member of the board of Zibra.ai since 2021, and a member of the board of PAWA.ai since 2021. Previously, Mr. Gazin served as
an affiliate partner at Lindsay Goldberg, a New York based private equity firm, from 2015 until December 2020, a member of the
board of Geo-Alliance Oil-Gas Public Ltd. from May 2010 until September 2019, a member of the advisory board of LetterOne
Technology LLP from 2015 until May 2020, and a member of the investment committee of the Russia Kazakhstan Nano
Technology Fund from November 2012 until 2018. From 2007 to 2012, Mr. Gazin served as the chief executive officer 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 is also the Chairman of Friends of Babyn Yar, a
Ukrainian Holocaust memorial center. He started his professional career as a systems and telecommunications engineer at Bell
Communications Research/Tellcordia and General Dynamics in the United States. 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.
Mr. Hans Holger Albrecht (Director) has been a director of VEON Ltd. since June 2020 and we deem him to be an independent
director. Mr. Albrecht is a member of the compensation and talent committee (the “CTC”) and is the Chairman of the digital and
innovation committee (the “Digital Committee”). Mr. Albrecht has served as the chairman of the supervisory board of Scout24 AG,
a publicly listed operator of online marketplaces in several industries, since 2018. Starting in 2022, Mr. Albrecht serves as the
chairman of the board of Storytel, one of the world’s largest subscribed audiobook and e-book streaming services. Mr. Albrecht
was the chief executive officer of Deezer Group, a French online music streaming service from 2015 to July 2021 and continues
to serve as a member of its board starting in 2022. Mr. Albrecht holds a Doctorate from Ruhr-Universitat Bochum in Germany
and a Master of Law from the University of Freiburg.
Mr. Leonid Boguslavsky (Director) has been a director of VEON Ltd. since January 2021 and we deem him to be an
independent director. Mr. Boguslavsky is a member of 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. Mr. Boguslavsky was a managing partner at PricewaterhouseCoopers from 1997 to 2001. Mr.
Boguslavsky has served as a member of the board of directors of JSC “AC Rus Media” since 2019, a member of the board of
directors of Sberbank PJSC between 2017 and 2021, a member of the board of directors of Super League Holdings Pte. LTD
(Singapore) since 2016, and the 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.
40
Mr. Yaroslav Glazunov (Director) has been a director of VEON Ltd. since October 2020 and we deem him to be a non-
independent director. Mr. Glazunov serves as the Chairman of the CTC and is a member of the NCGC. Mr. Glazunov has been
in the global leadership advisory business for over 20 years focusing on chief executive officer succession, efficiency and
performance and has worked with corporate boards and founders of companies in Europe, India and Russia. Since 2021, Mr.
Glazunov is a partner and managing director for the Russia and CIS practice of Korn Ferry, a global organizational consulting
company. Mr. Glazunov 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, United States.
Mr. Andrei Gusev (Director) has been a director of VEON Ltd. since April 2014 and we deem Mr. Gusev to be a non-
independent director. He is the Chairman of the Finance 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 MBA 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.
Mr. Sergi Herrero (Director) has been a director of VEON Ltd. since June 2021 and we deem Mr. Herrero to be a non-
independent director. He is a member of the Digital Committee. Mr. Herrero joined VEON in September 2019 to lead VEON
Ventures and later served as co-Chief Executive Officer from March 2020 to June 2021. Prior to joining VEON, Mr. Herrero
served as global director of payments and commerce partnerships at Facebook, where he helped to build and expand
Facebook’s successful payments and commerce business. Previously, Mr. Herrero held senior executive positions at the
financial services company Square and the French bank BNP-Paribas. Mr. Herrero currently serves as mentor at Endeavor, the
world’s leading community of high impact entrepreneurs. He also serves as venture advisor at THCAP, an early-stage venture
capital fund, and as senior advisor at Ripplewood, an American private equity firm. Mr. Herrero holds a Bachelor of Science in
electrical engineering and a Master of Science in telecommunication management, both from Ramon Llull University in
Barcelona. He also completed a program in angel investing and venture capital at Stanford University.
Mr. Gunnar Holt (Director) has served as a director of VEON Ltd. since June 2015 and we deem him to be an
independent director. He is the Chairman of the NCGC and a member of the Finance 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 chief financial officer. 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 has served on a number of corporate boards. 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 MBA from the University of Queensland in Australia; and an MBA in finance from the University of Wisconsin. He also
received a Diplomøkonom Degree from The Norwegian School of Management.
Ms. Karen Linehan (Director) has been a director of VEON Ltd. since January 2022 and we deem her to be an
independent director. She is a member of the Audit and Risk Committee and the NCGC. Ms. Linehan retired at the end of 2021
as the executive vice president and general counsel of Sanofi, a CAC 40 global pharmaceutical company, and as a member of
the supervisory boards of Sanofi Aventis Deuschland GmbH and Euroapi, which are both Sanofi subsidiaries. From 2022, Ms.
Linehan serves as a board member, chairwoman of the audit committee and member of the appointment, compensation and
RSE committee of Aelis Farma SA, a French biotech company. She also serves as a board member and member of the audit
committee of CNH Industrial N.V. since April 2022 and is an independent board member of GARDP North America Inc. (Global
Antibiotic Research and Development Partnership), a non-profit organization that develops new treatments for drug-resistant
infections. Ms. Linehan graduated from Georgetown University with Bachelor of Arts and Juris Doctorate degrees. Prior to
practicing law, Ms. Linehan served on the Congressional Staff of the Speaker of the U.S. House of Representatives from
September 1977 to August 1986.
Ms. Irene Shvakman (Director) has been a director of VEON Ltd. since June 2021 and we deem her to be an
independent director. She is a member of the CTC and the Digital Committee. Ms. Shvakman is co-founder and chairwoman of
Revo Technologies and has more than 25 years of experience in fintech, financial services and technology development. Since
2017, Ms. Shvakman has served on the board of directors of MTS Bank PJSC, prior to which she was a senior partner at
McKinsey & Company, where she advised top executives at leading banks, insurers, and regulators across emerging markets on
strategy, organization and performance transformation. Ms. Shvakman holds an MBA from Harvard Business School and a
Bachelor of Science in Biochemistry from Brown University in the United States. Since 2020, Ms. Shvakman serves as a
member of the European Advisory Board of Harvard Business School.
Mr. Vasily Sidorov (Director) has been a director of VEON Ltd. since June 2021 and we deem Mr. Sidorov to be an
independent director. He is a member of the Audit and Risk Committee and the Finance Committee. Mr. Sidorov has over 25
41
years’ experience in top management and non-executive directorship roles in telecoms, digital and other industries. His executive
roles include president and chief executive officer of MTS from 2003-2006, chief financial officer of Svyazinvest (Russia) in
1997-2000, and first VP for finance and investments at Sistema-Telecom (Russia) in 2000-2003. He was also a key investor and
founder of a number of telecoms-related businesses and non-executive director at a number of technology ventures. Mr. Sidorov
has also served on boards of large public and non-public corporations, such as Russian Railways (from 2012 to 2018), Aeroflot
(from 2013 to 2020) and Russian Post (from 2019 to 2020). He is currently a principal venture capital, private equity and special
situations investor in Russia, Continental Europe and the United States, as well as in several frontier markets. Mr. Sidorov serves
as a member of the Board of AS RUS MEDIA, publisher of Forbes Russia, since 2018.
Mr. Michiel Soeting (Director) has been a director of VEON Ltd. since March 2022 and we deem Mr. Soeting to be an
independent director. He is the Chairman of the Audit and Risk Committee. Mr. Soeting has 32 years of experience with KPMG,
one of the leading audit firms worldwide. While at KPMG, he worked in key locations in the EMEA, ASPAC and the Americas
regions, becoming KMPG partner in 1998 and leading some of its largest global advisory and audit clients, including BHP Group,
Equinor, LafargeHolcim, Philips Electronics, RD Shell, and Wolters Kluwer. From 2008, Mr. Soeting served as a Global Head of
the KPMG Energy and Natural Resources (ENR) Sector, and as a Global Chairman of the KPMG ENR Board. From 2009 to
2014, he was also a member of the KPMG Global Markets Steering Committee. From 2012 to 2014, Mr. Soeting served as a
member of the European Resource Efficiency Platform of the European Commission. From 2019, Mr. Soeting has taken on
various oversight roles, in particular, as a member of the Advisory Board of Parker College of Business of Georgia Southern
University in the United States and, from January 2021, as a member of the Board of Governors of Reed’s Foundation in the
United Kingdom. Mr. Soeting graduated from Vrije University of Amsterdam, the Netherlands as a Chartered Accountant and
completed there his Doctoral studies in Economics. He holds an MBA from Georgia Southern University in the United States. Mr.
Soeting is also a qualified Chartered Accountant in the United Kingdom.
Group Executive Committee
Mr. Kaan Terzioğlu has served as VEON’s Chief Executive Officer since June 30, 2021, and has overall responsibility
for corporate matters and our general operations. He was previously the co-Chief Executive Officer from March 2020 to June
2021. Previously, he served as a joint Chief Operating Officer from November 2019, and as a member of the Board of Directors
from June 2019 until November 2019. Mr. Terzioğlu was Turkcell’s chief executive officer from April 2015 until March 2019. He
serves as a member of the Board of Directors of Digicel since July 2019. Mr. Terzioğlu is a member of the GSMA Board, the
leading international association of the mobile communication industry. He also serves on the board of the GSMA Foundation,
which focuses on the role of mobile communications industry to support sustainable development. In 2019, Mr Terzioglu was the
recipient of GSMA’s “Outstanding Contribution to the Mobile Industry” award. Mr Terzioglu started his professional life in 1989 at
Arthur Andersen Turkey and later took on management roles in Arthur Andersen United States and Belgium. In 1999, he joined
CISCO, where he served as Managing Director of Technology Marketing, and later as the Vice President for Central and Eastern
Europe. Between 2012 and 2015, he served as a Board member of several Turkish companies in banking, insurance, retail,
technology and pharmaceuticals industries. Mr Terzioglu holds a BA in Business Administration from Boğaziçi University of
Turkey.
Mr. Serkan Okandan has served as VEON’s Group Chief Financial Officer since May 2020. Mr. Okandan brings more
than 25 years’ experience to VEON, including as group chief financial officer at the Etisalat Group and Turkcell,
telecommunications providers in the Middle East, Eastern Europe, Asia and Africa. During his time at the Etisalat Group and
Turkcell, Mr. Okandan also held senior management and board positions of subsidiaries in Asia, Africa and the Middle East,
including Morocco, Nigeria and Saudi Arabia, Ukraine and Pakistan. Mr. Okandan is a graduate of the Faculty of Economics and
Administrative Sciences at Bosphorus University in Istanbul, Turkey.
Mr. Victor Biryukov has served as VEON’s Group General Counsel since January 2022. From February 2017 to
December 2021, Mr. Biryukov served as vice president for legal, government relations and compliance and a member of the
management board of Beeline Russia, VEON’s operating company in Russia. Prior to joining Beeline Russia, Mr. Biryukov
served as general counsel of Access Industries for Russia and CIS, managing director for Legal Affairs of Brunswick Rail
Managements and a board member of a number of large Russian companies. Mr. Biryukov holds a Law degree from Moscow
State Institute of International Relations, and a Masters of Law degree from Northwestern University. He is also a graduate of
Harvard Business School’s General Management Program.
Mr. Michael Schulz has served as VEON’s Group Chief People Officer since July 2021. Prior to joining VEON, Mr.
Schulz was chief people and culture officer of Puma Energy and worked closely with the company’s board of directors as a
member of its group executive committee. Prior to Puma Energy, he led the human resources function for two of Petrofac plc’s
global oil & gas services businesses, its turn-key facilities business as well as its engineering services business as senior vice
president of human resources, based in Dubai. Mr. Schulz was previously legal counsel for BRAAS, a subsidiary of Redland plc
and had a wide-ranging career at Lafarge (now Holcim) following the company’s acquisition of Redland in 1997, including the
role of legal counsel in Germany, vice president of organizational effectiveness in Paris and vice president of human resources
for Middle East and North Africa, based in Cairo. Mr. Schulz graduated from the University Bayreuth, Bavaria, with a degree in
law. He also specialized in parallel in organizational psychology and business finance. He holds an MSc equivalent in law from
the State of Rhineland Palatine.
Mr. Joop Brakenhoff has served as VEON’s Group Chief Internal Audit and Compliance Officer since July 2020. Mr.
Brakenhoff joined VEON as the Head of Internal Audit in January 2019. Prior to this, he was at Heineken International, where he
was the head of global audit. Mr. Brakenhoff has also held senior financial and internal audit roles at Royal Ahold, prior to which
42
he was chief financial officer of Burg Industries B.V. and head of internal audit at Heerema International. 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 Chartered Accountant
(registeraccountant) of the Royal Netherlands Institute of Chartered Accountants (NBA) and a Certified Operational Auditor.
Mr. Alex Bolis has served as VEON’s Group Head of Corporate Development, Communications and Investor Relations
since April 2021. Mr. Bolis has over 20 years’ senior management experience in finance, telecommunications and investor
relations. Following a 12 year career in investment banking specializing in securities, treasury and derivatives, Mr. Bolis spent 21
years at Telecom Italia S.p.A. where he held the roles of group treasurer, head of investor relations and strategic advisor to the
chief executive officer, as well as serving as a board member for a number of the company’s subsidiaries. Mr. Bolis has also
served as an advisor in investor relations and shareholder services to listed companies and holds a variety of professional
affiliations, including memberships of the Italian Association of Financial Analysts and Italy’s NedCommunity. Mr. Bolis received a
degree in Economics and Business Administration from LUISS University, Rome. He has also completed London Business
School’s senior executive program and Assogestioni & Assonime’s induction program for board members and statutory auditors,
and is an Italian registered CPA (revisore legale).
Mr. Dmitry Shvets has served as VEON’s Group Head of Portfolio Management since April 2021. His role includes
oversight of VEON’s performance management and merger and acquisition teams. Mr. Shvets has a private equity background,
most recently as head of Russia and CIS for TPG Capital, where he focused on the operational performance of TPG’s portfolio
companies and investing activities. Mr. Shvets has management consulting experience from McKinsey and held a senior
management role leading a large operational transformation programme in metals and mining. He also has prior experience in
channel management, pricing and distribution in the FMCG industry. Mr. Shvets graduated from Moscow State Institute of
International Relations with Honors and holds an MBA from Goizueta Business School of Emory University.
Mr. Khairil Abdullah has served as the Chief Executive Officer of VEON Ventures since March 2022. Prior to joining
VEON, Mr. Abdullah was chief executive officer of Axiata Digital Services, a member of the Axiata Group, a leading mobile
operator in South East Asia. While at Axiata Digital Services, he built and operated successful digital businesses in data, artificial
intelligence, fintech and system integration, while securing attractive venture capital opportunities and relevant external funding.
Prior to arriving at the Axiata Group in 2012 as group chief marketing and operations officer, Mr. Abdullah was at Bain &
Company for 15 years, becoming a partner in the Tech, Media and Telecommunications practice for South East Asia. He
graduated from the University of Cambridge with a BA and Masters in Engineering and holds an MBA from INSEAD.
43
Compensation
In order to ensure alignment with the long-term interests of the company’s shareholders, the CTC periodically evaluates
the compensation of the company’s Board of Directors and the GEC taking into account the competitive landscape, the
compensation of directors at other comparable companies and recommendations regarding best practices. Following review by
the NCGC both the CTC and the NCGC make recommendations to the board of directors on compensation of the Board of
Directors and the GEC.
We incurred remuneration expense in respect of our directors and senior managers in an aggregate amount of
approximately US$55 million for services provided during 2021. For more information regarding our director and senior
management compensation, see Note 22—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 plans (“Incentive Plans”) were designed for members of our recognized leadership community. The participants in the
Incentive Plans may receive cash payouts or share awards after the end of each relevant award performance period. The Short
Term Incentive (“STI”) Scheme provides cash pay-outs to participating employees based on the achievement of established Key
Performance Indicators (“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 our financial and operational results (such as total
operating revenue, EBITDA and equity free cash flow), 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, and pay-out of the STI award is dependent upon final
approval by the CTC. The STI Scheme for the GEC has been revised to a 50 : 50 shares / cash scheme, which is effective for
the year 2022. Vesting of certain of our share awards are based on the attainment of certain 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. See Note 22—Related Parties to our Audited
Consolidated Financial Statements for further details of our various Incentive Plans.
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.
44
Board Practices
VEON Ltd. is governed by our Board of Directors, currently consisting of 11 directors. Our bye-laws provide that our
Board of Directors consists of at least seven and no more than 13 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 Chief Executive Officer (the “CEO”) 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 CEO and his 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 CEO 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 GEC, the Audit and Risk Committee and the 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: the Audit and Risk Committee, CTC, Finance Committee, NCGC
and Digital and Innovation Committee. Our Board of Directors and committees meet at least quarterly. In 2021, our Board of
Directors met ten times, the Audit and Risk committee met eight times, the CTC met four times, the Finance Committee met 19
times, the NCGC met twelve times, the Digital Committee met nine times, and the Telecommunications Committee met seven
times. Each director who served on our Board of Directors during 2021 attended at least 90% 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 the Audit and Risk Committee, Michiel Soeting (chairman), Gennady
Gazin, Karen Linehan and Vasily Sidorov, are expected to serve until our next annual general meeting.
Compensation and Talent Committee
The CTC 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). The CTC
also has overall responsibility for approving and evaluating company’s director, executive and employee compensation and
benefit plans. The CTC 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 CTC periodically evaluates the compensation of the members of the Board of
Directors (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 practices. The CTC formulates recommendations
to the Board of Directors regarding such director compensation and any adjustments in compensation and/or incentives that the
45
CTC considers appropriate. Such recommendations are reviewed by the NCGC, and both committees jointly deliver to the board
such recommendations for consideration and approval. Finally, the CTC 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 the CTC, Yaroslav
Glazunov (chairman), Hans Holger Albrecht and Irene Shvakman, are expected to serve until our next annual general meeting.
Finance Committee
The Finance Committee is responsible for assisting and advising the Board of Directors in discharging its
responsibilities with respect to its oversight of our business plan, management of our capital structure and the execution of
certain material transactions. In doing so, the Finance Committee reviews with our 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 the Finance Committee, Andrei
Gusev (chairman), Gunnar Holt and Vasily Sidorov, are expected to serve until our next annual general meeting.
Nominating and Corporate Governance Committee
The NCGC 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 and advising the Board of Directors on the adoption of and periodically reviewing a set of corporate
governance practices applicable to the conduct of our business, and periodically conducting an evaluation of the Board of
Directors and its committees. In addition, the NCGC reviews recommendations of the CTC 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 the NCGC, Gunnar Holt (chairman), Gennady Gazin, Yaroslav Glazunov and Karen Linehan,
are expected to serve until our next annual general meeting.
Digital and Innovation Committee
The Digital and Innovation Committee is responsible for advising on, and overseeing, the development of our digital
strategy and digital initiatives. The current members of the Digital and Innovation Committee, Hans Holger Albrecht (chairman),
Sergi Herrero, Leonid Boguslavsky and Irene Shvakman, are expected to serve until our next annual general meeting.
Telecommunications Committee
The Telecommunications Committee was responsible for oversight of the operations and business strategy of our
telecommunications business, including the operational and technological capabilities associated with that strategy. The
Telecommunications Committee was discontinued in June 2021 and its activities assumed by the Board of Directors and the
board of directors of our operating companies.
46
Employees
The following chart sets forth the number of our employees as of December 31, 2021, 2020 and 2019, respectively:
Russia
Pakistan
Bangladesh
Ukraine
Uzbekistan
Kazakhstan
HQ
Others
Total*
2021
28,235
5,091
1,128
3,794
1,555
3,868
116
799
44,586
As of December 31,
2020
26,453
4,539
1,137
3,628
1,604
2,521
187
824
2019
28,003
4,325
1,200
3,527
1,594
2,142
286
2,634
40,893
43,711
* Total number of employees does not include employees in our Algeria operations, which has been classified as a discontinued operation.
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, 2021, 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
Total
Russia
Pakistan
Ukraine
Kazakhstan Uzbekistan Bangladesh
As of December 31, 2021
21
24
18
13
5,027
804
1,469
1,281
14,799
3,130
2,020
4,915
471
982
541
250
76
266
964
444
775
65
59
1,501
231
660
53
129
12
430
352
146
370
35
210
8
344
552
123
35
23
43
28,235
5,091
3,794
3,868
1,555
1,128
(1) A breakdown of employees by category of activity is not available for our HQ segment and our “Others” category.
We have established a joint works council (“Joint Works Council”) for VEON Ltd, VEON Holdings B.V., VEON
Amsterdam B.V., and VEON Central Procurement B.V. 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. As of December 31, 2021, we had a
separate works council for VEON Wholesale Services B.V. (“VWS”) that addresses management decisions that may affect the
VWS workforce, and we are currently working to integrate the VWS works council into the Joint Works Council. Once integrated,
the Joint Works Council 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 Joint Works Council.
Our employees are represented by unions or operate collective bargaining arrangements in Kyrgyzstan and Ukraine.
We consider relations with our employees to be generally good. For a discussion of risks related to labor matters, see —General
Risk Factors—Our business may be adversely impacted by work stoppages and other labor matters.
Share Ownership
To our knowledge, as of April 15, 2022, none of our directors or senior managers beneficially owned more than 1.0% of
any class of our capital stock. See —Major Shareholders. — Major Shareholders And Related Party Transactions.
To our knowledge, as of April 15, 2022, Kaan Terzioğlu owned 900,000 of our ADSs and/or Common Shares. In
addition, in 2021, Kaan Terzioğlu, Serkan Okandan, Dmitry Shvets, Alex Bolis, Joop Brakenhoff, and Michael Schulz were
granted one-off share awards of 1,549,800, 444,343, 191,429, 128,572, 393,236, and 291,429, respectively. These one-off share
awards were granted in order to compensate GEC members for the initial loss of cash due to the introduction of 50% shares into
47
the STI scheme effective in 2022, and were subject to finalization of the incentive plan rules that occurred on February 24, 2022
and are subject to an up to two year vesting period.
To our knowledge, as of April 15, 2022, Yaroslav Glazunov owned 68,500 of our ADSs. In addition, Gennady Gazin and
Hans-Holger Albrecht were awarded 1,224,086 and 1,360,095 ADSs, respectively in July 2021, subject to the finalization of our
incentive plan rules that occurred on February 24, 2022, as an annual pro-rata time based award that will vest on June 10, 2022.
To our knowledge, as of April 15, 2022, apart from what has been disclosed above, no other members of the Board of
Director owned any ADSs or Common Shares. To our knowledge, as of April 15, 2022, none of our directors or senior managers
held any options to acquire our common shares.
For more information regarding share ownership, including a description of applicable stock-based plans and options,
see Note 22—Related Parties to our Audited Consolidated Financial Statements.
48
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 April 15, 2022, by
each person who is known by us to beneficially own 5.0% or more of our issued and outstanding shares. As of April 15, 2022, we
had 1,756,731,135 issued and outstanding common shares. None of our shareholders has different voting rights.
Name
L1T VIP Holdings S.à r.l.(1)
Stichting Administratiekantoor Mobile Telecommunications
Investor (2)
Exor N.V.
Number of VEON Ltd.
Common Shares
840,625,001
Percent of VEON Ltd.
Issued and Outstanding
Shares
47.85
145,947,562
89,174,902
8.31
5.10
(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 Administratiekantoor Mobile Telecommunications Investor (the “Stichting” with the SEC,
the 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. Based on information provided by the Stichting and public filings, (i)
the Stichting is a legal foundation established under Dutch law solely for non-for-profit purposes with no beneficial owners in respect of equity held by the
Stichting; (ii) the Stichting has no owners/shareholders; (iii) the Stichting holds title in VEON’s equity and votes and disposes of it in the sole discretion of
its board and is exclusively controlled by its board; and (iv) the articles of association and the Conditions of Administration of the Stichting provide that the
board members are fully independent from VEON, and LetterOne, its shareholders and any of their affiliates. Although LetterOne is contractually entitled
to the economic benefits of the depositary receipts and, indirectly, of the common shares represented by the depositary receipts held by the Stichting
(e.g., dividend payments, other distributions and sale proceeds), LetterOne has no control over voting or disposition of such equity. 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 April 15, 2022, a total of 1,228,276,40
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 511,889,772 common shares representing approximately 29.14% 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 16,564,960 common shares
representing approximately 0.94% 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 April 15, 2022, 23 record holders of VEON Ltd.’s ADRs, holding an aggregate of 763,528,329 common shares
(representing approximately 43.46% 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 13G, filed with the SEC on March 14, 2022 by Exor N.V., Exor N.V. bought 89,174,902 of
VEON Ltd. common stock, in the form of ADSs. This transaction represented approximately 5.1% of the total outstanding
common stock of VEON Ltd.
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.
49
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 22—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.
Board of Directors
Compensation paid to the Board of Directors is disclosed in — Directors and Senior Management — Compensation.
Mikhail M. Fridman, a former director of VEON Ltd., served as the Chairman of the Supervisory Board of the Alfa Group
Consortium and was a member of the board of directors of JSC Alfa-Bank, until February 28, 2022.
In September 2021, VEON Holdings B.V. issued senior unsecured notes of RUB 20 billion, under its global medium term note
program, maturing in September 2026, and the Alfa Group participated in the issuance as an underwriter.
In December 2021, VEON Finance Ireland Designated Activity Company, an indirect wholly-owned subsidiary of VEON Ltd.,
concluded a loan facility with JSC Alfa-Bank of RUB 45 billion, which was subsequently novated to PJSC VimpelCom. See
Operating and Financial Review and Prospects—Recent Developments after year end 2021—Novation of Loans for more details
on the novation of the loan.
The Alfa Group also participated in our RCF, which we entered into on March 9, 2021, following their purchase of a 10%
interest in the syndication, which was cancelled in March 2022. See Operating and Financial Review and Prospects—Recent
Developments after year end 2021—Liquidity Update for more details.
In January 2021, VEON Ltd. entered into an agreement with Alexander Pertsovsky, a 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 the Board of Directors). The initial term of the agreement was for one year,
which was then extended through to June 2022, although either party may terminate the agreement for any reason upon 30 days
written notice. The agreement was terminated by VEON Ltd. in March 2022.
Except as specified above, during 2021 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.
50
HOW WE MANAGE RISKS
VEON has adopted the criteria set forth in the Enterprise Risk Management – Integrating with Strategy and Performance – 2017,
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as the foundation of our enterprise
risk management (ERM) 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. The VEON ERM framework
is implemented and consistently applied throughout the organization through a well-defined governance structure and a robust
ERM process. The ERM framework also supports identifying opportunities that enable us to achieve our strategic objectives and
enable sustainable growth.
Strengthening our risk culture: three lines of defense
The ‘three lines of defense’ approach provides a simple and effective way to enhance communications around governance, risk
management and control by clarifying roles and responsibilities. VEON has adopted this model to provide reasonable assurance
that risks to achieving strategic objectives are identified and mitigated.
First line of defense
VEON recognizes that the first line of defense consists of the business, who owns and is 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 program in 2019 which continued through 2021. This program 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, which was launched to reinforce accountability and ownership for risk management and the internal
control environment. During 2021, a Risk Culture survey assessment was performed across our nine operating companies
(OpCos) and our HQ with the help of an external consultancy firm. This exercise was aimed at supporting management in
assessing the risk culture within the organization based on eight risk culture dimensions, and to identify potential actions to
strengthen or improve VEON’s risk culture in comparison with an external benchmark. Based on the results of the survey, almost
all risk culture dimensions at VEON outperformed the external consultant’s benchmark, which demonstrates a very positive
outcome. To further improve risk culture and capitalize on survey results, a set of recommendations was provided by the external
consultant tailored for each OpCo and HQ based on the assessment of each of the eight dimensions. The recommendations
were not mandatory in nature but were embraced as an opportunity to ensure a continuous improvement in risk culture and
served as the basis for action plans development. Status of the action plans and progress of the OpCos is tracked periodically
and reported to the OpCos’ Business Risk Committees (BRC) and the Group Audit & Risk Committee (ARC).
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.
Group ERM provides general oversight on ERM activities in the OpCos, such as quarterly risk reporting as well as
facilitating the Group functions with the performance of regular deep dives on specific risks, for example, Regulatory and Tax
risks, and assessments of Anti-bribery and Corruption (ABC), Anti-money Laundering (AML), and International Sanctions and
Export Controls risks. The ERM process is also embedded into the strategy setting and business planning process to ensure
consistency and completeness of VEON’s risk profile and that informed risk-based decisions are taken. Group ERM also
provides guidance on ERM reporting at BRC and leads the annual process of reviewing and revising VEON’s Risk Appetite with
the VEON Group Executive Committee members, approving it with the Group CEO and presenting the outcome to the ARC. The
Risk Appetite is then formally communicated to OpCos for local application in decision making and submission of business
decision approvals to their respective OpCo VEON Board.
Third line of defense
The Group Internal Audit function 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 financial,
information technology, strategic and operational audits in accordance with its annual plan and special investigations or audits,
as and when considered necessary. Throughout, Internal Audit conducts its activities in a manner based on a continuous
evaluation of perceived business risks.
51
Defining our risk appetite
Defining our risk appetite in line with the COSO Framework, the VEON Enterprise Risk Management (ERM) Framework
groups 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 strategic and business objectives, as
well as potential threats to achieving these objectives. On an annual basis, the VEON appetite statements for each category of
risk are revised and approved by the VEON Group Executive Committee and presented to the ARC. These statements are then
integrated into the business through our group 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 inherent risks involved in doing business. We
consider the potential effects of the business context on our 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 on the ability to
execute VEON’s strategy and business objectives. The severity of risk is assessed at multiple levels of the business as it may
vary same across functions and operating companies.
52
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.
4. Monitor, report and escalate:
VEON’s Group Executive Committee 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 to the ARC (at least on a quarterly
basis), to evaluate material Group risks. Top Group risks include HQ-specific risks, as well as consolidated assessment of key
risks from the OpCos. Local risk assessments are also reviewed by OpCo CEO and Senior Management and are reported to the
BRCs and OpCo Boards.
The Board of Directors maintains a number of committees, including the ARC, OpCo Boards and BRCs, which provides
independent oversight of the ERM framework and the timely follow-up on critical actions based on the progress updates.
To ensure strong governance and oversight of our risks, we established in each of our OpCos a BRC and an OpCo
Board. Each OpCo’s BRC, is chaired by either the Group Chief Financial Officer, his nominee or the Group Chief Internal Audit &
Compliance Officer. The purpose of the OpCo BRCs is to consider the overall risk profile of the OpCo and the Group and ensure
risk informed decision making. The OpCo BRC regularly reviews the OpCo’s governance and decision-making framework and
compliance with VEON Group and OpCo requirements, including those set out in the VEON Group Authority Matrix/Delegation
and policies. The BRC also receives, reviews and makes recommendations on reports from OpCo management regarding any
noncompliance with the VEON Group Authority Matrix/Delegation and policies. The BRC provides active VEON Group-level
governance, oversight and policy guidance and aligns the activities of the Group’s various assurance functions to coordinate and
manage actions efficiently in support of the local OpCo VEON Board and the VEON Board in its oversight role for the VEON
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 (at least once per quarter) and is accompanied by recommendations of its OpCo Business Risk
Committee. This program is continuously monitored by OpCo management and the OpCo Boards, and reviewed 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.
5. Assure:
On a quarterly basis, through our management certification process, OpCo CEOs and CFOs certify that 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, including our risk appetite.
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 the Sarbanes-Oxley Act (SOX). Section 404 of SOX requires that management perform an
assessment of the Internal Control over Financial Reporting (ICFR) and disclosures 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 OpCo Business Risk
Committees, OpCo VEON Boards, members of our Group Executive Committee, 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 2021 see Director's
Report section in these Financial statements.
Our Disclosure and Review Committee supports our Group Chief Executive Officer and Group Chief Financial Officer in
ensuring that public disclosures made by VEON are accurate and complete, fairly present VEON's financial condition and results
of operations in all material respects, and are made on a timely basis, in compliance with applicable laws, stock exchange rules
and other regulatory requirements.
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
53
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 Chief Executive Officer and Chief Financial Officer. 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/Delegation has been established and is regularly reviewed and updated. It provides clarity on
the role and focus of the VEON’s corporate HQ, empowers OpCos to ensure they have the appropriate scope of authority and
accountability to operate and manage local businesses, and ensures requisite oversight and control across the Group by CEOs
and management teams and OpCo and VEON Boards, among other things.
We have a Group-wide, quarterly management certification process in place, which requires the Chief Executive Officer
and Chief Financial Officer at each of our OpCos and certain Group Functional directors at our HQ 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 procedures, including compliance with VEON’s
principles, procedures and policies on ethics and compliance, fraud prevention and detection, accounting and internal
control standards, and disclosure requirements
Compliance with local laws and regulations
Compliance with the VEON Accounting Manual
Internal disclosure obligations
Deficiencies, if applicable, in design and operation of internal controls over financial reporting have been reported
Key risks table for VEON and example of mitigation and 2021 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 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: =
54
Risk
1. Market
Examples of how we mitigate
Some examples of 2021 developments
Our business is subject to a variety of market-related risks across our geographies. These include:
é The ongoing conflict between Russia
and Ukraine and the related responses
of the United States, the European
Union, the United Kingdom and certain
other nations, as well as related
responses by our service providers,
partners, suppliers and other
counterparties, have and will continue
to impact our operations in Russia,
Ukraine and elsewhere, including via
reputational harm.
é Foreign exchange-related risks since
a significant proportion of our costs and
liabilities are in US dollars and Russian
rubles while a proportion of our
revenue is in a variety of other
currencies.
é Unfavorable economic conditions
and the impact of geopolitical
developments and unexpected global
events outside of our control, such as,
pandemics, wars, international
economic sanctions and export
controls, especially those recently
imposed on Russia, among other
factors.
é Emerging markets-related risks
given that all 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 capital controls
and rules on foreign investment, as well
as social instability and military
conflicts.
é Risk related to our ability to continue
as a going concern as a result of the
effects of the ongoing conflict between
Russia and Ukraine.
é Competition since we operate in
highly competitive markets which may
impact our ability to attract, retain and
engage customers and achieve our
financial targets.
= Keeping pace with technology since
our future success will depend on our
ability to effectively anticipate and
adapt to the changes in the
technological landscape and deploying
networks and services that these
enable.
• We closely monitor the developments
• Project ‘Optimum’ was rolled out in 2021
related to international economic
sanctions, including those recently
imposed on Russia as well as
counter-sanctions being rolled out by
Russia, which allows us to adapt our
services and capital structure
accordingly in a timely manner and to
ensure the Group acts in accordance
with applicable sanctions
requirements.
• We hedge part of our exposure to
fluctuations on the translation into US
dollars of the revenues and
expenditures of its foreign operations
by holding borrowings in local
currencies and by the use of foreign
exchange swaps and forwards.
• We review and analyze OPEX and
CAPEX expenditures on an ongoing
basis to optimize the cost structure
while maintaining our commitments
towards VEON’s employees,
government and financial institutions
and our critical business partners.
• 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 have taken a number of
measures to protect our liquidity and
cash provision, such as accumulating
a significant cash balance at HQ and
maintaining a RCF from a group of
diversified lenders headquartered in
the United States, Europe and Asia.
• We develop and offer customers new
digital products and services in line
with our digital operator strategy,
which is focused on delivering high-
quality and seamless services to our
customers.
• We are monitoring and responding to
technology developments and
competitor activity that could have an
impact on us achieving our goals.
throughout the Group to drive sustainable
cost efficiency with P&L impact, focusing
on all structural costs and headquarters.
The project is driving short-term tactical
improvement and long-term structural
savings.
• On 1 July 2021, we exercised our put
option in Algeria to sell the entirety of our
stake in our Algerian subsidiary to the
Algerian National Investment Fund, Fonds
National d’Investissement (“FNI”). Under
the terms of the shareholders’ agreement
with the FNI, the transaction is expected
to be completed in the second quarter of
2022, unless any disagreements develop,
or any existing disagreements are
exacerbated. Conclusion of this deal will
allow to further streamline our operations,
with an improved focus on our core
markets.
• We have concluded and officially
communicated that Group liquidity is
sufficient to fund the business operations
for at least another 12 months. As at 13
April 2022, VEON has USD 1.3 billion in
cash and deposits, which is mostly held
with international banks from the
European Union, the United States and
Japan, and USD 0.7 billion in undrawn
revolving credit facilities. As at the date of
this Annual Report, VEON Holdings B.V. is
in the process of drawing down the
remaining committed amounts under the
RCF, with a portion of the related
utilization request having been received
as of such date. Once the drawdown is
complete, the RCF will be fully drawn. The
proceeds of this drawing will be used for
general corporate purposes.
• In 2021 in Pakistan, we secured a
syndicated credit facility from a banking
consortium for an amount of USD 320
million. This 10-year facility is being used
to finance the company’s ongoing 4G
network rollouts and technology upgrades,
as well as to address upcoming maturities.
• In accordance with our digital operator
strategy, in Russia Beeline has launched a
first joint tariff plan with Yandex.Plus,
which includes connectivity services as
well as access to Kinopoisk, Yandex
Music and cashback points in Yandex
services.
Continued next page
Con
55
Risk
1. Market
Examples of how we mitigate
Some examples of 2021 developments
Our business is subject to a variety of market-related risks across our geographies. These include:
• In Pakistan, JazzCash has introduced a
unique digital-first shopping experience
AlaCart on its mobile app, powered by
largest logistics provider TCS.
• In Kazakhstan, we launched the country’s
first digital payment card integrated with
MFS offering under the “Simply” brand.
• In 2021, in Russia we acquired IBS
DataFort a cloud IT infrastructure provider,
which will be integrated into Beeline’s
BeeCLOUD business unit. This will enable
to expand the portfolio of cloud services
for business customers, as well as offer
new products and integrated solutions at
the intersection of cloud, cybersecurity,
Big Data analytics and IoT.
56
Risk
2. Liquidity & Capital
Examples of how we mitigate
Some examples of 2021 developments
• We have a centralized treasury
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:
é 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 dividends or
currency restrictions in the countries in
which its subsidiaries operate, as well
as the ongoing conflict between Russia
and Ukraine, impacting local
economies and our operations in those
countries.
with respect to refinancing our debt and
concluded it to be possible based on
liquidity in the markets we have access to,
and our recent history of refinancing, also
taking into account recently introduced
additional US, EU and UK sanctions
against Russian financial institutions.
• Our 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.
function whose job is to manage
liquidity and funding requirements as
well as our exposure to financial and
market risks.
• We assessed the concentration of risk
• We have entered into a new multi-
• We monitor our risk to a shortage of
funds using a recurring liquidity
planning tool. Our 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 primary objective of our 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. We manage our
capital structure and make
adjustments to it in light of changes in
economic conditions.
• 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.
é 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, especially in case of breach of
covenants, significant FX volatility or
impaired ability to generate revenue
due to the ongoing conflict between
Russia and Ukraine.
é Access to capital since VEON’s
substantial amounts of indebtedness
and debt service obligations may not
be fully covered by our cash flow and
VEON’s worsened credit rating might
hinder our ability to access capital
markets on acceptable terms, both in
terms of interest rate and financial
covenants.
é 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. In addition,
restrictions on international transfers,
foreign exchange or currency controls
and other requirements might restrict
our activity in certain markets in which
we have operations, including as a
result of the ongoing conflict between
Russia and Ukraine.
57
currency revolving credit facility (RCF)
agreement of USD 1.25 billion with
commitments from international banks
from Asia, Europe and the US. This RCF
supports Group’s liquidity profile and
provides greater financial flexibility. As at
the date of this Annual Report, VEON
Holdings B.V. is in the process of drawing
down the remaining committed amounts
under the RCF, with a portion of the
related utilization request having been
received as of such date. Once the
drawdown is complete, the RCF will be
fully drawn. The proceeds of this drawing
will be used for general corporate
purposes.
• In December 2021 we have also signed
two bilateral loans in Russia with
Sberbank and Alfa bank for a total amount
of approximately USD 1,215 million. Due
to the US and UK sanctions rolled out
against these Russian banks, both loans
were novated to our Russian subsidiary
PJSC VimpelCom, with the former
borrower (VEON Finance Ireland DAC)
and the former guarantor (VEON Holdings
BV) having been released. In addition, the
novation of these loans has allowed us to
ensure that the majority of the Group’s
RUB liabilities are matched to the market
where RUB revenues are generated,
enabling further review of the capital
structure of PJSC VimpelCom.
• During 2021 we had a RUB drawdown
under our MTN program established in
April 2020. This was the fourth drawdown
overall and its net proceeds are used for
general corporate purposes.
• During 2022 we expect to receive
dividends from certain of our OpCos (net
of amounts paid to minorities), however
the ability of our subsidiaries to pay
dividends is not guaranteed, as it depends
on the success of their businesses and
may be restricted by applicable corporate,
tax and other laws and regulations.
• In addition, proceeds from the sale of our
stake in the Algerian subsidiary, Omnium
Telecom Algérie SpA, could provide
additional liquidity cushion during the year,
subject to absence of any disagreements
or exacerbation of any existing
disagreements.
Risk
Examples of how we mitigate
Some examples of 2021 developments
3. Operational
VEON is a complex business operating across nine markets at various levels of development and each with a variety of
opportunities and challenges. These give rise to operational risks, which include:
é Cyber-attacks and other
cybersecurity threats, 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.
é Network stability and business
continuity risks given that our
equipment and systems are subject to
damage, disruption and failure for
various reasons, including as a result of
the ongoing conflict between Russia
and Ukraine.
é 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
and export restrictions such as a result
of the ongoing conflict between Russia
and Ukraine), natural disasters,
pandemics and similar unforeseen
events.
= 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 countries,
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.
Continued next page
• We monitor and log our network and
• We are enhancing our cyber security
systems, and keep raising our
employees' security awareness
through training, and operate a
structured vulnerability scanning
process within our security operations
centers.
• Each OpCo monitors the business
continuity risks and ensures
appropriate mitigation action plans,
activities and systems are put in place
to minimize risks of network instability
and disruption.
• We reduce our reliance on single
vendors to the extent possible and
opt for use of alternative suppliers
where possible and ensure
compliance with the applicable
licensing and approval requirements
in case of sanctions and export
control restrictions.
• 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 remain committed to simplifying
our business structure, which extends
to our local partnerships.
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.
• Our operating companies are in the
process of implementing ISO 27001
standard by identifying potential gaps with
the help of third-parties and resolving
those gaps in accordance with the
standard requirements.
• Due to the rolled-out US export control
restrictions, our Russian subsidiary is
continuously assessing the developments
in relevant licensing requirements to
ensure continuity of the supply chain and
compliance with all the applicable
restrictions.
• To lessen the dependency on Chinese
vendors, during 2021, a swap of Huawei/
ZTE equipment has taken place in
Ukraine, where the IP MLPS tender was
awarded to CISCO, and in Georgia, which
partnered with Nokia for the core network
modernization, which is now the sole
provider for VEON Georgia.
• 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 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.
• On 1 December 2021 the sale of our
Russian tower assets was successfully
concluded. The transaction involved the
sale of 100% of National Tower Company
("NTC"), a subsidiary of VEON, which
operates a portfolio of approximately
15,400 mobile network towers in Russia,
to Service-Telecom.
Continued next page
Con
58
Risk
3. Operational
Examples of how we mitigate
Some examples of 2021 developments
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:
= 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 substantial
and ongoing expenditures by us, in
order to sustain our operations, in
addition to risk of maintaining our
infrastructure in Ukraine and
responding to the ongoing conflict as it
develops further.
= 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.
• In 2021 in Kazakhstan and Uzbekistan we
partnered with Amdocs for new
monetization, service and network
automation solutions, catalogue
management, commerce and care
systems, as well as enabling new multi-
channel front ends for digital services.
This will provide us the business agility
and IT velocity needed in our digital
operator transformation.
• In March 2021 VEON purchased the
remaining 15% shareholding in Pakistan
Mobile Communications Limited
("PMCL"), the operating company of
Pakistan's leading mobile operator Jazz,
from the Abu Dhabi Group, so now VEON
owns 100% of PMCL.
• Ukrainian OpCo is in the process of sites
restoration and critical infrastructure
relocation when and where possible to
ensure service continuity.
• We have also acquired new spectrum in
Bangladesh, 40 MHz of spectrum from the
2300 MHz band, to boost our network
capacity, enhance spectral efficiency and
further increase customer satisfaction. In
Russia, Beeline has also expanded its 4G
coverage, which enabled an increase in
the average speed of mobile internet by
up to 30%. In Pakistan, Jazz signed a 4G
license renewal for 15 years.
59
Risk
4. Legal
Examples of how we mitigate
Some examples of 2021 developments
Our business is subject to a variety of laws and regulations, including:
é Regulatory & compliance risks given
that we operate in a highly regulated
industry 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, including fines and
penalties, with respect to regulatory
compliance.
é Sanction and export controls risks
since we are 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 and especially in
connection with the ongoing conflict
between Russia and Ukraine.
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.
é Unpredictable tax claims, decisions,
audits & systems, as well as changes
in applicable tax treaties, laws, rules or
interpretations, which could give rise to
significant uncertainties and risks that
could complicate our tax planning and
business decisions.
= Unethical or inappropriate behavior,
including potentially bribery and
corruption, 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.
= Money Laundering rules which
require Anti-Money Laundering (AML)
and Counter-Terrorism Financing (CTF)
systems and controls due to our
expansion of Digital and Mobile
Financial services (DFS and MFS)
offerings beyond our core
telecommunications services.
= 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.
• We maintain good bilateral
• Our Legal team, with support from
external counsel, have assessed the
impact of the sanctions on our major
shareholder and their shareholders and
concluded that VEON is not subject to UK,
US or EU sanctions as of the 29 April
2022.
• Since 24 February 2022 the US and the
UK, as well as the EU since 6 April 2022,
have imposed full blocking sanctions on
VTB bank in Russia . On 9 March 2022
we pre-paid and closed a RUB 30 billion
(approximately USD 259 million) interest-
bearing loan with VTB Bank. Following
this payment to VTB, VEON has no further
loans outstanding with VTB. As of 6 April
2022, both Sberbank and Alfa Bank were
also sanctioned by the US and UK. Both
Sberbank and Alfa Bank loans were
novated to PJSC VimpelCom, with the
former borrower (VEON Finance Ireland
DAC) and the former guarantor (VEON
Holdings BV) having been released for
their obligations. In addition, the novation
of these loans has allowed us to ensure
that the majority of the Group’s RUB
liabilities are held within Russia and as
such are matched to the market where
RUB revenues are generated, enabling
further review of the capital structure of
PJSC VimpelCom.
• A central Export Administration
Regulations (EAR) database has been
created and is being utilized by the Group
since October 2021 with regards to US
sanctions and export controls against
HUAWEI. This "living list" contains more
than 15 thousand SKUs (stock keeping
unit) from HUAWEI and is being regularly
updated. OpCos check items against this
list before any purchase, return, re-sale or
utilization of equipment of SKUs to ensure
EAR compliance.
• The Tone at The Top (TaTT) model was
introduced in 2021, which focuses on fully
embedding the new operational model
and proper change management to realize
value creation, protect and strengthen
VEON's reputation, and better align the
Board, GEC and OpCo management on
company culture.
• OpCo Business Risk Committees (BRCs)
are utilized to ensure Group management
is in close alignment with local OpCo
managers and key risks they face, and
that effective, informed and risk-based
decision making by the local OpCo Boards
and VEON's Board takes place.
relationships with the regulatory
authorities in our operating markets in
order to help us understand and
adapt to their concerns with respect
to local regulation.
• We closely monitor the developments
related to international economic
sanctions and export controls to
comply with applicable sanctions and
export control requirements and
restrictions.
• 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.
• Developments in tax legislation and
requirements as well as tax claims
and decisions are monitored by local
tax teams with oversight from HQ to
ensure compliance with tax reporting
and timely mitigation of possible tax
disputes and audits.
• 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 an Ethics & Compliance
program which includes a
comprehensive approach to
detecting, investigating, remediating
and reporting misconduct, as well as
fostering a strong Tone at The Top
(TaTT) to encourage discussions
about behavior and values and to
optimize the cooperation and
communication between HQ and
OpCos to ensure appropriate
standards of behaviors are
communicated throughout the Group
and enforced locally.
• We maintain appropriate know-your-
customer (KYC) and anti-money
laundering (AML) controls across our
DFS and MFS products and services
as required by local rules and
international best practices.
• We maintain a privacy program that
includes data privacy controls such as
privacy assessments, data breach
response and individual rights
processes, to ensure we comply with
EU and local data privacy laws for the
collection and processing of personal
60
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.
Risk Factor Summary
The following summarizes the principal risks that could adversely affect our business, operations and financial results.
Before purchasing our shares listed on AEX, you should carefully consider all of the information set forth in this Annual Report
including, but not limited to, the risks set forth in this section.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 the ongoing conflict between Russia and Ukraine, such as its adverse impact on the economic
conditions and outlook of Russia and Ukraine; physical damage to property, infrastructure and assets; the effect of
sanctions and export controls on Russia and counter-sanctions enacted by Russia, in each case, on our supply chain,
the ability to transact with key counterparties, obtain financing and the ability to operate our business; the resulting
volatility in the Russia ruble and Ukrainian hryvnia; our ability to operate and maintain our infrastructure; reputational
harm we may suffer as a result of the conflict and geographical location of our operations; and its impact on our liquidity,
financial condition and our ability to operate as a going concern;
risks related to solvency and other cash flow issues, including our ability to raise the necessary additional capital and
raise additional indebtedness, our ability to comply with the covenants in our financing agreements, the ability of our
subsidiaries to make dividend payments, our ability to upstream cash from our subsidiaries, our ability to develop
additional sources of revenue and unforeseen disruptions in our revenue streams;
risks relating to foreign currency exchange loss and other fluctuation and translation-related risks;
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, 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;
risks related to the impact of export controls, international trade regulation, customs and technology regulation, on the
macroeconomic environment, our operations, our ability, and the ability of key 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;
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 ongoing COVID-19 pandemic, and other potential public health events, contagions and diseases,
such as adverse impacts on our financial performance resulting from lockdown restrictions or dangerous, new variants;
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 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 that the adjudications, administrative or judicial decisions in respect of 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;
61
•
•
•
•
•
•
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, laws regulating the ability
to provide goods and services to governmental customers, regulatory uncertainty regarding our licenses, regulatory
uncertainty regarding our product and service offerings and approvals or consents required from governmental
authorities in relation thereto, 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;
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 related to the ownership of our shares, 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 this section.
For a more complete discussion of the material risks facing our business, see below.
Market Risks
The ongoing conflict between Russia and Ukraine is having, and will continue to have, a significant impact on our
business, financial condition, results of operations, cash flows and prospects.
The ongoing conflict between Russia and Ukraine, and the sanctions imposed by the United States, member states of
the European Union, the European Union itself, the United Kingdom, Ukraine and certain other nations, countermeasure
sanctions by Russia and other legal and regulatory measures, as well as responses by our service providers, partners, suppliers
and other counterparties, and the consequences of all the foregoing, have negatively impacted and will continue to negatively
impact our results and operations in Russia and Ukraine, and may affect our results and operations in the other countries in
which we operate. Specifically, the ongoing conflict has had a marked impact on the economies of Russia and Ukraine. See
Operating and Financial Review and Prospects—Recent Developments after year end 2021—The Conflict Between Russia and
Ukraine. Our operations in Russia and Ukraine represented approximately 51% and 14% of our revenue for the year ended
December 31, 2021.
In Russia, economic conditions and outlook have deteriorated significantly since the beginning of the conflict. We expect our
results of operations in Russia on a U.S. dollar basis to be lower for the foreseeable future compared to results prior to the onset
of the conflict, largely due to the volatility of the Russian ruble. For example, the Central Bank of Russia exchange rates of the
Russian ruble to U.S. dollar was 74.3 on December 31, 2021 and depreciated to 120.4 as of March 11, 2022 and appreciated to
81.3 as of April 15, 2022. See —We are exposed to foreign currency exchange loss, fluctuation and translation risks, including as
a result of the conflict between Russia and Ukraine. Annual inflation in Russia accelerated to 9.15% in February 2022, compared
to 5.17% in February 2021. In response to accelerating inflation and the depreciation of the Russian ruble, on February 28, 2022,
the CBR increased its key interest rate from 9.5% to 20.0%, which was subsequently reduced to 17.0%, effective on April 11,
2022. Due to these monetary policy changes and the anticipated decline in the Russian economy, the domestic financial and
banking markets may experience periodic shortages of liquidity in the domestic money market. Lower money supply and higher
funding costs may cause banks to cut their lending programs and decrease exposure limits and become significantly more risk
averse. These factors could negatively affect the Russian banking sector as a whole and contribute to the worsening of economic
conditions in the corporate sector, as well as lower household spending across various retail sectors of the economy. See—The
international economic environment, geopolitical developments and unexpected global events could cause our business to
decline for a more detailed discussion on how this could affect our business.
The ongoing conflict between Russia and Ukraine, and related economic sanctions and export control actions against
Russia have also led to a surge in certain commodity prices, including wheat, oil and gas, which may have an effect on our
customers and their spending patterns. As of March 8, 2022, several countries, including the United States, announced sanctions
on oil and gas exports from Russia, while the United Kingdom announced a phase out of Russian oil imports by the end of 2022,
all of which is expected to further negatively impact the Russian economy and cause fossil fuel prices to increase. If additional
countries were to impose further sanctions on fossil fuel exports from Russia, or the existing sanctions were accelerated or
tightened, the price increases for related products would be exacerbated, which could cause further strain on our customers.
62
Rising fuel prices also make it more expensive for us to power our networks and operations. Furthermore, the Russian economy
is also expected to be significantly affected as result of many U.S. and other multi-national businesses across a variety of
industries indefinitely suspending their operations and pausing all commercial activities in Russia. These corporate boycotts have
resulted in supply chain disruptions and unavailability or scarcity of certain raw materials, goods and services in Russia, which
may in turn have a spillover effect on the wider Russian economy, which could negatively impact our business. As a result of the
above, unemployment rates in Russia have risen significantly, and could rise further if the conditions mentioned above are
sustained. This could cause affected customers to downgrade or disconnect their services, and make it more difficult for us to
maintain ARPUs and subscriber numbers at existing levels within Russia.
In the current climate, whether in connection with such sanctions or otherwise, the possibility of a sovereign debt default
in Russia cannot be excluded. On April 6, 2022, the Russian Ministry of Finance announced that it had attempted to pay interest
on certain U.S. dollar bonds in U.S. dollars, but was unable to do so when the U.S. Treasury Department did not grant approval
for a dollar payment through the U.S. correspondent bank. As a result the interest payment was made in rubles, though the terms
of the bonds do not contain provisions allowing payment in another currency. The Credit Derivatives Determinations Committee
of ISDA ruled on April 20, 2022 that such failure to pay interest in U.S. dollars is a potential default (which would mature into a
default 30 days after the required interest payment date if payment has not been paid in U.S. dollars prior to the end of such
grace period). Standard & Poor’s Credit Market Services Europe Limited (“Standard & Poor’s”) downgraded its credit rating of
the Russian Federation to “selective default” following the missed U.S. dollar payment. Even prior to the April 6, 2022
announcement, the credit rating of the Russian Federation had been downgraded by each of Fitch Ratings CIS Limited (“Fitch”),
Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s, as a result of the negative impact on the Russian economy
from the new international sanctions imposed on Russia and the economic isolation by parts of the international business
community, as well as countermeasures introduced by the Russian government. Each of these agencies subsequently withdrew
their Russia ratings following the EU prohibition on providing credit ratings to entities established in the Russian Federation.
While we cannot predict the effects of a sovereign default, on the Russian economy, such effects could be pronounced and
prolonged.
As of April 15, 2022, it is estimated by the United Nations High Commissioner of Refugees that approximately 4.85
million people have fled Ukraine and the country has sustained significant damage to infrastructure and assets. If the ongoing
conflict persists, we could lose a percentage of our customer base in Ukraine if Ukrainian refugees choose to relocate
permanently outside of Ukraine and switch to local providers. This could have a significant impact on their use and spending on
our services. We have been and will also incur additional expenditures to maintain and repair our mobile and fixed-line
telecommunications infrastructure in Ukraine as a result of any damage inflicted on our infrastructure due to the ongoing conflict,
as well as for security, increased energy costs and related operational and capital expenditures.
In addition, our ability to provide services in Ukraine may be impaired if we are unable to maintain key personnel within
Ukraine or our infrastructure within Ukraine is significantly damaged or destroyed. We have developed and, in some cases,
implemented additional contingency plans to relocate work and/or personnel to other geographies and add new locations, as
appropriate. Our business continuity plans are designed to address known contingency scenarios to ensure that we have
adequate processes and practices in place to protect the safety of our people and to handle potential impacts to our operations.
Our crisis management procedures, business continuity plans, and disaster recovery capabilities may not be effective at
preventing or mitigating the effects of prolonged or multiple crises, such as civil unrest, military conflict and a pandemic in a
concentrated geographic area. The current events in the regions where we operate in Ukraine and where we derive a significant
amount of our business may pose security risks to our people, our facilities, our operations, and infrastructure, such as utilities
and network services, and the disruption of any or all of them could significantly affect our business, financial conditions and
results of operations, and cause volatility in the price of our securities. Due to the nature of the conflict, we cannot assess with
certainty whether such events are likely to occur, and such events may happen suddenly and without warning.
International economic sanctions may also adversely affect our ability to operate in Russia, Ukraine or elsewhere. Many
jurisdictions including the United States, the United Kingdom and the European Union have passed new legislation and
implemented new sanctions designations that are far more expansive than those previously imposed, targeting additional banks,
individuals and key sectors in and related to Russia. Among other measures, the United Kingdom has imposed sectoral
sanctions on transferable securities and money-market instruments, restrictions on correspondent banking relationships, and the
provision of certain financial services, and has also introduced a new designation capability under its Russia sanctions regime on
the basis of which anyone who is or has been involved in obtaining a benefit from or supporting the Russian government can
become a designated party and subject to sanctions, which among other things, includes persons who carry on business of
economic significance, or in a sector of strategic significance, to the government of Russia. The imposition of U.S., EU and UK
sectoral and blocking sanctions against certain Russian financial institutions has affected our ability to continue to engage with
them, and if a broader range of Russian financial institutions were to be targeted by sanctions, that would affect our ability to
continue to engage with those financial institutions in the context of existing and new loan financings, commercial agreements,
and bonds and may require us to make a change in our repayment terms, to exercise our prepayment options, or to make a
mandatory prepayment, which could require that we seek authorization from the relevant regulatory authorities and relevant
lenders or investors and we may be unable to obtain such authorizations. See —Liquidity and Capital Risks—We may not be
able to raise additional capital, or we may only be able to raise additional capital at significantly increased costs. In addition,
given the international composition of our board of directors and senior management, these sectoral and blocking sanctions have
63
required us to make certain adjustments to our corporate governance framework. Such measures could make it more difficult for
us to transact with key counterparties in Russia.
In addition, Ukraine has also introduced new measures in response to the ongoing conflict with Russia, which include
local banking and capital restrictions that prohibit our Ukrainian subsidiary from making any interest or dividend payments to us
and requiring government approval for the payment of foreign vendors, and other restrictive measures that target companies that
have Russian affiliations, such as the increase of taxes by 150% on our Ukrainian subsidiary as we have operations in Russia.
Furthermore, the government of Russia has introduced countermeasure sanctions, which, together with any such future
measures, could make it more difficult for our Russian subsidiaries to transact with parties outside Russia, or with parties whose
shareholders or controlling persons are outside Russia, and could subject our legal entities and employees in Russian and/or
Ukraine to restrictions or liabilities, including capital controls, international funds transfer restrictions, asset freezes,
nationalization measures or other restrictive measures. See —Investing in emerging markets, where our operations are located,
is subject to greater risks than investing in more developed markets, including significant political, legal and economic risks for a
discussion on the introduction of nationalization laws in Ukraine.
If further sanctions issued by the United States, the United Kingdom or the European Union impact our suppliers or other
counterparties, this could result in substantial legal and other compliance costs and risks to our business operations and could
harm our business, financial condition, results of operations or prospects. Furthermore, while we have not been named as, and
have concluded that we are otherwise not, the target of the European Union’s or the United Kingdom’s sanctions as a
consequence of L1T VIP Holdings S.à r.l. (“LetterOne”) being a 47.85% shareholder in VEON (as of April 15, 2022), it cannot be
ruled out that VEON or LetterOne could become the target of future sanctions legislation or executive orders, which would
materially adversely affect our operations, access to capital and price of our securities. For example, we might be unable to
conduct business with persons or entities subject to the jurisdiction of the relevant sanctions regimes, including international
financial institutions and rating agencies, transact in U.S. dollars, raise funds from international capital markets, acquire
equipment from international suppliers or access assets held abroad. Moreover, if we become subject to U.S., EU or UK
sanctions, investors subject to the jurisdiction of an applicable sanctions regime may become restricted in their ability to sell,
transfer or otherwise deal in or receive payments with respect to our securities. We are also aware of initiatives by U.S.
governmental entities and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations or
policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with certain countries,
which, if implemented, could limit the liquidity of our securities and thereby have an adverse impact on their value.
The legislative sanctions imposed are more complex and comprehensive than any such measures to date, and are
evolving on a daily basis. We are not able to predict further developments on this issue, including those that could affect our
operations in Russia, Ukraine or elsewhere, nor can we predict when sanctions targeting Russia imposed by the United States,
the United Kingdom, the European Union and/or other countries as a result of Russia’s involvement in the ongoing conflict might
be lifted. There may be additions to the restricted parties lists (which could include VEON or certain of our counterparties) or
other expansions of sanctions by the United States, the United Kingdom, the European Union and/or other countries that target
Russia and restrict dealings with businesses operating in Russia, as well as related to Russian-occupied areas of Ukraine in the
future. The interpretation and enforcement of these new sanctions and counter-sanctions may result in unanticipated outcomes
and could give rise to significant uncertainties, which could complicate our business decisions. For example, to protect U.S.
foreign policy and national security interests, the U.S. government has broad discretion to at times impose a broad range of
extraterritorial “secondary” sanctions under which non-U.S. persons carrying out certain activities may be penalized or
designated as sanctioned parties, even if the activities have no ties, contact with, or nexus to the United States or the U.S.
financial system at all. These secondary sanctions could be imposed on us or any of our subsidiaries if they were to engage in
activity that the U.S. government determined was undertaken knowingly and rose to the level of material or significant support to,
for, or on behalf of certain sanctioned parties.
In addition to economic sanctions, our business operations could be adversely affected by export controls imposed as a
result of the ongoing conflict between Russia and Ukraine. For example, the United States imposed sweeping new export control
restrictions on Russia’s ability to obtain goods, software and technology subject to U.S. export control jurisdiction, including a
broad array of foreign-made items, that were previously not subject to U.S. export control jurisdiction. This could have an
adverse impact on our ability to maintain and/or improve our infrastructure and adversely impact the availability and quality of our
services and therefore have a material adverse effect on our operations and results of operation.
As a leading telecommunications provider in each of Russia and Ukraine, we have been adversely impacted by the
ongoing conflict. While we are still assessing the extent of the impact on our operations and financial performance, as long as the
conflict is ongoing, we expect a deterioration of our performance in Ukraine, which will be exacerbated as the conflict continues.
In Russia, the ongoing conflict between Russia and Ukraine and related sanctions will have an impact on our operations,
including as a result of the volatility of the Russian ruble and the CBR key interest rate. If there is an extended continuation or
further increase in the ongoing conflict between Russia and 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.
These are highly uncertain times and it is not possible to predict with precision how certain developments will impact our
results and operations, nor is it possible to execute comprehensive contingency planning in Ukraine due to the ongoing conflict
and inherent danger in the country. The discussion above attempts to surmise how prolongation or escalation of the conflict,
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expansion of current sanctions, the imposition of new and broader sanctions, an inability for us to transact with key suppliers and
counterparties, difficulties for us to access and service financing, and the severe depreciation of, and restrictions on, the Russian
ruble, could have a material impact on our results and operations. We cannot assure you that risks related to the conflict are
limited to those described in this Annual Report .
Our independent auditors have included an emphasis of matter paragraph on going concern in their opinion as a result
of the effects of the ongoing conflict between Russia and Ukraine.e.
The consolidated financial statements included in this Annual Report on Form 20-F have been prepared on a going
concern basis of accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and
commitments in the normal course of business. Due to the unknown duration and extent of the ongoing conflict between Russia
and Ukraine and the uncertainty of further sanctions in response to the ongoing conflict that may be imposed, there are material
uncertainties related to events or conditions that may cast significant doubt on our ability to continue as a going concern These
material uncertainties relate to our ability to maintain our financial and non-financial debt covenants and positive equity levels,
potential new sanctions and export controls imposed by the United States, European Union, and the United Kingdom that could
further impact our liquidity position and ability to attract new financing or our ability to source relevant network equipment from
vendors, as well as potential new counter-sanctions imposed by Russia that could materially impact Russia’s supply chain
stability as well VEON’s financial performance as a whole. After evaluating the uncertainties mentioned above and other
conditions and events discussed in Note 24—Basis of Preparation of the Consolidated Financial Statements to our Audited
Consolidated Financial Statements in the aggregate, our independent registered public accounting firm, in its report on our
consolidated financial statements as of and for the year ended December 31, 2021, has stated that there is substantial doubt
about our ability to continue as a going concern. Although we have taken a number of measures to protect our liquidity and cash
provisions, given the uncertainty and exogenous nature of the ongoing conflict between Russia and Ukraine and potential for
future imposed sanctions as well as potential new counter-sanctions, and the given the possible future imposition of external
administration over our Russian and Ukrainian operations in particular, we have concluded that a material uncertainty remains
related to events or conditions that may cast significant doubt on our ability to continue as a going concern, such that we may be
unable to realize our assets and discharge our liabilities in the normal course of business. See Note 24—Basis of Preparation of
the Consolidated Financial Statements to our Audited Consolidated Financial Statements for our disclosure on going concern.
We have recognized substantial impairment charges, and may in the future, recognize material impairment charges.
We have in the past recognized substantial impairment charges, and may in the future recognize material impairment
charges as a result of the impact of the ongoing conflict between Russia and Ukraine and/or from the write down of the value of
goodwill, particularly in Russia, which has a significant goodwill balance. As of the date of this Annual Report , as a result of the
factors discussed under —The ongoing conflict between Russia and Ukraine is having, and will continue to have, a significant
impact on our business, financial condition, results of operations, cash flows and prospects, we anticipate that the ongoing
conflict between Russia and Ukraine may have a material impact on our operations and business plans in Russia and Ukraine.
Over the next few months, we will be undertaking an assessment of the need and amount of potential impairment charges, which
is not as of yet determinable due to a number of factors, including the fluidity of the current situation and our ability to obtain
relevant data required to build a business plan given the ongoing conflict and associated uncertainties. We anticipate that we will
report material impairment charges with respect to assets in Ukraine and/or Russia during 2022. If there is a significant
improvement in the current underlying conditions, including a lasting resolution of the ongoing conflict, this will enable positive
adjustments to our business plans. We are still gathering the necessary data and we are not able at this time to estimate the
amount or range of this potential impairment charge to the profit and loss statement. It is possible these impairment charges may
rise to a level as to require additional analysis to determine the true value of assets as outlined in the provisions of our debt
agreements and in the worst case scenario, when the true value of assets is lower than the liabilities, could require early
repayments of our long term debt. See Note 24—Basis of Preparation of the Consolidated Financial Statements to our Audited
Consolidated Financial Statements for a more detailed discussion on the possible impact of a material impairment charge..
In addition, a significant difference between the actual performance of our operating companies and the forecasted
projections for revenue, adjusted EBITDA or capital expenditure could require us to write down the value of goodwill, particularly
in Russia, which had a goodwill balance of approximately US$1 billion as of December 31, 2021. See Note 13—Intangible
Assets to our Audited Consolidated Financial Statements for a further discussion. The possible consequences of a financial and
economic crisis in relation 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. 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. See —The international economic environment, geopolitical developments and
unexpected global events could cause our business to decline for a discussion on how the ongoing conflict between Russia and
Ukraine has impacted, and could continue to impact on our Russian subsidiary’s weighted average cost of capital.
For further information on the impairment of tangible and intangible assets and recoverable amounts (particularly key
assumptions and sensitivities), see Note 11—Impairment of Assets to our Audited Consolidated Financial Statements. For a
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discussion of the risks associated with the markets where we operate, see —The international economic environment,
geopolitical developments and unexpected global events could cause our business to decline, —Investing in emerging markets,
where our operations are located, is subject to greater risks than investing in more developed markets, including significant
political, legal and economic risks, and —The ongoing conflict between Russia and Ukraine is having, and will continue to have,
a significant impact on our business, financial condition, results of operations, cash flows and prospects.
We have suffered reputational harm as a result of the ongoing conflict between Russia and Ukraine.
On February 28, 2022, the European Union imposed sanctions on Mikhail Fridman and Petr Aven, and on March 15,
2022, the United Kingdom imposed sanctions on then LetterOne shareholders, Mr. Fridman, Mr. Aven, Alexey Kuzmichev and
German Khan, and the European Union additionally designated Mr. Khan and Mr. Kuzmichev (collectively, and with Mr. Aven and
Mr. Fridman, the “Designated Persons”). Mr. Fridman resigned from VEON’s board of directors effective February 28, 2022.
None of the other Designated Persons were members of the Board of Directors. We understand, based on a letter provided by
LetterOne, a 47.85% shareholder in VEON, that Mr. Fridman and Mr. Aven are shareholders in LetterOne (approximately 37.86%
and 12.13%, respectively) and that Mr. Khan and Mr. Kuzmichev are no longer shareholders in LetterOne.
We have not been named as, and have concluded that we are otherwise not, the target of the European Union’s or the
United Kingdom’s sanctions, including as a consequence of LetterOne being a 47.85% shareholder in VEON. However, as a
result of the association of Designated Persons with our largest shareholder, we have suffered reputational harm. In addition, as
VEON is perceived by some as having undue exposure to Russia, we have experienced difficulties in transacting with certain key
suppliers, business partners and other key counterparties at the Group level, and we cannot rule out the possibility that we may
not be able to appoint an auditing firm for the audit of our financial statements for the year ended December 31, 2022. This could
have an adverse effect on our ability to obtain financing to meet our capital needs or service our debt, or to access our existing
cash held in third-party bank accounts or to access committed amounts under credit facilities, and could lead to a delisting of our
securities. We have to date noted an unwillingness among certain of our business partners to continue to do business with us,
which could be further exacerbated if current conditions continue and which could affect our prospects to engage in new
business initiatives with existing or potential future business partners. Moreover, many multinational companies and firms,
including certain of our service providers, partners and suppliers, have chosen of their own accord to cease transacting with all
Russia-based or Russia affiliated companies (i.e., self-imposed sanctions), including our Russia-based operating subsidiary, as a
result of the ongoing conflict between Russia and Ukraine. To the extent that the ongoing conflict between Russia and Ukraine
continues or further escalates, the list of companies and firms refusing to transact with Russia-based companies may continue to
grow.
Such actions have the equivalent effect, insofar as the ability to transact with such companies is concerned, as if the
Russia-based companies were the target of government-imposed sanctions. Finally, the price of securities have suffered
significant volatility in recent months as a result of exposure, and perceived exposure to the ongoing conflict between Russia and
Ukraine. The inability to conduct business with key suppliers, business partners and other key counterparties could have a
material adverse impact on our business, financial condition, results of operations, cash flows or prospects and price of our
securities.
We are exposed to foreign currency exchange loss, fluctuation and translation risks, including as a result of the
ongoing conflict between Russia and Ukraine.
A significant amount of our costs, expenditures and liabilities, including capital expenditures and borrowings, is
denominated in U.S. dollars and Russian rubles, while our operating revenue is denominated in Russian rubles, Ukrainian
hryvnia and other local currencies. In general, declining values of local currencies against the U.S. dollar and Russian rubles
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 or Russian rubles, and may impact our ability to
exchange cash reserves in one currency for use in another jurisdiction for capital expenditures, operating costs and debt
servicing. See —Operational Risks—As a holding company with a number of operating subsidiaries, we depend on the
performance of our subsidiaries and their ability to pay dividends or make other transfers to VEON Ltd., as well as the ability to
make certain intercompany payments and transfers. Our operating metrics, debt coverage metrics and the value of some of our
investments in U.S. dollar terms have been negatively impacted in recent years, and will be negatively impacted in the current
period by foreign currency transactions and translations. More broadly, future currency fluctuations and volatility may result in
losses or otherwise negatively impact our results of operations despite our efforts to better align the currency mix of our debt and
derivatives with the currencies of our operations.
The value of the Russian ruble has experienced significant volatility following the outbreak of conflict between Russia
and Ukraine and such volatility may continue for the foreseeable future, particularly if the scope and severity of sanctions are
maintained or increased. For example, the Central Bank of Russia exchange rates of the Russian ruble to U.S. dollar was 74.3
on December 31, 2021 and depreciated to 120.4 as of March 11, 2022 and appreciated to 81.3 as of April 15, 2022. When the
Russian ruble depreciates against the U.S. dollar in a given period, the results of our Russian business expressed in U.S. dollars
will be lower period-on-period, even assuming consistent Russian ruble revenue across the periods. In addition to the direct
effect of sanctions on the Russian ruble, we could be materially adversely impacted by a decline in the value of the Russian ruble
against the U.S. dollar due to the decline of the general economic performance of Russia, investment in Russia or trade with
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Russian companies decreasing substantially, the Russian government experiencing difficulty raising money through the issuance
of debt in the global capital markets or as a result of a technical or actual default on Russian sovereign debt. Depreciation of the
Russian ruble may be sustained over a long period of time due to rising inflation levels in Russia as well. Although this would
have a positive impact on our local currency results in Russia, such gains could be offset by a corresponding depreciation of the
Russian ruble in U.S. dollar terms. In addition, a significant depreciation of the Russian ruble could also negatively affect our
leverage ratio and equity balances, which would have an impact on certain covenants and provisions under our debt
agreements. See —Liquidity and Capital Risks—Our substantial amounts of indebtedness and debt service obligations could
materially decrease our cash flow, which could adversely affect our business and financial condition for a further discussion on
this risk.
In addition to the Russian ruble, the values of the Pakistani rupee, Ukrainian hryvnia, Kazakh tenge, Algerian dinar, and
Uzbekistani som have experienced significant volatility in recent years in response to certain political and economic issues, and
such volatility may continue and result in depreciation of these currencies against the U.S. dollar. For example, as a result of the
ongoing conflict between Russia and Ukraine, the National Bank of Ukraine has fixed the Ukrainian hryvnia against the U.S.
dollar and there is a 10-20% gap between this set exchange rate and the unofficial exchange rate. Other countries in which we
operate have recently experienced periods of high levels of inflation, such as Pakistan and Uzbekistan during 2020. Our profit
margins in those countries could be harmed as well if we are unable to sufficiently increase our prices to offset any significant
future increase in the inflation rate, manifested in inflationary increases in salary, wages, benefits and other administrative costs,
which may be difficult with our mass market and price-sensitive customer base.
To counteract the effects of the aforementioned risks, we engage in certain hedging strategies. However, our hedging
strategies may prove ineffective if, for example, exchange rates fluctuate in response to legislative or regulatory action by a
government with respect to its currency. In addition, following the onset of the conflict between Russia and Ukraine, fewer
counterparties are willing to transact in Russian rubles, particularly following the sanctioning of the Russian central bank and
Russia’s exclusion from the international SWIFT payments system, and as a result, our ability to hedge our exposure to Russian
ruble exchange rate risk has been less effective. For more information about our foreign currency translation and associated
risks, see —Operating and Financial Review and Prospects—Factors Affecting Comparability and Results of Operations, —
Quantitative and Qualitative Disclosures About Market Risk and Note 18—Financial Risk Management to our Audited
Consolidated Financial Statements.
The international economic environment, geopolitical developments and unexpected global events could cause our
business to decline.
As a global telecommunications company operating in a number of emerging markets, our operations are subject to
macroeconomic risks, geopolitical developments and unexpected global events that are outside of our control. Unfavorable
economic conditions in the markets in which we operate may have a direct negative impact on the financial condition of our
customers, which in turn will affect a significant number of our current and potential customers’ spending patterns, in terms of
both the products they subscribe for and usage levels. During such downturns, it may be more difficult for us to grow our
business, either by attracting new customers or by increasing usage levels among existing customers, and it may be more likely
that customers will downgrade or disconnect their services, making it more difficult for us to maintain ARPUs and subscriber
numbers at existing levels. In addition to the potential impact on revenue, ARPUs, cash flow and liquidity, such economic
downturns may also impact our ability to decrease our costs, execute our strategies, take advantage of future opportunities,
respond to competitive pressures, refinance existing indebtedness or meet unexpected financial requirements.
The ongoing conflict between Russia and Ukraine, related sanctions and similar measures against Russia and Russia-
based entities, and the effect of such developments on the Russian and Ukrainian economies (and other economies that are
closely tied to the Russian economy), will affect our operations and financial condition in 2022, and will likely continue to have a
significant impact for the foreseeable future. In addition, the increasing price of fossil fuels and rising inflation rates are expected
to have broader adverse effects on many of the economies in which we operate and may result in recessionary periods and
lower corporate investment, which, in turn, could lead to economic strain on our business and on current and potential
customers. Sustained high levels of inflation or hyperinflation in Russia would create significant imbalances in the Russian
economy and undermine any efforts the government is taking to create conditions that support economic growth in the wake of
the conflict with Ukraine, which would have an adverse impact on our results of operations. For example, it has had, and may
have in the future, an impact on our Russian subsidiary’s weighted average cost of capital, which could result in potential impairment of our
cash generating units in Russia. See —Market Risks—We have recognized, and may in the future, recognize substantial impairment
charges for a further discussion on potential impairment risks. Outside of the ongoing conflict between Russia and Ukraine, we
are exposed to other geopolitical and diplomatic developments that involve the countries in which we operate, such as the
current political upheaval in Pakistan following the no-confidence vote that resulted in the removal of Pakistan’s then prime
minister Imran Khan from office, as well as those which do not involve our countries of operation but have a knock-on effect on
our business. For example, heightened tensions between the major economies of the world, such as the U.S. and China, can
have an adverse effect on the economies in which we operate, and therefore an adverse impact on our results of operation,
financial condition and prospects.
In addition, other adverse economic developments in the markets in which we operate have adversely affected us in
recent years. For example, lockdown restrictions imposed by governments during the height of the COVID-19 pandemic
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adversely impacted our financial performance and results of operations. Our total revenue for the six months ended June 30,
2020 was 9.0% lower compared to the six months ended June 30, 2019, mainly due to the effect of the COVID-19 pandemic.
Following the introduction of lockdown measures in response to COVID-19, we also experienced a reduction in roaming revenue,
which largely disappeared in the second quarter of 2020. Travel restrictions that were imposed in certain of the countries in
which we operate resulted in a reduction in migrant workforce, which has traditionally been a source of a large subscriber base in
Russia. Network traffic patterns were also impacted as people worked from home, which required some adjustments to our
network deployment plans. In addition, the COVID-19 pandemic caused delays and disruptions in our supply chain due to
difficulty in obtaining components, temporary suspensions of operations, including in factories and disruption to logistic services.
Correspondingly, the COVID-19 pandemic also adversely impacted demand, which was partly caused by a deterioration of
confidence and expectations, negative income and wealth effects. Accordingly, there was a substantial deterioration in financial
markets in 2020, unprecedented drops in commodity prices, a sudden slowdown in commercial activity and strong restrictions on
transportation and travel. While lockdown restrictions have eased around the world since vaccines have become available, many
governments respond to surges in case numbers or the emergence of new variants by re-imposing lockdown and travel
restrictions. The uncertainty surrounding the ongoing COVID-19 pandemic, both in terms of new variants and surges and
government responses thereto, continues to impact our ability to accurately predict our financial performance. Furthermore, the
ongoing conflict between Russia and Ukraine could have a similar or more severe impact on our business, financial condition,
results of operations, cash flows or prospects. Going forward, other adverse global developments, such as wars, terrorist attacks,
natural disasters, and pandemics, may have a similar impact on us.
Our financial performance may also be affected by macroeconomic issues more broadly, including risks of inflation,
deflation, stagflation, recessions, sovereign debt levels and the stability of currencies across our key markets and globally.
Following stimulative monetary policies by central banks and increased government spending to combat the adverse economic
effects of COVID-19 and associated lockdowns, many countries across the world are experiencing high levels of inflation and
lower corporate profits, causing increased uncertainty about the near-term macroeconomic outlook as central bank interest rates
are being raised to combat the high inflation. This, combined with increased energy prices, supply shortages resulting from
logistical difficulties arising from the COVID-19 pandemic and the ongoing conflict between Russia and Ukraine, may adversely
impact our customers’ discretionary spending, which could, in turn, affect their usage levels of our products or their ability to pay
for our services.
Investing in emerging markets, where our operations are located, is subject to greater risks than investing in more
developed markets, including significant political, legal and economic risks.
Our operations are located in the world’s 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 the rapid reversal of political and economic policies. The political and economic relations of our countries of
operation 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 outbreak of the conflict between Russia and
Ukraine is an illustration of this.
The economies of emerging markets are also vulnerable to market downturns and economic slowdowns in the global
economy. As has happened in the past, a slowdown in the global economy 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. In addition, 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 developed 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 could also 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. See —Regulatory, Compliance and Legal Risks—The
telecommunications industry is a highly regulated industry and we are subject to an extensive variety of laws and operate in
uncertain judicial and regulatory environments, which may result in unanticipated outcomes that could harm our business for a
more detailed discussion on our regulatory environment.
Many of the emerging markets in which we operate are susceptible to significant social unrest or military conflicts. For
example, over the past several years, Russia has been involved in conflicts, both economic and military, involving neighboring
and distant states. On several occasions, this resulted in deterioration of relations between Russia and other countries, including
the United States and various countries in Europe. Changes in government policy, other government actions and political risks
could adversely affect our operations and the value of investments in Russia. Shifts in governmental policy and regulation in the
Russian Federation are less predictable than in many Western countries, and could disrupt political, economic, social, regulatory
and business processes and environments. Russian authorities have been reported to sometimes apply policies selectively and
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arbitrarily, including through withdrawal of licenses, sudden and unexpected tax audits, criminal prosecutions, asset freezes,
seizures or confiscations, regulatory measures, and civil actions. Federal and local governmental entities have, in the past, used
common defects in share issuances and registration as pretexts for court claims and other demands to invalidate such issuances
and registrations and/or to void transactions, which may be seen as being influenced by political or business considerations.
Some observers have noted that takeovers of major private sector companies by state controlled companies following tax,
environmental and other challenges in recent years may reflect a shift in official policy in favor of state control at the expense of
individual or private ownership, at least where large enterprises are concerned. This has, in turn, resulted in significant
fluctuations in the market price of Russian securities and had a negative impact on foreign investments in the Russian economy,
over and above any recent general market dislocations. Any similar actions by the Russian authorities which result in a further
negative effect on investor confidence in Russia’s business and legal environment could have a further adverse impact on the
Russian securities market and prices of Russian securities or securities issued or backed by Russian entities.
In addition, our ability to provide service in Ukraine following the onset of the conflict with Russia has been impacted
due to power outages, disruption to traffic volumes and damage to our infrastructure. Similarly, our subsidiary in Pakistan has
also been ordered to shut down parts of its mobile network and services from time to time due to the security situation in the
country, and our operations and services in Kazakhstan were affected during the riots in January 2022. Local authorities may
order our subsidiaries to temporarily shut down part or all of our networks due to actions relating to military conflicts or
nationwide strikes. See—The ongoing conflict between Russia and Ukraine is having, and will continue to have, a significant
impact on our business, financial condition, results of operations, cash flows and prospects for a detailed discussion on the
impact that the ongoing conflict between Russia and Ukraine has and could have on our business.
Furthermore, governments or other factions, including those asserting authority over specific territories in areas of
conflict, could make inappropriate use of our networks, 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 or broadcasts, inappropriate use of our network or being compelled to operate our
network in conflict zones could materially harm our business, financial condition, results of operations, cash flows or prospects.
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.
Social instability in the countries in which we operate, coupled with difficult economic conditions, could lead to increased support
for centralized authority, a rise in nationalism and potential nationalizations or expropriations by governments. These sentiments
and adverse economic conditions 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. Our key
infrastructure and assets located within Ukraine may be seized or subject appropriation should Russian forces obtain control of
the regions within Ukraine where those assets are situated and therefore may have a significant adverse effect on our ability to
operate in Ukraine.
As part of the measures that Ukraine is considering in response to the ongoing conflict with Russia, amendments to the
nationalization law (the “Nationalization Law”) in Ukraine have been published and are awaiting signature by the President of
Ukraine (“Nationalization Law Amendments”). The Nationalization Law Amendments extends the definition of “residents” whose
property in Ukraine (owned directly or indirectly) can be seized under the Nationalization Law to include property owned by the
Russian state, Russian citizens, other nationals with a very close relationship to Russia, residing or having a main place of
business in Russia, or legal entities operating in Ukraine whose founder or ultimate beneficial owner is the Russian state or are
controlled or managed by any of the individuals identified above. In addition, we cannot rule out the possibility that Russia might
also consider enacting a similar nationalization law in response to Ukraine’s Nationalization Law Amendments or to sanctions
imposed by the international community. Such measures, if adopted and applied in relation to either our Ukrainian or Russian
subsidiary, or both, could lead to the involuntary deconsolidation of our Ukrainian and/or Russian operations, which would have a
material adverse impact on our business, financial condition, results of operations, cash flows and prospects.
Our revenue performance can be unpredictable by nature, as a large majority of our customers have not entered into
long-term fixed contracts with us.
Our primary source of revenue comes from prepaid mobile customers, who are not required to enter into long-term fixed
contracts, and we cannot be certain that these customers will continue to use our services and at the usage levels we expect.
Revenue from postpaid mobile customers represents a small percentage of our total operating revenue and such customers can
cancel our postpaid contracts with limited advance notice and without significant penalty. For example, the marked economic
impact in Ukraine associated with the conflict with Russia has adversely impacted our gross connections, airtime sales, and
roaming revenue from customers in Ukraine. The ramifications of the Russia-Ukraine conflict may become more severe and the
extent of such ramifications cannot be known at this time as the conflict is ongoing. Furthermore, as 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 in a
given market could harm our business, financial condition, results of operations, cash flows or prospects.
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In addition, following the outbreak of COVID-19 in February 2020 and the resulting lockdown restrictions imposed by
governments across all of our countries of operations, our revenue projections for the first quarter of 2020 did not reflect actual
revenue, and we had to change our fiscal year 2020 guidance as a result. This was partly due to store closures, which had an
impact on our gross connections and airtime sales and restrictions on travel, which caused a significant decline in roaming
revenue and the loss of migrant worker customers from our subscriber base, particularly in Russia. The impact of this was only
partially offset by increases in fixed line revenue, as lockdown restrictions 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 the conflict between Russia and Ukraine and the COVID-19 pandemic on our operations and financial performance,
see —Operating and Financial Review and Prospects—Factors Affecting Comparability and Results of Operations.
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.
Competition may be intensified by further consolidation of or strategic alliances amongst our competitors, as well as new entrants in our
markets. Our financial performance has been and will continue to be significantly determined by our success in adding, retaining and
engaging our customers. If our customers do not find our connectivity and internet services valuable, reliable or trustworthy, or otherwise
believe competitors in our markets can offer better services, we may have difficulty retaining and engaging customers. 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 downward pressure on the prices we
offer to our customers;
with the increasing pace of technological developments, including new digital technologies and regulatory changes
impacting our industry, we cannot predict future business drivers with certainty and we cannot assure you that we will
adapt to these changes at a competitive pace, see —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;
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, see —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 we may
incur significant capital expenditures as our customers demand new services, technologies and increased access;
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 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;
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;
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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;
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;
our customers in countries outside of Russia may, as a result of the ongoing conflict in Russia and Ukraine, choose to
migrate to local competitors that do not have a connection to Russia; and
as a result of the unfavorable economic circumstances in Russia or other countries, our customers may opt for lower
cost offerings by our competitors over our products.
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 we may incur significant capital expenditures as our customers demand new services,
technologies and increased access.
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. 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. In addition, the mobile markets in Russia, Ukraine, Kazakhstan, Kyrgyzstan and Georgia have each
reached mobile penetration rates exceeding 100%, according to GSMA 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 4G/LTE penetration rates, 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.
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
effectively anticipate and adapt to the changing technological landscape and the resulting regulations. It is possible that the
technologies or equipment we use today will become obsolete or subject to competition from new generation technologies for
which we may be unable to deploy, or obtain the appropriate license, in a timely manner or at all.
For example, while we continue deploying mobile networks such as 4G/LTE, in certain markets the telecommunications
industry as a whole 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. Technological change is also impacting the capabilities of 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 and there can be no guarantee that we will generate our expected return on any such investments.
If we are not able to effectively anticipate or adapt to these technological changes in the telecommunications market or
to otherwise compete in a timely and cost-effective manner, we could lose customers, fail to attract new customers, experience
lower ARPU or incur substantial or unanticipated costs and investments in order to maintain our customer base, all of which
could materially affect our business, financial condition, results of operations, cash flows or prospects.
Banking and other financial systems in many of our countries of operation remain underdeveloped and currency
control requirements in certain countries restrict our activities, including as a result of the ongoing conflict between
Russia and Ukraine.
The banking and other financial systems in our countries of operation are underdeveloped and/or underregulated, and
laws relating to banks and bank accounts are subject to varying interpretations and inconsistent application. Uncertain banking
laws may also limit our ability to attract future investment in these countries. Such banking risk cannot be completely eliminated
by diversified borrowing and conducting credit analyses. In addition, underdeveloped banking and financial systems are more
susceptible to a banking crisis, which would affect the capacity for financial institutions to lend or fulfill their existing obligations,
or lead to the bankruptcy or insolvency of the banks from which we receive, or with which we hold, our funds, and could result in
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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.
In addition, the central banks and governments in the markets in our countries of operation may also restrict or prevent
international transfers, or impose foreign exchange controls or other currency restrictions, which could prevent us from making
payments, including the paying dividends and third party suppliers. For example, on February 28, 2022, Russian President
Vladimir Putin signed an order (the order “On the Application of Special Economic Measures in Connection With the Unamicable
Actions of the U.S. and the Adjoining Foreign States and International Organizations”) restricting certain cross-border currency
transactions. For more information on currency restrictions, see Note 18—Financial Risk Management—Liquidity Risks to our
Audited Consolidated Financial Statements. Furthermore, banks have limitations on the amounts of loans that they can provide
to single borrowers, which could limit the availability of local 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,
which could harm our business, financial condition, cash flows, results of operations or prospects..
Liquidity and Capital Risks
Our substantial amounts of indebtedness and debt service obligations could materially decrease our cash flow, which
could adversely affect our business and financial condition.
We have substantial amounts of indebtedness and debt service obligations. As of December 31, 2021, the outstanding
principal amount of our external debt for bonds, bank loans, and other borrowings amounted to approximately US$7.6 billion. In
addition to these borrowings, we also have lease liabilities amounting to US$2.7 billion. For more information regarding our
outstanding indebtedness and debt agreements, see —Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Indebtedness.
Some of the agreements under which we borrow funds contain covenants or provisions that impose certain operating
and financial restrictions on us, 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. Devaluations of the currencies of our key markets, would
make it more difficult to comply with certain of these ratios, for example, since our earnings are in local currency, while some of
our debt is denominated in U.S. dollars. In addition, capital controls and other restrictions, asset freezes, including limitations on
payment of dividends or international funds transfers may be imposed in Russia, along with punitive taxes and penalties targeted
at certain foreign entities which may also impact our liquidity or ability to comply with certain of the above mentioned ratios.
Involuntary deconsolidation of either of our Russian or Ukrainian operations or both would also make it more difficult or
impossible to comply with certain of these ratios. See —Market Risks—Investing in emerging markets, where our operations are
located, is subject to greater risks than investing in more developed markets, including significant political, legal and economic
risks for a further discussion of the risk of deconsolidation. 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 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 certain of 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 16—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 the
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.
Following the onset of the conflict between Russia and Ukraine, our ability to generate cash to service our indebtedness
has been materially impaired, due to expected lower revenues in Ukraine, the volatility of the Russian ruble and tightened
currency controls within Russia and Ukraine. On April 13, 2022, VEON announced that it had approximately US$1.3 billion of
cash held at the level of its HQ in Amsterdam, which was deposited with international banks and fully accessible at HQ, with
approximately US$700 million available under its RCF. In addition, VEON’s operating companies had a total cash position
equivalent to over US$500 million. As of the date of this Annual Report, VEON Holdings B.V. is in the process of drawing down
the remaining committed amounts under the RCF, with a portion of the related utilization request having been received as of
such date. Once the drawdown is complete, the RCF will be fully drawn. The proceeds of this drawing will be used for general
corporate purposes. Despite our current liquidity levels, there can be no assurance that our existing cash balances and revolving
credit lines, together with cash generation made available to the Group level, will be sufficient over the medium term to service
our existing indebtedness, including to address our upcoming bond maturities in February 2023 and April 2023. In addition, we
may have technical difficulty transferring cash to our Russian and Ukrainian operations to service their loan repayments, if
required. See —Operational Risks—As a holding company with a number of operating subsidiaries, we depend on the
performance of our subsidiaries and their ability to pay dividends or make other transfers to VEON Ltd., as well as the ability to
make certain intercompany payments and transfers. For a discussion of our current liquidity profile in the wake of the ongoing
conflict between Russia and Ukraine, see Operating and Financial Review and Prospects—Liquidity and Capital Resources.
Furthermore, there is no assurance that we will be able to service our debt obligations when due. For example, as a
result of current or future economic sanctions affecting Russian banks and decreased availability of the Russian ruble on
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international markets, we might be required to refinance part or all of our existing Russian ruble loans or bonds, which could
have a material impact on our liquidity. Following the designation of VTB Bank as a sanctioned entity by the United States and
the United Kingdom, we repaid our RUB 30 billion seven year term loan with VTB Bank on March 9, 2022. If we are unable to
meet our debt obligations, including debt obligations that are accelerated as a results of sanctions, or if we fail to comply with the
financial and other covenants contained in the agreements governing such debt obligations, we may as a consequence be
required to refinance all or part of our debt, which may necessitate selling important strategic assets at unfavorable prices in
order to meet such refinancing requirements, or entering into restructuring negotiations with our creditors. For example, these
highly uncertain times and it is not possible to predict with precision how certain developments will impact our liquidity position,
our financial covenants and non-financial provisions in our debt agreements, and our equity levels on a regular and continuous
basis both at the group and operating company levels. A continued deterioration in the results or operations of our operating
companies could trigger certain financial covenants or non-financial provisions in our debt agreements, requiring accelerated
repayment, potentially triggering a cross-default across all debt facilities and the RCF and negatively impact our liquidity. We
may also be impacted by conditions or local legal requirements in local or international markets that could make it more difficult
to refinance existing debt or service our existing debt obligations. In addition, there can be no assurance that any assets which
we could be required to dispose of can be sold or that, if sold, the timing of such sale and the amount of proceeds realized from
such sale will be acceptable. If such contingencies develop and we are unsuccessful in these efforts, we may not have sufficient
cash to meet our obligations.
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. See—Our
substantial amounts of indebtedness and debt service obligations could materially decrease our cash flow, which could adversely
affect our business and financial condition above.
Our ability to raise additional capital, and the cost of raising additional capital, may also be affected by a further
downgrade or withdrawal of our credit rating, which may happen for reasons outside our control and could materially harm our
business, financial condition, results of operations and prospects. In March 2022, following the onset of the conflict between
Russia and Ukraine, Fitch revised VEON’s credit rating from “BBB-“ to “B+” and S&P revised VEON’s credit rating from “BB+” to
“CCC+” following a downgrade of the Russian sovereign rating as a result of the ongoing conflict between Russia and Ukraine.
S&P withdrew VEON’s rating in April 2022. Following these downgrades and withdrawal, the terms of any additional capital
raised in the near future will likely be on terms less favorable than our existing financing arrangements, both in terms of interest
rate, financial covenants and restrictive covenants.
In addition, economic sanctions that have been imposed in connection with the conflict between Russia and Ukraine,
have also negatively affected our existing financing arrangements, such as our multi-currency revolving credit facility (the “RCF”)
in particular with Russian banks. In March 2022, commitments of two Russia-based banks under the RCF were cancelled as it is
no longer possible for them to fund drawings under the RCF given the recently introduced Russian currency controls. As a result,
the commitments under the RCF will be reduced from US$1,250 million to US$1,055 million. Economic sanctions could affect our
ability to service our debt obligations, and our ability to secure future external financing. Our ability to secure future external
financing may also be affected by an unwillingness of non-Russian banks, finance providers and debt investors to transact with,
provide loans or purchase bonds of entities with significant exposure to Russia and/or significant indirect share ownership by
Russian entities or individuals. See —Market Risks—We have suffered reputation harm as a result of the ongoing conflict
between Russia and Ukraine. Furthermore, two of our group-level loans with Sberbank and Alfa Bank respectively, totaling RUB
90 billion in total, were novated to PJSC VimpelCom. This resulted in the release of the former borrower (VEON Finance Ireland
DAC) and the former guarantor (VEON Holdings BV) from their obligations. See Operating and Financial Review and Prospects
—Recent Developments after year end 2021 for a further discussion of the novation of the Sberbank and Alfa Bank RUB loans.
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, as is the case when central banks raise benchmark interest rates, 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. For example, as a result of the ongoing conflict between Russia and Ukraine, the Central Bank of Russia
increased key policy interest rates to 20% from 9.5% on February 28, 2022, which was subsequently reduced to 17.0%, effective
on April 11, 2022, and any further increase in interest rates would have an impact on our Russian subsidiary’s weighted average
cost of capital, which could result in potential impairment of our cash generating units in Russia. See —Market Risks—We have
recognized, and may in the future, recognize substantial impairment charges for a further discussion on potential impairment
risks.
A change in control of VEON Ltd. could require us to prepay certain indebtedness.
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 any given loan documentation,
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then the prepayment provision will be triggered under such loan. Failure to make any such required prepayment 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.
Operational Risks
As a holding company with a number of operating subsidiaries, we depend on the performance of our subsidiaries and
their ability to pay dividends or make other transfers to VEON Ltd., as well as the ability to make certain intercompany
payments and transfers.
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 as a result, VEON Ltd.
depends on cash dividends, distributions, loans or other transfers received from its subsidiaries to make dividend payments to its
shareholders, including holders of ADSs and ordinary shares, and service interest and principal payments in respect of the
indebtedness incurred at its intermediate holding companies, and to meet other obligations. The ability of its subsidiaries to pay
dividends and make other transfers to VEON Ltd. is not guaranteed, as it depends on the success of their businesses and may
be restricted by applicable corporate, tax and other laws and regulations. Such restrictions include 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 our financing agreements, and foreign currency exchange controls and related restrictions in certain
agreements or certain jurisdictions in which VEON Ltd.’s subsidiaries operate or both. Capital controls and other restrictions,
asset freezes, including limitations on payment of dividends or international funds transfers may be imposed in Russia, along
with punitive taxes and penalties targeted at certain foreign entities, which may impact our ability to receive loan repayments,
dividends and distributions from Russia.
Similarly, at times our local operating subsidiaries depend on support received from us through cash generated in other
jurisdictions or through debt incurred at the Group-level to make capital expenditures, service debt or to meet other obligations.
The ability of an operating subsidiary to receive from, or make a transfer to, another Group entity can be limited by cash
restrictions imposed by governments or restrictions in private contracts. The inability to make payments and/or transfer funds
within the Group could limit or prohibit the payment of cash dividends, distributions, the repayment of indebtedness or payment
of debt servicing obligations and thus could result in a default under any such instruments.
The ongoing conflict between Russia and Ukraine has impaired our ability to make cash transfers into and out of both
Russia and Ukraine. In Russia, this is due to many of our entities’ countries of incorporation being considered to be an
“unfavorable jurisdiction” by the Russian state. We have also encountered difficulties exchanging currency into Russian rubles for
our Russian operations due to sanctions and other restrictions imposed on the Russian banking system. For example, certain
Russian banks have been removed from the SWIFT payment messaging system which facilitates transfers of funds between
financial institutions and across borders. As the effects of current and any future sanctions continue to put downward pressure on
the Russian economy, see —Market Risks—The international economic environment, geopolitical developments and unexpected
global events could cause our business to decline, there is the possibility that the Russian government could implement orders
prohibiting the transfer of foreign currency, or even Russian rubles, from entities within Russia to entities outside of Russia. In
Ukraine, capital controls introduced by the National Bank of Ukraine prohibit our Ukrainian subsidiary from making any interest or
dividend payments to us and transferring foreign currency to entities outside of Ukraine.
Furthermore, VEON Ltd.’s ability to withdraw funds and dividends from our subsidiaries and operating companies may
depend on the consent of our strategic partners, where applicable, as well as the tax regimes and treaties between the
Netherlands and the local jurisdictions in which we operate.
For more information on the legal and regulatory risks associated with our markets and restrictions on dividend
payments, see—Regulatory, Compliance and Legal Risks—The telecommunications industry is a highly regulated industry and
we are subject to an extensive variety of laws and operate in uncertain judicial and regulatory environments, which may result in
unanticipated outcomes that could harm our business and—Market Risks—Banking and other financial systems in many of our
countries of operation remain underdeveloped and currency control requirements in certain countries restrict our activities,
including as a result of the ongoing conflict between Russia and Ukraine, respectively.
We are exposed to cyber-attacks and other cybersecurity threats that 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.
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 private or state-sponsored third parties through exploiting unidentified
existing or new weaknesses or flaws in our network or IT systems or disruption by computer malware or other technical or
operational issues. Cybersecurity threats could also lead to the compromise of our physical assets dedicated to processing or
storing customer, employee, financial data and strategic business information, which would result in exposing this information to
possible leakage, unauthorized dissemination and loss of confidentiality.
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As each of our operating subsidiaries is responsible for managing their own cybersecurity risks and putting in place all
operational preventive, detective and response capabilities, our operations and business continuity is dependent on how well
these subsidiaries collectively protect and maintain our network equipment, information technology (“IT”) systems and other
assets. 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, and our systems in Russia and Ukraine may be particularly vulnerable to
these attacks given the ongoing conflict.
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. There is also a possibility that we are not currently aware of certain undisclosed vulnerabilities in
our IT systems, processes 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). 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, other technical or operational issues or human error will not disrupt our network or systems and cause significant harm
to our operations. For example, in August 2021, certain personal data held by our Russian operations was inadvertently made
public due to human error. We have been monitoring the darknet to ensure no information was published, which to date has not
occurred, and have been working on mitigation measures to prevent such cases in the future. In addition, from time to time, we
experience cyber-attacks of varying degrees to gain access to our computer systems and networks. As of April 15, 2022, 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. We have also experienced infections by malware, advanced persistent threats, and network service interruptions
during installations of new software. In some of countries of operation, our equipment for the provision of mobile services resides
in a limited number of locations or buildings, and 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 business 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.
Furthermore, due to the ongoing conflict between Russia and Ukraine, there is an increased risk of cyber-attacks or
cybersecurity incidents that could either directly or indirectly impact our operations. Any attempts by cyber attackers to disrupt
our services or systems, if successful, could harm our business, result in the misappropriation of funds, be expensive to remedy
and damage our reputation or brands. Following the onset of the ongoing conflict between Russia and Ukraine, as of the date of
this Annual Report, there have been an increasing number of cyber-attacks on our Russian operations, which have caused
service disruptions in certain instances. Our insurance coverage may not be sufficient to cover significant expenses and losses
related to such cyber-attacks and cybersecurity incidents.
The occurrence of any of the foregoing events could result in reputational harm, lawsuits, violations of applicable laws,
adverse regulatory actions, an inability to operate our digital services or our wireless or fixed-line networks, loss of revenue from
business interruption or significant additional costs. As a result of this, our customers may curtail or stop using our products and
services, which could harm our business, financial condition, results of operations, cash flows or prospects. In addition, the
potential liabilities associated with the occurrence of any of these events could exceed the cyber insurance coverage we
maintain and certain violations of applicable laws (including as a result of data leakage) could result in the suspension of
operating licenses, imprisonment or fines for the entity and/or the individuals involved.
Our equipment and systems are subject to disruption and failure for various reasons, including as a result of the
ongoing conflict in Russia and Ukraine, 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 technological infrastructure and other property is vulnerable to damage or disruptions from numerous events.
These include natural disasters, extreme weather and other environmental conditions, 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
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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 other 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. For example, while we have not sustained major damage to our assets in Ukraine thus far as a result of the
ongoing conflict between Russia and Ukraine, there can be no assurance that our Ukrainian network will not sustain additional
damage that cannot be repaired in a timely manner as the conflict continues.
Interruptions of services due to disruption or failure of our equipment and systems could harm our reputation and
reduce the confidence of our customers to provide them with reliable services and hold their personal data. As a result, this could
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.
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. For example, we currently
purchase the majority of our network-related equipment from a core number of suppliers, such as 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, due to factors such as new and existing telecommunications regulations,
customs regulations and governmental investigations or enforcement actions. If this is the case, we may experience temporary
service interruptions or service quality problems. As we seek to execute our “infrastructure” strategy and sell our tower assets, as
we have done in Russia in December 2021, we will become more exposed to risks associated with our network service partners,
including their ability to adequately maintain the tower infrastructure and provide use of it to us through network service
agreements.
Since the onset of the conflict between Russia and Ukraine, certain of our business partners have expressed hesitancy
or unwillingness to continue to do business with us and concern regarding our ability to perform our existing business contracts.
Several existing and prospective business partners have declined to conduct business with us and others may do so in the
future. For further discussion, see —Market Risks —The ongoing conflict between Russia and Ukraine is having, and will
continue to have, a significant impact on our business, financial condition, results of operations, cash flows and prospects. For a
further discussion of how the ongoing conflict between Russia and Ukraine will affect our ability to transact with our suppliers,
see —Market Risks—The international economic environment and geopolitical developments could cause our business to
decline. Furthermore, even if an entity is not formally subject to sanctions, customers and business partners of such entity may
decide to reevaluate or cancel projects with such entity for reputational or other reasons. As result of the ongoing conflict
between Russia and Ukraine, various U.S. and other multi-national businesses across a number of industries, including
consumer goods and retail, food, energy, finance, media and entertainment, tech, travel and logistics, manufacturing and others,
have indefinitely suspended their operations and paused all commercial activities in Russia and Belarus. Depending on the
extent and breadth of sanctions, export controls and other measures that may be imposed in connection with the conflict in
Ukraine, our business, financial condition and results of operations could be materially and adversely affected.
We do not have direct operational or financial control over our key suppliers and have limited influence with respect to
the manner in which these key suppliers conduct their businesses. Our business, including key network and IT projects, could be
materially impacted by disruptions to our key suppliers’ businesses or supply chains, due to factors, such as significant
geopolitical events, changes in law or regulation, the introduction of restrictions to curb epidemics or pandemics, as seen in the
current COVID-19 pandemic, trade tensions and export and re-export restrictions. Any of these factors could affect 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 U.S. export control jurisdiction to Huawei without
authorization and procuring items from Huawei when they know or have reason to know that the items were originally procured
by Huawei in violation of U.S. export control regulations. This development continues to be a factor in the management of our
supply chain. 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. In addition, if the United States were to impose similar export control
restrictions on Russian entities as a result of the ongoing conflict between Russia and Ukraine, that could impact the supply of
items critical to the telecommunications sector in Russia and 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. For example, our digital stacks and data management platforms are dependent on
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third parties and we have also entered into outsourcing initiatives in a number of our countries of operation, including Russia and
Kazakhstan. As a result, 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), if they become unwilling or unable
to service our businesses in Russia, Ukraine or elsewhere, or a dispute between us and such parties occurs, which causes our
suppliers to be unable to fulfill their obligations under our agreements with them on a timely basis, or at all. If such events occur,
we may attempt to renegotiate the terms of such agreements with the third parties, as we did with Ericsson in February 2019.
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. We also depend on third parties, including software providers and
service providers, for our day-to-day business operations. 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. In addition, mobile handset providers
are at times subject to supply constraints, particularly when there is high demand for a particular handset or when there is a
shortage of components.
We cannot assure you that our suppliers will continue to provide services and products to us at attractive prices or that
we will be able to obtain such services and products in the future from these or other suppliers on the scale and within the time
frames we require, if at all. If our suppliers are unable to provide us with adequate services and products or provide them in a
timely manner, our ability to attract customers or offer attractive product offerings could be negatively affected, which in turn
could materially harm our business, financial condition, results of operations, cash flows or prospects.
Our business depends on our ability to effectively implement our strategic initiatives and if they are not successfully
implemented, the benefits we expect to achieve may not be realized.
The success of our business depends, to a large extent, on our ability to effectively implement our corporate and
operational strategies. We continue to transform our business with the aim of improving our operations across all our markets of
operation. In September 2019, we announced a strategy framework comprising of three vectors: infrastructure, digital operator
and ventures. As part of this strategy, we are focusing on growing customer engagement and retention and through expanding
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 and customer relationship
management systems in order to improve customer engagement. We have also been focused on identifying, acquiring and
developing “know-how” and technologies that open up adjacent growth opportunities, and updating our networks, developing
enterprise resource management systems, human capital management systems and enterprise performance management
systems, and reducing and simplifying our IT cost base. In addition, we recently implemented a distributed governance model
that empowers its operating companies with the authority and accountability to manage their operations subject to certain limits
and a framework to allow our operating companies to operate more efficiently and capitalize on local insight.
We cannot assure you that we will be able to implement this strategy or any future strategies fully, within our estimated
budget and/or on time, or that it 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, economic and
logistical effects of the ongoing conflict between Russia and Ukraine, 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 these initiatives. Any inability on our
part to implement our current and future strategies effectively could adversely affect our business, financial condition, results of
operations, cash flows or prospects.
In addition, the onset of the ongoing conflict between Russia and Ukraine has disrupted our strategic plans in the short-
term and diverted management’s attention from such initiatives while focusing on the impact the ongoing conflict has had on our
business. In addition, management’s attention may be diverted from operations in other countries, if it continues to focus on our
operations in Russia and Ukraine. We may also have to divert and/or hold funds at the Group-level to respond to maintenance
capital expenditure requirements in Ukraine and Russia instead of being able to incur strategic and growth-related capital
expenditures in the other countries where we have operations. The diversion of management’s attention or funds and resulting
disruption to our strategic plans could adversely affect 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 telecommunications
providers in Kazakhstan (KaR-Tel LLP and TNS-Plus LLP), Algeria (Omnium Telecom Algérie S.p.A., "OTA"), Uzbekistan (Joint
Venture Buzton LLC), and Kyrgyzstan (“Sky Mobile” LLC and Terra LLC) as well as an e-commerce platform in Bangladesh,
which is held by a parent company in Singapore (a minority holding in Shopup Pte. Ltd.). 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
by the shareholders’ agreements entered into with our strategic partners and our ability to withdraw funds and dividends from or
exit our investment in these entities may depend on the consent and cooperation of our partners. For example, on July 1, 2021,
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we exercised our put option in Algeria to sell the entirety of our stake in our Algerian subsidiary to the Algerian National
Investment Fund, Fonds National d’Investissement (“FNI”). The exercise of the option initiated a process under which a third
party valuation has been undertaken to determine the fair market value at which the transfer is to take place. Under the terms of
the shareholders’ agreement with the FNI, the transaction is expected to be completed in the second quarter of 2022 for a sale
price of US$682 million. If disagreements develop, or any existing disagreements are exacerbated, this might result in a material
adverse effect on our business, financial condition, results of operations, cash flows or prospects.
In addition, we do not have direct control over the conduct of our strategic partners. If any of them become the subject
of an investigation, sanctions or liability, or does not act in accordance with our standards of conduct, our reputation and
business 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. In addition, some of the businesses for which we are not a controlling shareholder operate in
highly-regulated markets, such as ShopUp, and as a result we cannot ensure that these business remain compliant with
intellectual property, licensing and content restrictions. We could also determine that a partnership or joint venture no longer
yields the benefits that we expected to achieve and may decide to exit such initiative, which may result in significant transaction
costs or an inferior outcome than was expected when we entered into the partnership or joint venture. For a discussion of how
the ongoing conflict between Russia and Ukraine could affect our ability to transact with strategic partners and joint ventures, see
—Market Risks—The international economic environment and geopolitical developments could cause our business to decline.
We depend on our senior management, board of directors, 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
on the continuity of our global senior management team and highly skilled personnel. Competition for qualified personnel in our
markets of operation with relevant expertise is intense, and there can be a limited availability of individuals with the requisite
knowledge and relevant experience of the telecommunications and digital services industries 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 and our board of directors. The ongoing
conflict between Russia and Ukraine, including any adverse publicity relating to us, may make it more difficult for us to attract
and retain key talent, including senior management, both at the Group-level and also within our key markets.
Furthermore, we may not succeed in instilling our corporate culture and values in our personnel, which could delay or
hamper the implementation of our strategic priorities, or our compensation schemes may not always be successful in attracting,
retaining and motivating our personnel. Our success is also dependent on our personnel’s ability to adapt to rapidly changing
environments and to perform in line 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
may not adapt effectively. Although we devote significant attention to recruiting, training and instilling new personnel with our
corporate values and culture, there can be no assurance that our existing personnel will successfully be able to adapt to and
support our strategic priorities.
The loss of any members of our senior management or our 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 our business strategy, which could have a significant impact on 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.
Our business is highly capital intensive and requires significant amounts of cash to improve and maintain our networks.
The physical infrastructure in our countries of operation, including transportation networks, power generation and transmission
and communications systems is in poor condition. Supply chain issues arising from the geopolitical developments in Russia and
Ukraine, from restrictions enacted as a result of the COVID-19 pandemic, or from other issues, including but not limited to export
control regulation and other regulation, may result in significant increases to our costs, capital expenditures or inability to access
equipment and technology required for business continuity or expansion. For example, in Russia, public switched telephone
networks have reached capacity limits and are in need of modernization, which may create connectivity issues for our customers
and as a result, will require us to make additional capital expenditures if there is continued traffic growth and development in the
services provided. Our success also 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.
We cannot provide any assurance that our business will generate sufficient cash flows from operations to enable us to
fund our capital expenditures or investments. The amount and timing of our capital requirements will depend on many factors
over which we have little or no control, 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. For example, if network usage develops faster than we anticipate, we may require greater
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capital investments in shorter time frames than originally anticipated and we may not have the resources to make such
investments.
Furthermore, the ongoing conflict between Russia and Ukraine creates uncertainty regarding our capital expenditure
plans as we need to retain more flexibility to maintain our infrastructure in Ukraine and respond to the conflict as it develops
further. Since the onset of the conflict, a material portion of our uncommitted capital expenditure plans throughout the Group
have been delayed. See —Market Risks—The ongoing conflict between Russia and Ukraine is having, and will continue to
have, a significant impact on our business, financial condition, results of operations, cash flows and prospects. and —Market
Risks—We have suffered reputational harm as a result of the ongoing conflict between Russia and Ukraine. For example, a
decline in gross connections and lower than expected ARPU due to the swift decline in the Russian and Ukrainian economies
and the Russian ruble will severely limit our ability to fund capital expenditures in Russia and Ukraine. In Russia, as a result of
sanctions and other restrictions affecting the Russian ruble, we may not be able to fund these expenditures from cash generated
in other countries or to apply the proceeds from foreign financings to Russian capital expenditures. If that is the case, we may
need to access capital from local Russian banks or deplete our Russian ruble-denominated cash reserves. In Ukraine, we have
already made expenditures, and as the ongoing conflict continues, may need to spend a significant amount of capital, to repair
or replace infrastructure and other systems to ensure consistency of our services.
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 or we are unable to access funds sufficient 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. See —Liquidity and Capital Risks—We may not be able to raise additional capital, or we may only be able to raise
additional capital at significantly increased costs for a further discussion. We cannot assure you that we will generate sufficient
cash flows in the future to meet our capital expenditure needs, develop or enhance our products, take advantage of future
opportunities or respond to competitive pressures, which could have a material adverse impact on 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.
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.
As part of our business strategy, we seek from time to time to merge with or acquire other companies or businesses,
divest our companies or businesses, 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 and tower
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 of the acquired business or assets;
higher or unforeseen costs of integration or capital expenditures (including the time and resources of our personnel
required to successfully integrate any combined businesses);
adverse changes in our operating efficiencies and structure;
difficulties relating to the combined business’s compliance with telecommunications or other regulatory licenses and
permissions, compliance with laws, regulations and contractual obligations, ability to obtain and maintain favorable
commercial terms, and ability to optimize and protect our assets (including spectrum and 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;
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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, including disagreements or difference in strategy with joint
venture partners;
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;
increased liability and exposure to unforeseen contingencies and liabilities that we did not contemplate at the time of the
merger, acquisition, strategic partnership or investment, including tax liabilities or claims by the counterparty or regulator
related to the transaction, for which we may not have obtained contractual protections; and
a material impairment of our operating results by causing us to incur debt or requiring us to amortize merger or
acquisition expenses and merged or acquired assets.
For more information about our recent transactions, see Note 9—Significant Transactions to our Audited Consolidated
Financial Statements.
From time to time, we may also seek to divest some of our businesses, including divestitures of operations in certain
markets, infrastructure or business lines. 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 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. Furthermore, in some cases,
we may agree to indemnify acquiring parties for certain liabilities arising from our former businesses. For example, following the
sale of our mobile network towers in Russia in 2021, as part of our “infrastructure” strategy, we may incur increased operating
costs in accessing tower and network infrastructure in Russia and are exposed to increased counterparty risks, as our network
service provider may not fulfil their obligations under our service agreement or perform the necessary maintenance of the tower
infrastructure. Failure to successfully implement or complete a divestiture could also materially harm our business, financial
condition, results of operations, cash flows or prospects.
We face uncertainty regarding our frequency allocations and may experience limited spectrum capacity for providing
wireless services or be required to transfer our existing spectrum allocations, which would have a negative impact on
our growth.
We are dependent on access to adequate frequency allocation within the right spectrum bands in each of our markets
in order to launch mobile and fixed wireless telecommunications networks and maintain and expand our customer base.
However, the availability of spectrum is limited, closely regulated and can be expensive, and we may not be able to obtain the
frequency allocations we need from the relevant regulator or third party, without the imposition of burdensome service obligations
or incurring commercially unreasonable costs given that the interest from various parties frequently exceeds available spectrum.
In the past, we have experienced difficulties in obtaining adequate frequency allocation in some of the markets in which
we operate. For example, we had previously been unable to obtain frequency allocations in an assigned frequency band for the
development of our LTE network in Russia, and until March 2021, had held a disproportionately small amount of the available
spectrum in Bangladesh given the size of our operations. In addition, we are also vulnerable to government action that impairs
our frequency allocations. For example, the government of Uzbekistan ordered 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, which came into effect in 2018. Frequency allocations may also be issued for
periods that are shorter than the terms of our licenses to provide telecommunications services in our countries of operation, and
such allocations may not be renewed in a timely manner, or at all. In the event that we are unable to acquire sufficient frequency
allocations in each of our countries of operations to support the growth of our customer base and products, our business,
financial condition, results of operations, cash flows or prospects could be materially adversely affected.
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. The fees for all available frequency assignments, as well as allotted frequency bands for different
mobile communications technologies, are 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 decision which is currently under
appeal in the Pakistan Supreme Court, even though the license renewal was signed under protest on October 18, 2021.
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.
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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.
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, over which we have no direct control.
Our ability to provide high quality telecommunications services depends on our ability to secure and maintain
interconnection and roaming agreements with other mobile and fixed-line operators and access to infrastructure, networks and
connections that are owned or controlled by third parties and governments. 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. While we have interconnection agreements in place with other operators, we
do not have direct control over the quality of their networks and the interconnection and roaming services they provide. 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. In addition, certain roaming partners have been
targeted by sanctions restrictions, which has led us to change or terminate certain roaming relationships, and as a result of the
ongoing conflict between Russia and Ukraine, there is a possibility that certain of our partners could choose to terminate their
roaming relationships with us. See —Market Risks—The international economic environment, geopolitical developments and
unexpected global events could cause our business to decline. Any difficulties or delays in interconnecting with other networks
and services, or the failure of any operator to provide reliable interconnection or roaming services to us on a consistent basis,
could result in a loss of customers or a decrease in traffic, which would reduce our revenues and harm our business, financial
condition, results of operations, cash flows or prospects. For more information on our interconnection agreements, see —
Business Overview.
Securing these interconnection and roaming agreements and access on cost-effective terms is critical to the economic
viability of our operations. Our countries of operation 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. In certain of the markets in which we operate, the relevant regulator sets mobile
termination rates (“MTRs”), which are fees for access and interconnection that mobile operators charge for calls terminating on
their respective networks. 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 revenue 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 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.
The loss of important intellectual property rights, as well as third-party claims that we have infringed on their
intellectual property rights could significantly harm our business.
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 on 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
the enforcement of court decisions is difficult. In addition, as we continue our investment into a growing ecosystem of local digital
services and execute our “digital operator” strategy, 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 we offer are developed using source code created in
conjunction with third parties. Even though 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 still infringe or misappropriate our intellectual property. We may be required to bring claims against third parties
in order to protect our intellectual property rights, and we may not succeed in protecting such rights. As a result, we may not be
able to use intellectual property that is material to the operation of our business.
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 March 1, 2022, 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.
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In addition, as the number of convergent product offerings, such as JazzCash, Toffee TV, Tamasha and Beeline TV, and
overlapping product functions increase as we execute our “ventures” and “digital operator” strategies, the possibility of
intellectual property infringement claims against us may correspondingly increase. Producers and distributors of content face
potential liability for negligence, copyright and trademark infringement and other claims based on the nature and content of
materials, such as morality laws in Bangladesh and Pakistan. As we expand our offerings of these services, our ability to provide
our customers with content depends on obtaining various rights from third parties on terms acceptable to us.
Current and new intellectual property laws may affect our ability to protect our innovations and defend against third-
party 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. Any such claims
or lawsuits, whether with or without merit, could result in substantial costs and diversion of resources, could cause us to cease
offering or licensing services and products that incorporate the challenged intellectual property, or could require us to develop
non-infringing products or services, if feasible, which could divert the attention and resources of our technical and management
personnel. We cannot assure you that we would prevail in any litigation related to infringement claims against us. A successful
claim of infringement against us could result in us being required to pay significant damages, cease the development or sale of
certain products and services that incorporate the challenged intellectual property, obtain licenses from the holders of such
intellectual property which may not be available on commercially reasonable terms, or otherwise redesign those products to
avoid infringing upon others’ intellectual property rights, any of which could have a significant impact on our business and our
ability to compete.
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Regulatory, Compliance and Legal Risks
The telecommunications industry is a highly regulated industry and we are subject to an extensive variety of laws and
operate in uncertain judicial and regulatory environments, which may result in unanticipated outcomes that could harm
our business.
Our operations are subject to different and occasionally conflicting laws and regulations in each of and between the
jurisdictions in which we operate, which could result in market uncertainty and the lack of clear criteria. Regulatory compliance
may be costly and involve a significant expenditure of resources, thus negatively affecting our financial condition. 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, could result in 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. In
addition, the application of the laws and regulations of any particular country is frequently unclear and may result in adverse
rulings or audit findings by courts or government authorities resulting from a change in interpretation or inconsistent application of
existing law. As a result of the ongoing conflict between Russia and Ukraine, these risks are compounded in those jurisdictions,
as there is a risk that laws and regulations affecting telecommunications companies operating in those jurisdictions may be
changed dramatically and in ways that are adverse to our operations and results. For a further discussion on the ongoing conflict
between Russia and Ukraine and its impact on our business, see —Market Risks—The ongoing conflict between Russia and
Ukraine is having, and will continue to have, an adverse impact on our business, financial condition, results of operations, cash
flows and prospects. For a discussion on the risks associated with operating in emerging markets, see —Market Risks—
Investing in emerging markets, where our operations are located, is subject to greater risks than investing in more developed
markets, including significant political, legal and economic risks.
Mobile, internet, fixed-line, voice, content and data markets generally are subject to extensive regulatory requirements,
such as strict licensing regimes, antitrust and consumer protection regulations. Our ability to provide our mobile services is
dependent on obtaining and maintaining the relevant licenses. These licenses are limited in time and subject to renewal. While
we are confident in our ability to obtain renewals upon request, we may not reliably predict the financial and other conditions at
which such renewals will be granted. See—Our licenses are granted for specific periods and may be suspended, revoked or we
may be unable to extend or replace these licenses upon expiration and we may be fined or penalized for alleged violations of
law, regulations or license terms. In addition, 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, resulting in unpredictable outcomes such as 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.
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 MFS and DFS offerings are complex and increase our
exposure to fraud, money laundering and reputational risk.
In addition, certain regulations may require us to reduce retail prices, roaming prices or MTR 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 of our countries of operation, 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. 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. See—Anti-terror legislation passed in Russia and other jurisdictions could result in
additional operating costs and capital expenditures for a discussion of the impact of the Yarovaya laws on our business. The
nature of our business also subjects us to certain regulations regarding open internet access or net neutrality.
Regulatory requirements and compliance with such regulations may be costly and involve a significant expenditure of
resources, which could 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. In particular, our ability to
compete effectively in existing or new markets could be adversely affected if regulators decide to expand the restrictions and
obligations to which we are subject, or extend such restrictions and obligations to new services and markets, or otherwise
withdraw or adopt regulations, which may cause delays in implementing our strategies and business plans and create a more
challenging operating environment. Furthermore, our ability to introduce new products and services may also be affected if we do
not accurately predict how existing or future laws, regulations or policies would apply to such products and services, which could
prevent us from realizing a return on our investment in their development. Any failure on our part to comply with existing or new
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laws and regulations can result in negative publicity, the risk of prosecution or the suspension or loss of our licenses, frequency
allocations, authorizations or various permissions, diversion of management time and effort, increased competitive and pricing
pressure on our operations, significant fines and liabilities, third party civil claims, and other penalties or otherwise harm our
business, financial condition, results of operations, cash flows or prospects.
Violations of and changes to applicable sanctions and embargo laws, including export control restrictions, may harm
our business.
Various governmental authorities have imposed significant penalties on companies that fail to comply with the
requirements of applicable sanctions and embargo laws and regulations, as well as export control restrictions. We are subject to
certain sanctions and embargo laws and regulations and export control restrictions of the United States, the United Nations, the
European Union, the United Kingdom and the jurisdictions in which we operate, including those that have been imposed in
response to the ongoing conflict between Russia and Ukraine. Sanctions and embargo and export control 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. For example, in the United
States, 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 years, 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,
and has introduced heightened export restrictions targeting parties identified as military end-users and military intelligence end-
users, including parties in Russia and China. This has had an effect on our ability to procure certain supplies for our business
and transact with certain business partners. In response to these developments, countries, such as China, have also adopted
sanctions countermeasures that may impact our future ability to ensure our suppliers’ compliance with these laws.
Our recent unsponsored listings on MOEX and the St. Petersburg Stock Exchange (“SPB Exchange”) also exposes us
to increased risk that designated individuals and entities may buy, sell or otherwise transact with VEON Ltd.’s shares, as there
are certain brokers in the Russian market that are currently designated entities and certain brokers do not have policies against
providing services to designated individuals or entities. Further, in March 2022, the U.S. government imposed expansive new
export control restrictions on Russia’s ability to obtain goods, software and technology subject to U.S. export control jurisdiction,
including a broad array of foreign-made items that were previously not subject to U.S. export control jurisdiction. These
restrictions apply to items critical to the telecommunications sector and could have an adverse impact on our ability to maintain
and/or improve our infrastructure and adversely impact the availability and quality of our services in Russia and therefore have a
significant impact on our operations and results of operation.
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, including those recently imposed following the Russia-
Ukraine conflict, 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 equipment, infrastructure and other products important to our business.
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 an entity of our group did not satisfy their
relevant tax obligations in any given year. Such audits may also impose additional burdens on us 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. In the past, 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. We have 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
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or continuation of associated criminal proceedings. The outcome of these audits or the adverse or delayed resolution of other tax
matters, 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.
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 significantly adversely affect 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 and business decisions.
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 condition, results of
operations, cash flows or prospects. For example, within the Organization 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.
Our business decisions 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, and in our
other countries of operation.
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, as a result of the termination of the double tax treaty between Russia and the
Netherlands that became effective on December 31, 2021, Russian interest withholding tax increased from 0% to 20% on our
existing intercompany loans between our Dutch and Russian entities. We have incurred costs and diverted personnel resources
to reduce the impact of this increase in withholding tax on our financing operations. 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.
The tax laws and regulations in our jurisdictions of operation are complex and subject to varying interpretations and
degrees of enforcement, 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 or if there are any unforeseen changes in applicable tax laws,
we could incur additional tax liabilities, which could increase our costs of operations and significantly harm our business, financial
condition, results of operations, cash flows or prospects.
Laws restricting foreign investment could materially harm our business.
In recent years, an increasing number of jurisdictions have introduced rules restricting foreign investment or have
strengthened existing rules, and our business could be materially harmed by such new or existing laws.
The Russian government has historically placed limitations on the ability of foreign persons to own and invest in
companies that operate in Russia, and such restrictions have already and will continue to be increased as the ongoing conflict
between Russia and Ukraine continues. For a discussion of the recently-enacted sanctions, see Operating and Financial Review
and Prospects—Recent Developments after year end 2021—The Conflict Between Russia and Ukraine, including the
Deoffshorization Law, where since VEON Ltd. is incorporated in Bermuda (which is considered an “offshore” jurisdiction for
purposes of the Deoffshorization Law), our operating subsidiary in Russia is prohibited from participating in new state and
municipal procurement procedures in Russia.
There is also a law restricting foreign investment in Kazakhstan. The national security law of Kazakhstan states that 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 Ministry of Digital Development, Innovation and Aerospace Industry and national security authorities in
Kazakhstan..
The existence of such laws that restrict foreign investment could hinder potential business combinations or transactions
resulting in a change of control, or our ability to obtain financing from foreign investors should prior regulatory 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.
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New or proposed changes to laws or new interpretations of existing laws in the markets in which we operate may harm
our business.
As a telecommunications operator, with DFS, MFS, banking, digital content and other non-connectivity offerings, 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 some 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 (including in all respects in Russia or in Ukraine as a
consequence of the ongoing conflict between Russia and Ukraine) could have a significant adverse impact on our business,
financial condition, results of operations, cash flows or prospects.
For example, in some of the markets in which we operate, SIM verification and re-verification initiatives have been
implemented, which could result in the loss of some of our customer base in a particular market. 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. In addition, 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.
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 currently 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 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 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. See—Our
MFS and DFS offerings are complex and increase our exposure to fraud, money laundering, reputational and regulatory risk
below for further discussion of this increased risk.
In addition to any potential legal and financial liability, our reputation may also be adversely impacted by association,
action or inaction that is either real or perceived by stakeholders or customers to be inappropriate or unethical. Reputational risk
may arise in many different ways, including, but not limited to any real or perceived:
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•
•
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failure to act in good faith and in accordance with our 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;
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•
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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.
We regularly review and update our policies and procedures and internal controls, which are designed to provide
reasonable assurance that we and our personnel comply with applicable laws and our internal policies. We have also issued a
Business Partner Code of Conduct that we expect our representatives, agents, suppliers and other third parties to follow and
conduct risk-based training for our personnel. However, there can be no assurance 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.
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 U.S. 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 significantly 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 issuers, including foreign issuers with securities registered on a U.S. stock
exchange 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
applicable anti-corruption laws, 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.
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 lead to reputational harm and have a material adverse impact on our business, financial
condition, results of operations, cash flows or prospects.
Our MFS and 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 are different from the traditional
regulatory requirements of a telecommunications business. They may involve cash handling or other value transfers, exposing
us to the risk 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 result in legal and
financial liability or reputational damage and harm our business, financial condition, results of operations, cash flows or
prospects. 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, as we seek to execute our
“ventures” strategy, we may seek to expand our MFS and DFS offerings, thereby compounding our exposure to such risks.
For example, Mobilink Bank in Pakistan carries on a microfinance banking business and provides certain MFS, DFS
and traditional banking services in Pakistan under a license that was granted by the State Bank of Pakistan and is subject to
regulation by the State Bank of Pakistan. Such 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 us to a
risk of liability under banking and financial services compliance laws, including, for example, anti-money laundering and counter-
terrorist financing regulations.
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 the risks associated with possible unauthorized disclosure of such personal data, see—
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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.
We collect and process sensitive 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 both content and metadata.
These laws and regulations are subject to frequent revisions and differing interpretations and are becoming more stringent over
time.
We are subject to numerous data protection regulations. For example, in Russia and certain other jurisdictions in which
we operate, we are subject to other data protection laws and regulations that establish different categories of information such as
state secrets and personal data of our customers, which have different corresponding levels of protection, permitted registration,
disclosure and required safeguards. In each case, we are required to implement the appropriate level of data protection and
cooperate with government authorities on law enforcement disclosures for state secrets and personal data of our customers. In
our operating jurisdictions, new laws and regulations may be introduced subjecting us to more rigorous and stringent data
protection or privacy requirements which may result in increased compliance costs and business risks or potential liability and
exposure to fines and sanctions. In addition, the European Union introduced a data protection framework, the General Data
Protection Regulation (“GDPR”), which came into effect on May 25, 2018 and is still applicable in the United Kingdom following
its withdrawal from the European Union on December 31, 2020. While we believe that the processing of personal data by a
limited number of our 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, such as in Ukraine, may also become
subject to this regulation. For example, 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 or if other markets align their data privacy requirements to those of
the GDPR. Laws and regulations may also become more stringent over time. For example, the current draft of the EU ePrivacy
Regulation is expected to be expanded 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. This could broaden the exposure of our business
to data protection liability, restrict our ability to leverage our data and increase our costs.
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.
Furthermore, 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 OTT 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).
Our 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, such as 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 law also significantly increases penalties for non-compliance.
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
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penalties. In general, mobile operators are directly liable for actions of third parties to whom they forward personal data for
processing. 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. Violation of these data privacy laws and regulations may lead to a seizure of our 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, 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, cash flows or prospects.
Anti-terror legislation passed in Russia and other jurisdictions could result in additional operating costs and capital
expenditures.
Russian Federal Law No 374-FZ (the “Yarovaya law”) amended anti-terrorism legislation and imposed certain
obligations on communication providers, including, among others, a requirement to store certain communications information for
a specified period of time. This requirement came into force on July 1, 2018 for voice traffic and on October 1, 2018 for data
traffic. Failure to comply with the Yarovaya law may lead to administrative fines and could impact 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, as the Russian authorities required, among other
things, the use of specific storage equipment. We estimate that total Yarovaya law-related expenditures will be RUB 45 billion
over five to seven 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, which will lead
to additional expenditures or otherwise necessitate additional investments to be compliant.
Similar legislation has been implemented, or is being contemplated, in our other countries of operation. 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 business, financial condition, results of
operations, cash flows or prospects.
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, which when concluded, could have an adverse
impact on our business.
We are party to a number of lawsuits and other legal, regulatory or antitrust proceedings and commercial disputes, the
final outcome of which are uncertain and inherently unpredictable. 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. 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.
Any such disputes or legal proceeding, whether with or without merit, could be expensive and time consuming, and
could divert the attention of our senior management. Any adverse outcome in 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. We cannot assure you what the ultimate outcome of any particular dispute or legal
proceeding will be. For more information on current disputes, see Note 7—Provisions and Contingent Liabilities to our Audited
Consolidated Financial Statements.
Our licenses are granted for specific periods and may be suspended, revoked or we may be unable to extend or replace
these licenses 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
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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 continue operating 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. For a
discussion of the risks related to operating in emerging markets, see —Market Risks—Investing in emerging markets, where our operations
are located, is subject to greater risks than investing in more developed markets, including significant political, legal and economic risks.
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.
Our mobile network is supported by numerous base station transmission systems. Given the multitude of regulations
that govern such equipment and the various permits required to operate our base stations, 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. For a discussion of the risks
associated with the export controls that have been enacted as a result of the ongoing conflict between Russia and Ukraine and
how this could impact our ability to update and maintain our equipment and infrastructure, see —Operational Risks—We depend
on third parties for certain services and equipment, infrastructure and other products important to our business. As a result, there
could 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.
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. In
the past, 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.
Our Egyptian holding 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 subject to
corresponding laws and regulations. Although GTH is no longer operating any business activities and GTH entered into a tax
settlement agreement with the Egyptian tax authorities for certain historic periods, GTH may in the future be subject to further
dubious or unfounded tax claims for other tax periods under existing or new Egyptian tax law or upon winding up or liquidation.
The winding up of GTH and its subsidiaries may take some time and may expose the Company to costs and expenses or
liabilities. In particular, GTH still has a large number of private investors holding less than 0.5% of GTH’s share capital and they
may subject VEON Ltd. or GTH to claims in the future and may delay the winding up or liquidation of GTH.
Regulatory developments and government action on climate change issues may drive medium-to-long term increases
in our operational costs.
Our business operations and financial condition are subject to regulatory developments and government action on
climate change. Governments across the world are responding to climate change by adopting ambitious climate policies as
public awareness of and concern about climate change continues to grow. Government climate policies include the enactment of
circular economy regulations, regulating greenhouse gas (“GHG”) emissions, carbon pricing and increasing energy and fuel
costs. Increased fuel and energy prices and taxes and pricing of GHG emissions could make it more expensive for us to power
our networks and operations, and may also result in our being subject to carbon emission taxation directly for our limited carbon
emissions as a telecommunications operator, which would drive medium-to-long term increases in our operational costs. In
addition, there are initial capital costs that we will have to incur as we transition towards the use of renewable energy across our
operations.
There could also be medium-to-long term increases in our operational costs due to changing levels of precipitation,
increased severity and frequency of storms and other weather events, extreme temperatures and rising sea levels, which could
cause potential damage to vital infrastructure and utilities. Increased risk of flooding to low-lying facilities and infrastructure due
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to longer-term increases in precipitation patterns could increase operating costs to maintain and/or repair facilities and network
equipment. Decreased precipitation and rising and extreme temperatures could generate drought conditions that could create an
increased burden to local power and water resources, which are required to operate our cooling infrastructure. In addition, these
climate change impacts could also result in drops in productivity or increased operational costs for our suppliers, which in turn
may be passed on to us, which could harm our business, financial condition, results of operations, cash flows or prospects.
General Risk Factors
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 may change accounting
regulations that govern the preparation and presentation of our financial statements, and those who interpret the accounting
standards, including the U.S. Securities and Exchange Commission (the “SEC”), the Dutch Authority for the Financial Markets
(the “AFM”), and our independent registered public accounting firm may amend or even reverse their previous interpretations or
positions on how various accounting 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 or interpretation thereof, an outcome from a unfavorable regulatory review relating to our financial
reporting or new requirement may have to be implemented with retrospective effect, which requires us to restate or make other
changes to our previously issued financial statements and such circumstances may involve the identification of one or more
significant deficiencies or material weaknesses in our internal control over financial reporting, or may otherwise impact how we
prepare and report our financial statements, and may impact future financial covenants in our financing documents. For example,
we were engaged in a comment letter process with the AFM regarding our financial statements as of and for the six and three-
month periods ended June 30, 2020 in which the AFM indicated that our goodwill impairment tests may have been applied
incorrectly and that an additional goodwill impairment charge may be necessary, which concluded in December 2021. While the
outcome of this particular process did not require us to restate previously issued financial statements or result in other changes
to our goodwill impairment testing being imposed, there can be no assurance that the AFM will not raise new comments on our
financial statements in the future that will be resolved without adverse consequences.
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 Note 25—Significant Accounting Policies to our Audited
Consolidated Financial Statements.
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 cost savings initiatives, which included
redundancies in our Amsterdam and London offices most recently in 2021. We may also experience strikes or other 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—Employees.
Work stoppages could also occur due to natural disasters, civil unrest (including potential dissatisfaction with regards to
our response to the ongoing conflict between Russia and Ukraine) or security breaches/threats, such as due to the ongoing
conflict between Russia and Ukraine, which would make access to work places and management of our systems difficult and
may mean that we are not able to timely or cost effectively meet the demands of our customers. 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, which could harm our business, financial condition, results of operations, cash
flows or prospects.
Risks Related to the Ownership of our ADSs
The price of our ADSs may be volatile, and holders of ADSs could incur substantial losses.
Volatility in the market price of our ADSs may prevent holders of our ADSs from selling their ADSs at or above the price
at which they purchased our ADSs. The trading price for our ADSs may be subject to wide price fluctuations in response to many
factors, including:
•
adverse geopolitical and macroeconomic developments, including caused by the ongoing conflict between Russia and
Ukraine;
•
•
involuntary deconsolidation of our operations in Russia and/or Ukraine;
breach or default of the covenants in our financing agreements;
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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;
•
•
•
the failure of securities analysts to cover our shares or changes in financial estimates by analysts;
•
ratings downgrades;
investor perception of our company and of the industry in which we compete, as well as of the countries in which we
operate; and
other general economic, political and market conditions.
These and other factors, including the other factors listed in this section—Risk Factors might cause the market price of
our ADSs to fluctuate substantially, which might limit or prevent holders of our ADSs from readily selling their ADSs and may
otherwise negatively affect the liquidity of our ADSs. In addition, in recent years, the stock market has experienced extreme
volatility that has often been unrelated to the operating performance of particular companies, including at the outset of the
COVID-19 pandemic and in connection with the ongoing conflict between Russia and Ukraine.
Various factors may hinder the declaration and payment of dividends.
The payment of dividends is subject to the discretion of our board and VEON Ltd.’s assets consist primarily of
investments in its operating subsidiaries. For the years ended December 31, 2021 and 2020, we did not pay a dividend. Various
factors may cause our board to determine not to pay dividends or not to increase dividends. Such factors include our financial
condition and prospects, our earnings, shareholders equity and equity free cash flow, the movement of the U.S. dollar against
our local currencies, such as the Russian ruble, our leverage, our capital requirements, contractual and currency restrictions, the
economic outlook of markets in which we operate, legal proceedings and other such factors as our 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 with a number of operating subsidiaries, we depend
on the performance of its subsidiaries and their ability to pay dividends or make other transfers to VEON Ltd., as well as the
ability to make certain intercompany payments and transfers.
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 the depositary to make them
available, including in the case of sanctioned holders. These restrictions may materially reduce the value of the ADSs.
Our ADSs and common shares represented by ADSs trade on more than one market and this may result in increased
volatility and price variations between such markets.
Our ADSs trade on both NASDAQ and the SPB Exchange and our common shares trade on Euronext Amsterdam and
MOEX. Trading in our securities on these markets occurs in different currencies (U.S. dollars on NASDAQ and SPB Exchange,
euro on Euronext Amsterdam and Russian rubles on MOEX) and at different times as a result of different time zones, trading
days and public holidays in the United States, the Netherlands and Russia. The trading prices of our securities on these markets
may differ due to these and other factors, including the inability of market participants to take advantage of arbitrage
opportunities and price differentials arising between the trading venues.
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The liquidity in our securities may be limited. Listing of our ADSs and common shares on multiple trading venues and
convertibility of our ADSs into common shares may further contribute to the split of liquidity split between NASDAQ, the SPB
Exchange, Euronext Amsterdam, MOEX, and any other venues where our securities may be admitted to trading. This may impair
your ability to sell your ADSs at the time you wish to sell them or at a price that you consider reasonable. Our securities are
completely fungible between the markets or can be made fungible via deposit and cancellation procedures as set out in the
deposit agreement. As a result, any decrease in the trading price of our ADSs or common shares on one of these markets could
cause a decrease in the trading price of our securities on the other markets.
VEON Ltd. is a Bermuda incorporated exempt company that, while headquartered in the Netherlands with its principal
place of business in Amsterdam, is 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 incorporated exempted company. As a result, the rights of VEON Ltd.’s shareholders are
governed by Bermuda law and by its 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 Ltd. 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 rules of NASDAQ, we are subject to different NASDAQ governance
standards than domestic U.S. issuers, which may afford less protection to holders of our ADSs.
As a Bermuda incorporated exempt company with ADSs listed on the NASDAQ Global Select Market, 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. Certain corporate
governance practices in Bermuda, may differ significantly from the NASDAQ corporate governance listing standards.
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 are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act, and therefore, we are not
required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and
regulations.
The rules governing the information that foreign private issuers are required to 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 are not subject to review by the SEC and Section 16 of the Exchange Act regarding sales of our shares by insiders.
In the future, 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 a majority of our directors or management are U.S. citizens or
residents. Based on a review of our register of members maintained in Bermuda, as of April 15, 2022, 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 511,889,772 common shares representing approximately 29.14% 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 16,564,960 common shares
representing approximately 0.94% 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 April 15, 2022, 23 record holders of VEON Ltd.’s ADRs, holding an aggregate of 763,528,329 common shares
(representing approximately 43.46% of VEON Ltd.’s issued and outstanding shares), were listed as having addresses in the
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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 as a U.S. domestic issuer may be significantly higher than costs we incur as a foreign private issuer.
Our ADSs may no longer qualify for listing on the NASDAQ Global Select Market, in which case we would seek a
transfer to the NASDAQ Capital Market.
On April 7, 2022, we received notification from the Listing Qualifications Department of NASDAQ that, as a result of
failing to meet the minimum bid price of $1.00 for 30 consecutive business days, our ADSs are not in compliance with the
continued listing standards of the NASDAQ Global Select Market. Under the relevant listing rules, we have 180 calendar days
from the date of notice, or until October 4, 2022, to achieve compliance. If we have failed to achieve compliance (generally
measured as 10 consecutive business days of meeting the minimum bid price of $1.00), then we may be eligible for an additional
180 calendar days to achieve compliance. While we are monitoring and will continue to monitor the closing bid price of our ADSs,
and may, if appropriate, consider available options to regain compliance with the minimum bid price requirement, such as a
reverse stock split. However, we cannot assure you that we will regain compliance with the minimum bid price requirement or
secure a second period of 180 calendar days to regain compliance or maintain compliance with other NASDAQ listing
requirements.
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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 2020
compared to 2019, Operating and Financial Review and Prospects in our Annual Report for the fiscal year ended December 31,
2020, which was filed on March 15, 2021, excluding the discussion related to the adjustments to our Consolidated Income
Statement, Consolidated Statement of Cash Flows and capital expenditures that have been made following the classification of
Algeria as a discontinued operation (see Note 10—Held for Sale and Discontinued Operations in our Audited Consolidated
Financial Statements), which is discussed in this section.
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 these forward-looking
statements due to 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 currently provides more than 220 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, infrastructure 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, 2021, our reportable segments consist of the following segments: Russia, Pakistan, Ukraine,
Kazakhstan, Uzbekistan and Bangladesh.
Following the exercise of the put option for our stake in Algeria on July 1, 2021, the Algerian business has, in line with
the IFRS 5 requirements, become a discontinued operation, and accounted for as an “Asset held for sale.” Refer to Note 9—
Significant Transactions in our Audited Consolidated Financial Statements attached hereto for further details. We also present
our results of operations for “Others” and “HQ” separately, although these are not reportable segments. “Others” represents our
operations in Kyrgyzstan and Georgia and “HQ” 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. For more information on our reportable segments, refer to
Note 2—Segment Information in our Audited Consolidated Financial Statements attached hereto for further details.
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 Audited Consolidated Financial Statements and applied by VEON.
Critical Accounting Estimates
For a discussion of our accounting policies please refer to Note 25—Significant Accounting Policies of our Audited
Consolidated Financial Statements attached hereto.
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Key Developments for the year ended December 31, 2021
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 are no longer
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.
VEON completes the acquisition of minority shareholding in Pakistan Mobile Communications Limited
In March 2021, VEON successfully concluded the acquisition of the 15% minority stake in Pakistan Mobile
Communications Limited ("PMCL"), the operating company of Pakistan’s leading mobile operator, Jazz, from the Dhabi Group for
USD 273 million.
This transaction follows the Dhabi Group’s exercise of its put option announced on September 28, 2020 and gives
VEON 100% ownership of PMCL. This simplifies and streamlines the Group’s governance over its Pakistani assets and enables
VEON to capture the full value of this growing business, including future dividends paid by PMCL. The transaction is presented
within 'Acquisition of non-controlling interest' within the Consolidated Statement of Cash Flows.
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 Bangladesh
Telecommunication Regulatory Commission (“BTRC”). The newly acquired spectrum will see Banglalink increase its total
spectrum holding from 30.6MHz to 40MHz. Banglalink total investment will amount to BDT 10 billion (US$115 million equivalent)
to purchase the spectrum.
VEON completes the acquisition of majority shareholding in OTM
In June 2021, VEON successfully acquired a majority stake in OTM, a technology platform for automating and planning
online advertising purchases in Russia. VEON's investments in OTM will significantly strengthen Beeline's position in the
advertising technology market and enable VEON to expand OTM's operations into other markets served by VEON’s mobile
operators. The acquisition builds on VEON’s ongoing transformation into a digital operator.
VEON announced the exercise of its put option to sell its stake in Djezzy
On July 1, 2021, VEON exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary, Omnium
Telecom Algérie SpA ("Omnium") to the Algerian National Investment Fund, Fonds National d’Investissement ("FNI"). Omnium
owns Algerian mobile network operator, Djezzy. The exercise of the option initiates a process under which a third-party valuation
will be undertaken to determine the fair market value at which the transfer shall take place. Under the terms of the shareholders’
agreement with FNI, the transaction is expected to be completed in the second quarter of 2022 for a sale price of US$682
million.
Agreement between VEON and Service Telecom regarding the sale of its Russian tower assets
On September 5, 2021, the Company and VEON Holdings B.V., a subsidiary of the Company, signed an agreement for
the sale of its mobile network towers in Russia to Service Telecom Group of Companies LLC ("Service Telecom"). The sale
reflects VEON's continued focus on active portfolio management and the pursuit of opportunities to realize the value of its
infrastructure portfolio. On December 1, 2021, VEON announced the successful conclusion of the sale of its Russian tower
assets to Service-Telecom for RUB 70.65 billion (US$957 million equivalent), paving the way for the establishment of a long-term
partnership pursuant to a master tower agreement that has been entered into between PJSC VimpelCom and Service Telecom.
VEON aligns executive compensation with total shareholder returns
On December 7, 2021, VEON announced a new incentive plan for its Group executive leadership. The purpose of the
new compensation scheme is to reward long-term value creation and ensure the alignment of management and shareholder
interests.
Management changes
In April 2021, VEON announced changes to its leadership structure. Co-CEO Sergi Herrero, who joined the company in
September 2019, stepped down as co-CEO effective June 30, 2021. Kaan Terzioglu continues in his role as CEO of VEON Ltd.
with overall responsibility for corporate matters and the Group’s general operations.
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In addition, in April 2021, VEON announced the appointment of two new members of the Group’s leadership team. Alex
Bolis joined VEON as Group Head of Corporate Strategy, Communications and Investor Relations while Dmitry Shvets joined as
Group Head of Portfolio and Performance Management, a new role that includes oversight of VEON’s Performance Management
and M&A teams. Mr. Bolis joined VEON on April 1, 2021 and Mr. Shvets on April 15, 2021.
On August 17, 2021, VEON announced the appointment of Michael Schulz as VEON’s Group Chief People Officer.
On October 21, 2021, VEON announced that its Group General Counsel, Scott Dresser, would be leaving VEON
effective on December 31, 2021.
On December 18, 2021, VEON announced that Victor Biryukov had been appointed as its Group General Counsel
effective January 1, 2022, succeeding Scott Dresser.
Board of Director changes
In June 2021, VEON Ltd. announced the results of the elections conducted at its Annual General Meeting of
Shareholders. Shareholders elected three new members to the Company’s Board of Directors: Vasily Sidorov, Irene Shvakman
and Sergi Herrero, who previously served as co-CEO of VEON. Shareholders also elected nine previously serving directors:
Hans-Holger Albrecht, Leonid Boguslavsky, Mikhail Fridman, Gennady Gazin, Yaroslav Glazunov, Andrei Gusev, Gunnar Holt,
Stephen Pusey and Robert Jan van de Kraats.
On July 15, 2021, VEON announced that Stephen Pusey decided to step down from its Board of Directors.
See —Recent Developments after year end 2021 below for further information on changes to our Board of Directors in
2022.
Financing activities
In March 2021, VEON Holdings B.V. successfully entered into a new multi-currency revolving credit facility agreement of
US$1,250 million. The RCF replaced the revolving credit facility signed in February 2017, which was cancelled. The RCF has an
initial tenor of three years, with VEON having the right to request two one-year extensions, subject to lender consent.
International banks from Asia, Europe and the United States 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. VEON will have the option to make
each drawdown in either U.S. dollars or euro.
In March 2021, PMCL successfully entered into a new PKR 15 billion (US$98 million equivalent) syndicated facility with
MCB Bank as agent and PKR 5 billion (US$33 million equivalent) bilateral term loan facility with United Bank Limited. Both these
floating rate facilities have a tenor of seven years.
In March 2021, VEON Holdings B.V. successfully amended and restated its existing RUB 30 billion (US$396 million
equivalent) bilateral term loan agreement with Alfa Bank and increased the total facility size to RUB 45 billion (US$594 million
equivalent), by adding a new floating rate tranche of RUB 15 billion (US$198 million equivalent). The new tranche has a five year
term. In April 2021, the proceeds from Alfa Bank new tranche of RUB15 billion (US$198 million equivalent) were used to early
repay RUB 15 billion (US$198 million equivalent) of loans from Sberbank, originally maturing in June 2023.
In June 2021, PMCL secured a PKR 50 billion (US$320 million equivalent) syndicated credit facility from a banking
consortium led by Habib Bank Limited. This ten year facility will be used to finance the company’s ongoing 4G network rollouts
and technology upgrades, as well as to address upcoming maturities.
In September 2021, VEON Holdings B.V. issued senior unsecured notes of RUB 20 billion (US$273 million equivalent),
maturing in September 2026. The notes were issued under its existing Global Medium Term Note Program with a Program limit
of US$6.5 billion, or the equivalent thereof in other currencies. The proceeds were used for early repayment of RUB 20 billion
(US$273 million equivalent) of outstanding loans to Sberbank that were originally maturing in June 2023.
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$612 million
equivalent) Term Facilities Agreement with Alfa Bank which includes a RUB 30 billion (US$408 million equivalent) fixed rate
tranche and a RUB 15 billion (US$204 million equivalent) floating rate tranche, both with a maturity date of December 2026. The
facilities are guaranteed by VEON Holdings B.V. The proceeds from the Alfa Bank facilities have been used to finance
intercompany loans to PJSC VimpelCom. See —Recent Developments after year end 2021—Novation of Loans for a discussion
of the novation of this loan in 2022.
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In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$611 million
equivalent) Term Facility Agreement with Sberbank with a floating rate. The maturity date of the facility is December 2026 and it
is guaranteed by VEON Holdings B.V. The proceeds from the Sberbank facility have been used to finance an intercompany loan
to PJSC VimpelCom. See —Recent Developments after year end 2021—Novation of Loans for a discussion of the novation of
this loan in 2022.
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (USD611 million equivalent) of outstanding loans to Alfa
Bank, comprising of a RUB 30 billion loan (US$407 million equivalent) originally maturing in March 2025 and a RUB 15 billion
(US$204 million equivalent) loan originally maturing in March 2026.
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$612 million equivalent) of outstanding loans to
Sberbank, comprising of a RUB 15 billion (US$204 million equivalent) loan originally maturing in June 2023 and a RUB 30 billion
(US$408 million equivalent) loan originally maturing in June 2024.
VEON concludes comment letter process with the AFM
On November 25, 2020, we received a letter from the AFM asserting that the goodwill impairment tests for the cash-
generating units in Russia and Algeria had not been applied correctly in the first half of 2020 because our goodwill impairment
tests did not take into account all aspects that market participants would take into account in determining the fair value less cost
of disposal. The AFM comment process began in November 2020, when we received an initial comment letter from the AFM
seeking additional information regarding our goodwill impairment testing performed in the first half of 2020 as disclosed in the
2020 Interim Financial Report. The AFM had asserted that they did not agree with our assumptions regarding the discount rate
and projected cash flows used in our discounted cash flow model.
We responded to these requests from the AFM during 2020 and 2021 and met several times with the AFM to discuss
our goodwill impairment testing. We maintained that our goodwill impairment tests were performed correctly and that no re-
performance of the past impairment tests is necessary. These discussions with the AFM have now been resolved without a
restatement of previously issued financial statements or other changes to our goodwill impairment testing being imposed.
Recent Developments after year end 2021
Karen Linehan joins VEON board as a non-executive director
On January 5, 2022, VEON announced the appointment of Karen Linehan to the Board of Directors as a non-executive
director, following the resignation of Steve Pusey in 2021.
VEON announces its intention to establish a new parent holding company in the United Kingdom
On February 3, 2022, VEON announced its intention to move its group parent company to the United Kingdom, with the
introduction of a newly formed UK incorporated public limited company (the “new UK Parent Company”) as the top holding
company of the VEON Group. It is expected that the new UK Parent Company will replace VEON Ltd. as the VEON Group’s
ultimate parent company by way of a Bermuda court-approved scheme of arrangement. VEON has since suspended all activities
related to the previously proposed re-domiciliation of VEON Ltd. to the United Kingdom and will continue to consider the optimal
corporate structure for the Group.
The Conflict between Russia and Ukraine
In response to the ongoing conflict between Russia and Ukraine, the United States, European Union (including
individual E.U. member states), the United Kingdom, as well as other countries (such as, Japan, Canada, Switzerland) have
imposed wide-ranging economic sanctions and trade restrictions which have targeted individuals and entities, as well as large
swaths of the Russian (and Belarussian) economy. The United States, the European Union and the United Kingdom have also
imposed sanctions on a number of individuals and entities from both Russia and Belarus (including many Russian and
Belarussian financial institutions), including measures that prohibit dealings with these individuals and entities and/or freezing
their assets and measures that prohibit dealing with newly issued securities or extending credit to designated entities and, in the
case of the United Kingdom, persons connected with Russia. In addition, certain Russian banks have been removed from the
SWIFT payment messaging system, which facilitates transfers of funds between financial institutions and across borders. In
addition to economic sanctions, the United States, the European Union and the United Kingdom have expanded export and
import prohibitions on items destined for or from Russia or Belarus, including, among other things, restrictions on the export to or
for use in Russia certain commodities, critical-industry software and technology, iron and steel products, and luxury goods.
Ukraine has also enacted sanctions with respect to certain Russian entities and individuals, such as MOEX on which VEON
Ltd.’s shares are listed and traded on an unsponsored basis. The sanctions and trade restrictions have been frequently updated
as events have unfolded and are subject to ongoing change.
98
Furthermore, as a response to the new sanctions Russia recently introduced a number of counter-sanctions and
measures aimed at stabilizing domestic financial markets. These, among others, include new restrictions related to capital and
foreign exchange controls, restrictions on lending to foreign (non-Russian) persons, restrictions on foreign persons’ transactions
with Russian securities and real estate, and limitations on export and import of certain goods into and outside Russia. The
introduction of certain of these measures may significantly harm our business. For example, we are limited in our ability to pay
and receive dividends, including interest payments on intercompany loans and dividends from our subsidiary PJSC VimpelCom,
we may also be limited in issuing or repaying intra-group loans, completing corporate restructurings or planned M&A
transactions. Moreover, new Russian counter-sanctions may affect our ability to service our indebtedness towards non-Russian
creditors as Russian counter-sanctions introduce new rules related to debt repayment towards foreign creditors.
As of the date on this Annual Report, the conflict between Russia and Ukraine is still ongoing. For a discussion of the
potential impact of the conflict on our business, see—Risk Factors and —Factors Affecting Comparability and Results of
Operations—The Conflict Between Russia and Ukraine.
Mikhail Fridman steps down from VEON board
On March 1, 2022, VEON announced the resignation of Mikhail Fridman from the Board of Directors, effective from
February 28, 2022.
Liquidity and financing update
On March 2, 2022, VEON announced that as of February 27, 2022, it had approximately US$2.1 billion of cash and deposits,
including US$1.5 billion of U.S. dollars and euro-denominated cash and deposits held at the level of its HQ in Amsterdam. The HQ cash and
deposits are held in bank accounts, money market funds and on-demand deposits at a diversified group of international banks from the
European Union, the United States and Japan. In addition, VEON utilized US$430 million under its RCF on February 28, 2022 to repay the
principal and accrued interest of its US$417 million notes due March 1, 2022.
On March 11, 2022, a subsidiary of VEON prepaid its RUB 30 billion interest-bearing loan with VTB Bank, which had been
entered into on February 17, 2021, in accordance with its terms, and the facility was cancelled. The repayment and cancellation was in
compliance with applicable sanctions. In February 2022, VEON requested a one-year extension to the RCF, which was approved by
eight lenders, and in March 2022, commitments of two Russia-based banks under the RCF were cancelled as it is no longer
possible for them to fund drawings under the RCF given the recently introduced Russian currency controls. As a result, the
commitments under the RCF will be reduced from US$1,250 million to US$1,055 million.
On April 13, 2022, VEON announced that it had approximately US$1.3 billion of cash held at the level of its HQ in Amsterdam,
which was deposited with international banks and fully accessible at HQ, with approximately US$700 million available under its RCF. In
addition, VEON’s operating companies had a total cash position equivalent to over US$500 million. As of the date of this Annual
Report ,VEON Holdings B.V. is in the process of drawing down the remaining committed amounts under the RCF, with a portion
of the related utilization request having been received as of such date. Once the drawdown is complete, the RCF will be fully
drawn. The proceeds of this drawing will be used for general corporate purposes.
In February 2022, PMCL fully utilized the remaining PKR 40 billion that it had available under its existing line of credit and in
April 2022, PMCL entered into a PKR 40 billion syndicated loan with a ten year maturity and Banglalink entered into a BDT 12 billion
syndicated loan with a five year maturity. In addition, in April, Kyivstar prepaid a UAH 1,350 million loan with JSC CitiBank, prepaid a
portion of a UAH 1,677 million loan with Alfa Bank (UAH 1,003 million) and prepaid a portion of a UAD 1,275 million loan with JSC
Credit Agricole (UAH 940 million prepaid).
Robert Jan van de Kraats steps down from VEON Board
On March 8, 2022, VEON announced the resignation of Robert Jan van de Kraats from the Board of Directors, effective
from March 7, 2022.
U.S., EU and UK Sanctions not applicable to VEON
On March 15, 2022 and April 13, 2022, we announced our conclusion that, on the basis of information available to us,
VEON is not the subject of any sanctions imposed by the United States, the European Union or the United Kingdom. Bermuda
adopts UK sanctions by operation of law.
VEON has no ultimate controlling shareholder. As disclosed in this Annual Report, LetterOne holds 47.85% of our
common and voting shares. Mr. Mikhail Fridman and Mr. Peter Aven, upon whom sanctions have been imposed on by the
European Union and the United Kingdom, hold in the aggregate a less than 50% interest in the LetterOne group, the ultimate
shareholding entity of LetterOne, and both have stepped down from the LetterOne group board. All of our shareholders have
identical voting rights. None have ‘special’ voting rights (either through the bye-laws or as a matter of agreement between VEON
and any shareholder). On the basis of public filings, there are no agreements in place between LetterOne and any other
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shareholders relating to the voting of VEON shares, and neither Mr. Fridman nor Mr. Aven directly or indirectly own any voting
interests in VEON shares or ADSs outside of their interest in LetterOne. As we announced on 1 March 2022, Mr. Fridman
stepped down as a director of VEON effective 28 February 2022. Mr. Aven is not a director of VEON or of any company within
our Group.
Michiel Soeting joins the VEON Board as a non-executive Director
On March 16, 2022, VEON announced the appointment of Michiel Soeting to the Board of Directors as a non-executive
director and Chairman of the Audit and Risk Committee, following the resignation of Robert Jan van de Kraats on March 7, 2022.
VEON confirms notification from NASDAQ on minimum share price requirement
On April 12, 2022, VEON confirmed that on 7 April 2022 VEON received notification from the Listing Qualifications
Department of NASDAQ that VEON is not in compliance with the minimum bid price requirement set forth in NASDAQ’s Listing
Rule 5550(a)(2). This does not impact current NASDAQ listing and trading, and VEON will evaluate options to return to
compliance.
Spectrum Acquisition in Bangladesh and Pakistan
On March 31, 2022, Banglalink acquired new spectrum for a fee o US$205 million payable in installments over eleven
years, which doubles its spectrum holding in Bangladesh. Banglalink acquired 40 MHz of spectrum from the 2300 MHz band. On
April 12, 2022, Jazz signed a 4G license renewal with the PTA for a fee of US$486 million for 15 years, of which 50% has been
settled, and the remaining amount will be paid in five equal annual installments.
Novation of Loans
As a result of current economic sanctions affecting Russian banks, in April 2022, VEON novated two group-level loans,
with Sberbank and Alfa Bank respectively, and totaling RUB 90 billion, to PJSC VimpelCom. This resulted in the release of the
former borrower, VEON Finance Ireland DAC and the former guarantor, VEON Holdings B.V. from their obligations. In addition,
the novation of these loans has allowed VEON to ensure that the majority of the Group’s RUB liabilities are held within Russia
and as such are matched to the market where RUB revenues are generated, enabling further review of the capital structure of
PJSC VimpelCom.
First Quarter 2022 Trading Update
On April 28, 2022, VEON announced a trading update for the first quarter period ended March 31, 2022 (unaudited),
including selected financial and operational details.
Factors Affecting Comparability and Results of Operations
The Conflict Between Russia and Ukraine
The conflict between Russia and Ukraine has had a significant impact on our business. As the conflict commenced in
February 2022 and is ongoing, we anticipate that our future results of operations will be adversely impacted and not comparable
to past results of operations due to the volatility in foreign currency exchange rates, the potential loss of some customers in
Ukraine, the impact of sanctions and export control restrictions and numerous other factors. While we are still assessing the
extent of the impact on our operations and financial performance, as long as the conflict is ongoing, we expect a deterioration of
our performance in Ukraine, which will be exacerbated as the conflict continues. In Russia, the ongoing conflict between Russia
and Ukraine and related sanctions will have an impact on our operations, including as a result of the volatility of the Russian
ruble. See Risk Factors—Market Risks—We are exposed to foreign currency exchange loss, fluctuation and translation risks,
including as a result of the ongoing conflict between Russia and Ukraine. The legislative sanctions imposed, coupled with self-
imposed restrictions by multinational companies and service providers unwilling to conduct business in Russia, are more
complex and comprehensive than any such measures to date, and are evolving on a daily basis. We are not able to predict
further developments on this issue, including those that could affect our operations in Russia, Ukraine or elsewhere, nor can we
predict when sanctions targeting Russia imposed by the United States, the United Kingdom, the European Union and/or other
countries as a result of Russia’s involvement in the ongoing conflict might be lifted.
These are highly uncertain times and it is not possible to predict with precision how certain developments will impact
our results and operations, nor our ability to execute comprehensive contingency planning in Ukraine due to the ongoing conflict
and inherent danger in the country. For a discussion of the potential impact of the conflict on our business, see —Risk Factors.
Foreign Currency Translation
Our Audited Consolidated Financial Statements are presented in U.S. dollars and 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
100
by increases or decreases in the value of the U.S. dollar or our functional currencies. A higher average exchange rate will
correlate to a weaker functional currency. The functional currencies of our group are the Russian ruble in Russia, the Pakistani
rupee in Pakistan, the Bangladeshi taka in Bangladesh, the Ukrainian hryvnia in Ukraine, the Uzbekistani som in Uzbekistan, and
the Kazakhstani tenge in Kazakhstan. See Quantitative and Qualitative Disclosures about Market Risk for a further discussion.
For a discussion on risks associated with foreign currency translations related to the ongoing conflict between Russia and
Ukraine see —Risk Factors.
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,
which includes 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. Therefore, 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 business
strategies, hurt our liquidity or prevent us to meet unexpected financial requirements. For example, the COVID-19 pandemic has
significantly affected our results of operations as it had various adverse impacts on supply and demand and caused a substantial
deterioration in financial markets in 2020, unprecedented drops in commodity prices, a sudden slowdown in commercial activity
and strong restrictions on transportation and travel. Following the introduction of lockdown measures, we saw a significant
impact on roaming revenues, while travel restrictions that were imposed in certain of our countries of operation further saw a
market reduction in the migrant workforce, which has traditionally been a source of a large subscriber base in Russia. The
ongoing conflict between Russia and Ukraine, related sanctions and similar measures against Russia and Russia-based entities,
and the effect of such developments on the Russian and Ukrainian economies will significantly affect our operations and financial
condition in 2022, and will likely continue to have a significant impact for the foreseeable future. In addition, the increasing price
for fossil fuels and rising inflation rates, are expected to have broader adverse effects on many of the economies in which we
operate and may result in recessionary periods and lower corporate investment, which, in turn, could lead to economic strain on
our business and on current and potential customers. Sustained high levels of inflation or hyperinflation in Russia would create
significant imbalances in the Russian economy and undermine any efforts the government is taking to create conditions that
support economic growth in the wake of the conflict with Ukraine, which would have an adverse impact on our results of
operations. For more information regarding economic trends and how they affect our operations, see .—Risk Factors—Market
Risks.
Acquisitions, Dispositions and Divestitures
From time to time, we undertake acquisitions, dispositions and divestitures, which may affect comparability across
periods and our results of operations. Our decision to engage in such transactions will be opportunistic and subject to market
conditions. Consummation of such transactions may have an effect on comparability of our results of operations and financial
condition across certain periods as changes to our asset base and revenue streams will be reflected in our financial statements.
For example, on July 1, 2021, we exercised our put option in Algeria to sell the entirety of our stake in our Algerian subsidiary to
the Algerian National Investment Fund, Fonds National d’Investissement. In line with the requirements of IFRS 5, the Algerian
business has become a discontinued operation, and was accounted for as an “Asset held for sale” commencing in the third
quarter of 2021. As a result, the Algerian operations do not contribute to the comparison base or our actual reported numbers,
without any change in the net economic value of this business. Furthermore, in December 2021, we concluded the sale of our
network of approximately 15,400 mobile network towers in Russia to Service-Telecom for RUB 70.65 billion. We received a
payment of RUB 64.4 billion at closing, and the balance of certain deferred amounts will be due and payable over the next three
years, which allowed us to record a US$225 million gain including tax benefits for the year ended December 31, 2021.
Execution of Business Strategies and Initiatives
In September 2019, we announced a strategy framework comprising of three vectors: infrastructure, digital operator and
ventures. See —History and Development of the Company for further information on what this strategic framework entails, and in
the first quarter of 2021, we initiated a cost efficiency program called Project Optimum to cultivate a mindset of continuous
efficiency building and an improvement of actual costs. Although it is our objective that such initiatives improve our results of
operation and financial profile, no assurance can be given that such effects will be achieved in the time frame indicated or at all.
Changes in Tax Regimes
Changes in tax regimes have the potential to affect our business and results of operations. For example, as a result of
the termination of the double tax treaty between Russia and the Netherlands that became effective on December 31, 2021, the
withholding tax rate applicable to profit distributions from Russia to the Netherlands increased from 5% to 15%, which contributed
to restrictions on the distributable profits at VEON Ltd. For a further discussion of the risks relating to VEON Ltd.’s ability to
withdraw funds and dividends from our subsidiaries and operating companies, see —Operational Risks—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. as well as Note 6 to the Company Financial Statements as attached to this Annual report.
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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.
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.
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.
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Results of Operations
In millions of U.S. dollars
Consolidated income statement data:
Service revenues
Sale of equipment and accessories
Other revenues
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
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,
2021
2020*
2019*
7,147
508
133
7,788
4
(1,393)
(487)
(2,579)
(1,545)
(308)
(20)
(17)
101
1,544
(690)
16
34
4
908
(258)
650
151
801
605
69
127
801
6,786
388
117
7,291
4
(1,334)
(378)
(2,432)
(1,432)
(310)
(784)
(36)
(78)
511
(673)
23
111
(54)
(82)
(313)
(395)
79
(316)
(384)
35
33
(316)
7,472
463
154
8,089
350
(1,366)
(476)
(2,736)
(1,512)
(333)
(108)
(44)
1
1,865
(876)
52
21
(18)
1,044
(462)
582
101
683
576
45
62
683
*Prior year comparatives for the years ended December 31, 2020 and 2019 are adjusted following the classification of Algeria as a
discontinued operation (see Note 10–Held for Sale and Discontinued Operations in our Audited Consolidated Financial
Statements).
Total Operating Revenue
In millions of U.S. dollars, includes intersegment revenue
Russia
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Bangladesh
Others
HQ and eliminations
Total
Year ended December 31,
2021
3,950
1,408
1,055
569
194
564
81
(33)
2020
3,819
1,233
933
479
198
537
125
(33)
2019
4,481
1,321
870
486
258
537
172
(36)
7,788
7,291
8,089
For the year ended December 31, 2021, our consolidated total operating revenue increased to US$7,788 million as
compared to US$7,291 million for the year ended December 31, 2020. This was an increase of 6.8% primarily due to higher
mobile data and fixed revenue in Russia, higher mobile data revenue in Pakistan that was driven by increased 4G penetration
and an increase in our data customer base, continued growth in mobile data revenue in Ukraine, Bangladesh and Kazakhstan,
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and an increase in financial services revenue in Kazakhstan and Pakistan. For further details, please refer to —Reports of our
reportable segments below.
For the year ended December 31, 2020, our consolidated total operating revenue decreased to US$7,291 million as
compared to US$8,809 million for the year ended December 31, 2019. This was a decrease of 17.2% 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 —Operating and Financial Review and Prospects—Results of our Reportable Segments in our
Annual Report for the fiscal year ended December 31, 2020, which was filed for the fiscal year ended December 31, 2020,
which was filed with the U.S. Securities and Exchange Commission on March 15, 2021.
Operating Profit
For the year ended December 31, 2021, our consolidated operating profit increased to US$1,544 million as compared
to US$511 million for the year ended December 31, 2020 primarily due to growth in operating revenue as described above as
well as an impairment loss of US$784 million booked in 2020 in respect of our operations in Russia and Kyrgyzstan. For more
information, refer to Note 11—Impairment of Assets to our Audited Consolidated Financial Statements attached hereto.
For the year ended December 31, 2020, our consolidated operating profit decreased to US$511 million compared to US$1,865
million for the year ended December 31, 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 of Assets of our audited consolidated financial statements attached to
our Annual Report for the fiscal year ended December 31, 2020, which was filed on March 15, 2021. Furthermore, reduced
consolidated total operating revenue as described above also contributed to a year-on-year reduction in operating profit
104
Non-Operating Profits And Losses
Finance Costs
For the year ended December 31, 2021, our consolidated finance costs were US$690 million as compared to US$673
million for the year ended December 31, 2020. This was an increase of 2.5% that was primarily driven by an increase in
borrowings.
For the year ended December 31, 2020, our consolidated finance costs were US$673 million as compared to US$876
million for the year ended December 31, 2019. This was a decrease of 23.2% 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
For the year ended December 31, 2021, our consolidated finance income was US$16 million as compared to US$23
million for the year ended December 31, 2020. This was a decrease of 30.4% that was primarily due to lower short-term deposit
balances held in our accounts.
For the year ended December 31, 2020, our consolidated finance income was US$23 million as compared to US$52
million. This was a decrease of 55.8% 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)
For the year ended December 31, 2021, we recorded an other non-operating gain of US$34 million as compared to a
non-operating gain of US$111 million for the year ended December 31, 2020. This change was mainly driven by a one-off non-
operating gain in 2020 in relation to a revaluation of contingent consideration liability, and another one-off non-operating gain
upon reaching a settlement in connection with the dispute concerning the sale of Telecel Globe Limited.
For the year ended December 31, 2020, we recorded an other non-operating gain of US$111 million as compared to a
non-operating gain of US$21 million for the year ended December 31, 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 16—Investments, Debt and Derivatives and Note 7—Provisions and Contingent Liabilities, respectively of
our audited consolidated financial statements attached to our Annual Report for the fiscal year ended December 31, 2020, which
was filed with the U.S. Securities and Exchange Commission on March 15, 2021
Net Foreign Exchange Gain / (Loss)
For the year ended December 31, 2021, we recorded a net foreign exchange gain of US$4 million as compared to a net
foreign exchange loss of US$54 million for the year ended December 31, 2020. This change was primarily due to the
stabilization of the value of the Russian ruble against the U.S. dollar, which was partially offset by the impact of the deterioration
in the value of the Pakistani rupee against the U.S. dollar in 2021. For a discussion of risks related to foreign currency fluctuation
and translation, see Risk Factors—Market Risks—We are exposed to foreign currency exchange loss, fluctuation and translation
risks, including as a result of the ongoing conflict between Russia and Ukraine.
For the year ended December 31, 2020, we recorded a loss net foreign exchange loss of US$54 million as compared to
a net foreign exchange loss of US$18 million for the year ended December 31, 2019. The 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 U.S. dollar-denominated monetary liabilities, such as trade payables and debt.
Income Tax Expense
For the year ended December 31, 2021, our consolidated income tax expense decreased by 17.6% to US$258 million
as compared to US$313 million for the year ended December 31, 2020. 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
For the year ended December 31, 2020, our consolidated income tax expense decreased by 32.3% to US$313 million
compared to US$462 million in 2019. For more information regarding the factors affecting our total income tax expenses, please
refer to Note 8—Income Taxes of our audited consolidated financial statements attached to our Annual Report for the fiscal year
ended December 31, 2020, which was filed on March 15, 2021.
Profit / (Loss) after Tax from Discontinued Operations
105
For the year ended December 31, 2021, we recorded a profit after tax from discontinued operations of US$ 151 million as
compared to a profit after tax from discontinued operations of US$79 million for the year ended December 31, 2020. The
increase was mainly due to an increase in service revenue as curfew measures resulting from the COVID-19 pandemic were
lifted in Algeria and the repositioning of the business toward the Algerian youth market with a dedicated digital-centric platform.
For a discussion of the sale of our Algeria operations, please refer to Note 10 of our Audited Consolidated Financial Statements
attached hereto.
For the year ended December 31, 2020, we recorded a profit after tax from discontinued operations of US$79 million as
compared to a profit after tax from discontinued operations of US$101 million for the year ended December 31, 2019. The
decrease was mainly due to a lower subscriber base in an aggressively competitive market and the negative impact of a change
in the mobile termination rate as well as the economic slowdown in Algeria due to the COVID-19 pandemic. For a discussion of
the sale of our Algeria operations, please refer to Note 10 — Held for sale and discontinued operations of our Audited
Consolidated Financial Statements attached hereto.
Profit / (Loss) For The Period Attributable To The Owners Of The Parent From Continuing Operations
For the year ended December 31, 2021, we recorded a profit attributable to the owners of the parent from continuing
operations of US$605 million as compared to a loss attributable to the owners of the parent from continuing operations of
US$384 million in 2020, that was mainly due to an increase in operating profit as discussed above.
For the year ended December 31, 2020, we recorded a loss attributable to the owners of the parent from continuing
operations of US$384 million as compared to a profit attributable to the owners of the parent from continuing operations of
US$576 million in 2019, that was mainly due to a decrease in operating profit in 2020 as compared to 2019 as discussed above.
Profit / (Loss) For The Period Attributable To Non-Controlling Interest
For the year ended December 31, 2021, we recorded a profit attributable to non-controlling interest of US$127 million
as compared to a profit of US$33 million for the year ended December 31, 2020, which was mainly driven by an increase in
operating profit of our discontinued operations in Algeria.
For the year ended December 31, 2020, we recorded a profit attributable to non-controlling interest of US$33 million as
compared to a profit of US$62 million for the year ended December 31, 2020, which was mainly driven by a decrease in
operating profit for our discontinued operations in Algeria.
Adjusted EBITDA
In millions of U.S. dollars
Russia
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Bangladesh
Others
HQ and eliminations
Total
Year ended December 31,
2021
1,476
643
704
307
89
235
41
(162)
3,333
2020
1,504
612
630
265
68
228
22
(178)
3,151
2019
1,957
669
572
270
136
222
63
(28)
3,861
For the year ended December 31, 2021, our total Adjusted EBITDA was US$3,333 million as compared to US$3,151
million for the year ended December 31, 2020. This was an increase of 5.8% that was mainly due to higher operating revenue as
discussed above, as well as lower marketing costs and a favorable change in the tax regime in Bangladesh, which was partially
offset by an increase in advisory costs in Pakistan and Bangladesh and local currency devaluation against the U.S. dollar in
2021.
For the year ended December 31, 2020, our total Adjusted EBITDA was US$3,151 million as compared to US$3,861
million for the year ended December 31, 2019. This was a decrease of 18.4% mainly due to lower revenues as discussed above
as well as the recognition of a one-off gain of US$350 million in 2019 relating to a revised agreement with Ericsson to upgrade
the IT systems of VEON’s operating companies. The decrease was partially offset by lower general and administrative costs.
106
For more information on how we calculate Adjusted EBITDA and for the reconciliation of consolidated profit / (loss)
before tax from continuing operations, the most directly comparable IFRS financial measure, to Adjusted EBITDA, for the years
ended December 31, 2021, 2020 and 2019 please refer to table below.
In millions of U.S. dollars
Profit / (loss) before tax from continuing operations
Depreciation
Amortization
Impairment loss / (reversal)
(Gain) / loss on disposal of non-current assets
(Gain) / loss on disposal of subsidiaries
Finance costs
Finance income
Other non-operating (gain) / loss
Net foreign exchange (gain) / loss
Total Adjusted EBITDA
2021
908
1,545
308
20
17
(101)
690
(16)
(34)
(4)
2020
(82)
1,432
310
784
36
78
673
(23)
(111)
54
2019
1,044
1,512
333
108
44
(1)
876
(52)
(21)
18
3,333
3,151
3,861
107
Results of our Reportable Segments
Russia
Results of Operations in US$
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
Year ended December 31,
2021
3,950
2,916
179
948
552
482
2,478
1,476
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
37.4 %
39.4 %
43.7 %
‘20-21
% change
‘19-20
% change
3.4 %
0.0 %
9.1 %
3.2 %
5.5 %
27.2 %
6.9 %
-1.9 %
-2.0 pp
-14.8 %
-16.3 %
8.6 %
-5.5 %
-3.0 %
-17.1 %
-8.1 %
-23.1 %
-4.3 pp
Year ended December 31,
In millions of RUB (except as indicated)
2021
2020
2019
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
290,749
214,657
13,163
69,831
40,648
35,444
182,374
108,660
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
37.4 %
39.3 %
43.7 %
‘20-21
% change
‘19-20
% change
5.9 %
2.4 %
11.6 %
5.7 %
7.9 %
29.9 %
9.2 %
0.8 %
-1.9 pp
-5.3 %
-7.1 %
20.5 %
5.1 %
8.1 %
-7.4 %
2.3 %
-14.9 %
-4.4 pp
Year ended December 31,
2021
2020
2019
‘20-21
% change
‘19-20
% change
49.4
34.5
4.9
359.0
49.9
32.9
4.6
333.0
54.6
35.5
5.3
340.0
-1.0 %
4.9 %
6.5 %
7.8 %
-8.6 %
-7.3 %
-13.2 %
-2.1 %
For the year ended December 31, 2021 our total operating revenue in Russia increased by 3.4% (in USD terms) and by
5.9% (in local currency terms) as compared to the year ended December 31, 2020. Local currency growth was primarily
attributable to higher device and accessories sales, increased demand for mobile data leading to an increase in mobile data
revenue, continued growth in our B2B business and an increase in fixed line revenues due to the expansion of our broadband
customer base in Russia.
Adjusted EBITDA
For the year ended December 31, 2021, our Russia Adjusted EBITDA decreased by 1.9% (in USD terms) and
increased by 0.8% (in local currency terms) as compared to the year ended December 31, 2020. Local currency growth was
primarily due to an increase in total operating revenue and a decrease in marketing cost, which was partially offset by an
increase in personnel costs following a return to regular operations after various COVID-19 related lockdowns and additional
headcount due to the acquisitions of OTM and Westcall.
Number of Mobile Customers
As of December 31, 2021, we had 49.4 million mobile customers in Russia representing a decrease of 1.0% as
compared to December 31, 2020. The decrease was primarily due to customer perceptions of network quality, as well as a
108
reduction in sales through alternate distribution channels and loss of migrant customers from our subscriber base due to
COVID-19 related travel and lockdown restrictions.
Mobile ARPU
Our mobile ARPU in Russia increased by 6.5% (in USD terms) and by 7.8% (in local currency terms) for the year ended
December 31, 2021 as compared to the year ended December 31, 2020, which was mainly driven by the increase in mobile data
customers of 4.9% over this period that corresponded to an increase in mobile data revenue. The increase in mobile data
customers was in line with our focus on improving the quality of our customer base.
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,
2021
1,408
1,285
534
123
765
643
2020
1,233
1,134
426
99
620
612
2019
1,321
1,229
370
92
652
669
45.7 %
49.6 %
50.6 %
‘20-21
% change
‘19-20
% change
14.2 %
13.3 %
25.4 %
24.2 %
23.4 %
5.1 %
-3.9 pp
-6.7 %
-7.7 %
15.1 %
7.6 %
-4.9 %
-8.5 %
-1.0 pp
Year ended December 31,
In millions of PKR (except as indicated)
2021
2020
2019
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 PKR
Total Operating Revenue
228,927
208,923
86,977
20,004
124,360
104,567
45.7 %
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 %
‘20-21
% change
‘19-20
% change
14.9 %
13.9 %
26.1 %
25.7 %
24.2 %
5.4 %
-4.1 pp
0.8 %
-0.2 %
24.2 %
14.9 %
2.6 %
-0.9 %
-0.8 pp
Year ended December 31,
2021
2020
2019
‘20-21
% change
‘19-20
% change
72.6
50.9
1.5
248.0
66.4
44.0
1.5
239.0
60.5
38.8
1.7
261.0
9.3 %
15.7 %
0.0 %
3.8 %
9.8 %
13.4 %
-11.8 %
-8.4 %
For the year ended December 31, 2021, our Pakistan total operating revenue increased by 14.2% (in USD terms) and
14.9% (in local currency terms), as compared to the year ended December 31, 2020, which was mainly due to an increase in our
customer base of 9.3% over this period and increased 4G penetration that generated a growth in mobile data revenue. This
increase in our customer base supported higher device sales and we also benefited from strong growth in digital financial
services in 2021.
Adjusted EBITDA
For the year ended December 31, 2021 our Pakistan Adjusted EBITDA increased by 5.1% (in USD terms) and by 5.4%
(in local currency terms), as compared to the year ended December 31, 2020, which was primarily attributable to higher gross
margins in 2021, strong growth in our customer base and customer engagement, and the change in classification of certain costs
for the ex-Warid license paid in the form of security (under protest) from service costs in 2020 to amortization of licenses in 2021.
109
Number of Mobile Customers
As of December 31, 2021, we had 72.6 million mobile customers in Pakistan, representing an increase of 9.3% as
compared to December 31, 2020, which was driven primarily by growth in our mobile data customers, which increased by 15.7%
over the same period. The increase was mainly due to the continued expansion of our 4G data network in Pakistan.
Mobile ARPU
For the year ended December 31, 2021, our mobile ARPU in Pakistan was unchanged as compared to 2020 (in USD
terms) due to devaluation of the PKR against USD and increased by 3.8% (in local currency terms), which was mainly driven by
the increase in mobile data customers as discussed above.
Ukraine
Results of Operations in US$
In millions of U.S. dollars (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
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
2021
1055
980
590
68
6
351
704
Year ended December 31,
2020
2019
‘20-21
% change
‘19-20
% change
933
869
489
59
5
303
630
870
812
421
52
6
298
572
13.1 %
12.8 %
20.7 %
15.3 %
20.0 %
15.8 %
11.7 %
-0.8 pp
7.2 %
7.0 %
16.2 %
13.5 %
-16.7 %
1.7 %
10.1 %
1.8 pp
66.7 %
67.5 %
65.7 %
Year ended December 31,
2021
28,748
26,712
16,092
1,859
176
9,556
19,196
66.8 %
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 %
‘20-21
% change
‘19-20
% change
14.3 %
14.1 %
22.0 %
16.0 %
27.5 %
16.8 %
13.1 %
-0.7 pp
12.4 %
12.0 %
21.6 %
18.7 %
-0.7 %
6.1 %
15.6 %
1.9 pp
Year ended December 31,
2021
2020
2019
‘20-21
% change
‘19-20
% change
26.2
18.5
3.1
85.0
25.9
17.1
2.8
75.0
26.2
16.9
2.6
66.0
1.2 %
8.2 %
10.7 %
13.3 %
-1.1 %
1.2 %
7.7 %
13.6 %
For the year ended December 31, 2021, our Ukraine total operating revenue increased by 13.1% (in USD terms) and by
14.3% (in local currency terms) as compared to the year ended December 31, 2020. The change was primarily due to strong
growth in mobile data consumption due to 4G adoption by customers as a result of our continued focus on 4G connectivity and
migration to data-centric tariffs, as well as an increase in B2B revenue as we promoted new digital solutions for our business
customers. Fixed line revenue also increased in 2021 as customers continued to consume fixed line data at home and as we
focused on rolling out fiber-to-the-building services.
Adjusted EBITDA
110
For the year ended December 31, 2021, our Ukraine Adjusted EBITDA increased by 11.7% (in USD terms) and by
13.1% (in local currency terms) as compared to the year ended December 31, 2020, primarily due to the increase in our total
operating revenue as discussed above, which was partially offset by higher technology and personnel costs compared to 2020.
Number of Mobile Customers
As of December 31, 2021, we had 26.2 million mobile customers in Ukraine representing an increase of 1.2% year-on-
year. This was primarily due to growth in our mobile data customers, which increased by 8.2% as compared to 2020.
Mobile ARPU
For the year ended December 31, 2021, our mobile ARPU in Ukraine increased by 10.7% (in USD terms) and by 13.3%
(in local currency terms) for the year ended December 31, 2020, primarily due to the growth in mobile data consumption during
2021 as described above.
Kazakhstan
Results of Operations in US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2021
2020
2019
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
569
459
265
91
19
262
307
479
392
199
78
9
214
265
486
379
157
66
41
216
270
54.0 %
55.3 %
55.6 %
‘20-21
% change
‘19-20
% change
18.8 %
17.1 %
33.2 %
16.7 %
-1.4 %
3.4 %
26.8 %
18.2 %
111.1 %
-78.0 %
22.4 %
15.8 %
-1.3 pp
-0.9 %
-1.9 %
-0.3 pp
Year ended December 31,
In millions of KZT (except as indicated)
2021
2020
2019
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
242,509
195,583
113,045
38,676
8,250
111,449
131,060
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
54.0 %
55.3 %
55.6 %
‘20-21
% change
‘19-20
% change
22.6 %
20.8 %
37.2 %
20.1 %
6.3 %
11.7 %
37.3 %
26.6 %
122.7 %
-76.4 %
26.1 %
19.8 %
-1.3 pp
7.0 %
5.7 %
-0.3 pp
Year ended December 31,
2021
2020
2019
‘20-21
% change
‘19-20
% change
9.9
7.9
3.9
9.5
7.2
3.3
10.2
6.9
3.1
1,671.0
1,364.0
1,192.0
4.2 %
9.7 %
18.2 %
22.5 %
-6.9 %
4.3 %
6.5 %
14.4 %
For the year ended December 31, 2021, our Kazakhstan total operating revenue increased by 18.8% (in USD terms)
and increased by 22.6% (in local currency terms) as compared to the year ended December 31, 2020, primarily due to strong
demand for our mobile data services that also supported the strong growth in sale of equipment and an increase in demand for
our digital services. This strong demand was attributable to the increase of our 4G customers accounting for 63.5% of our
customer base as at December 31, 2021, largely due to an expansion to our 4G network. Fixed line services revenue grew
111
mainly as a result of the growth in our broadband customer base, which was partially attributable to the popularity of our
convergent product offers, which included fixed line services products.
Adjusted EBITDA
For the year ended December 31, 2021, our Kazakhstan Adjusted EBITDA increased by 15.8% in (USD terms) and
increased by 19.8% (in local currency terms) as compared to the year ended December 31, 2020, primarily due to higher total
operating revenue as described above. This increase was partially offset by increased technology costs, marketing spend, and
general and administrative costs as well as the adjustment that was made to discount the US$ 6 million gain that was recorded
related to a government grant for radio frequency taxes.
Number of Mobile Customers
As of December 31, 2021, we had 9.9 million mobile customers in Kazakhstan representing an increase of 4.2% as
compared to December 31, 2020, primarily driven by growth in mobile data customers, which increased by 9.7% over this period
as a result of improved mobile data services and the expansion of our 4G network.
Mobile ARPU
For the year ended December 31, 2021, our mobile ARPU in Kazakhstan increased by 18.2% (in USD terms) and by 22.5% (in
local currency terms) as compared to the year ended December 31, 2020, which was primarily due to the rise in the demand for
mobile data due to the growth in our 4G customer base and digital services.
Uzbekistan
Results of Operations in US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2021
2020
2019
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
194
193
122
0.89
0.36
105
89
198
196
111
1
1
130
68
258
255
120
2
1
122
136
45.9 %
34.3 %
52.7 %
‘20-21
% change
‘19-20
% change
-2.0 %
-1.5 %
9.9 %
-11.0 %
-64.0 %
-19.2 %
30.9 %
11.6 pp
-23.3 %
-23.1 %
-7.5 %
-50.0 %
0.0 %
6.6 %
-50.0 %
-18.4 pp
Year ended December 31,
In millions of UZS (except as indicated)
2021
2020
2019
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
2,056,545
2,043,366
1,298,999
9,404
3,774
1,985,465
1,966,778
1,114,049
11,489
7,198
1,112,252
1,307,334
944,432
679,613
2,275,256
2,251,950
1,059,616
13,229
10,077
1,071,233
1,204,023
45.9 %
34.2 %
52.9 %
‘20-21
% change
‘19-20
% change
3.6 %
3.9 %
16.6 %
-18.1 %
-47.6 %
-14.9 %
39.0 %
11.7 pp
-12.7 %
-12.7 %
5.1 %
-13.2 %
-28.6 %
22.0 %
-43.6 %
-18.7 pp
112
Selected Performance Indicators
Mobile
Customers in millions
Mobile data customers in millions
ARPU in US$
ARPU in UZS
Total Operating Revenue
Year ended December 31,
2021
2020
2019
‘20-21
% change
‘19-20
% change
7.1
5.7
2.3
6.8
4.8
2.2
8.1
5.2
2.4
24,217
21,758
21,390
4.4 %
18.8 %
4.5 %
11.3 %
-16.0 %
-7.7 %
-8.3 %
1.7 %
For the year ended December 31,2021, our Uzbekistan total operating revenue decreased by 2.0% (in USD terms) as
compared to the year ended December 31, 2020 primarily due to currency devaluation, and increased by 3.6% (in local currency
terms) as compared to the year ended December 31, 2020, which was primarily due to an increased demand for mobile data that
corresponded with an increase of 16.6% to mobile data revenue over the period, a decrease in excise rates from 15% to 10%
and the entry into new contracts with higher tariff rates.
Adjusted EBITDA
For the year ended December 31, 2021, our Adjusted EBITDA in Uzbekistan increased by 30.9% (in USD terms) and by
39.0% (in local currency terms) as compared to the year ended December 31, 2020, mainly due to the recording of a one-off non
income tax provision in the third quarter of 2020 and efficient cost management in 2021.
Number of Mobile Customers
As of December 31,2021, the number of mobile customers in Uzbekistan increased by 4.4% to 7.1 million. This
increase was primarily driven by growth in our mobile data customers which increased by 18.8% as compared to December 31,
2020, which was mainly due to the continued expansion of our 4G network in Uzbekistan.
Mobile ARPU
For the year ended December 31, 2021, our mobile ARPU in Uzbekistan increased by 4.5% (in USD terms) and 11.3%
(in local currency terms) as compared to December 31, 2020, which was primarily attributable to growth in our mobile data
customers base and focus on high value customers.
Bangladesh
Results of Operations in US$
Year ended December 31,
In millions of U.S. dollars (except as indicated)
2021
2020
2019
Total operating revenue
Mobile service revenue
- of which mobile data
Sales of equipment, accessories and other
Operating expenses
Adjusted EBITDA
Adjusted EBITDA margin
564
553
160
10
329
235
537
527
133
10
310
228
537
525
109
12
314
222
41.7 %
42.5 %
41.3 %
‘20-21
% change
‘19-20
% change
5.0 %
4.9 %
20.3 %
0.0 %
6.1 %
3.1 %
-0.8 pp
0.0 %
0.4 %
22.0 %
-16.7 %
-1.3 %
2.7 %
1.2 pp
113
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
Year ended December 31,
2021
47,941
47,050
13,647
891
27,975
19,966
41.6 %
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 %
‘20-21
% change
‘19-20
% change
5.1 %
5.2 %
20.9 %
1.8 %
6.4 %
3.4 %
-0.8 pp
0.7 %
0.9 %
22.8 %
-8.1 %
-0.9 %
2.9 %
1.0 pp
Year ended December 31,
2021
2020
2019
‘20-21
% change
‘19-20
% change
35.1
22.1
1.3
115.0
33.2
19.9
1.3
111.0
33.6
18.9
1.3
112.0
5.7 %
11.1 %
0.0 %
3.6 %
-1.2 %
5.3 %
0.0 %
-0.9 %
For the year ended December 31, 2021, our Bangladesh total operating revenue increased by 5.0% (in USD terms) and
by 5.1% (in local currency terms) as compared to the year ended December 31, 2020. This was primarily due to an increase in
mobile data revenue, which can be attributed to personalized data offers that increased our 4G user base and the demand for
data, as well as an increase in voice and interconnect revenue.
Adjusted EBITDA
For the year ended December 31, 2021, our Bangladesh Adjusted EBITDA increased by 3.1% (in USD terms) and by
3.4% (in local currency terms) as compared to the year ended December 31, 2020. This was mainly due to the increase in
mobile data revenue and change in minimum tax regime, which was partially offset by a slight increase in marketing, personnel
and technology costs.
Number of Mobile Customers
As of December 31, 2021, the number of mobile customers in Bangladesh increased by 5.7% to 35.1 million as
compared to December 31, 2020. This was primarily driven by growth in mobile data customers, which increased by 11.1% as
compared to 2020, which was primarily due to our continued investment in the 4G network and focus on growing our 4G user
base.
Mobile ARPU
For the year ended December 31, 2021, our mobile ARPU in Bangladesh remained stable in USD terms and increased
by 3.6% in local currency terms as compared to December 31, 2020. This was primarily driven by growth in mobile data and
voice revenue and described above.
114
Liquidity and Capital Resources
Working Capital
As of December 31, 2021, we had negative working capital of US$830 million, compared to negative working capital of
US$1,560 million as of December 31, 2020. Working capital is defined as current assets less current liabilities. The change was
primarily due to an increase in cash and cash equivalents as compared to 2020, due to the proceeds received from the sale of
our tower assets in Russia.
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 refinanced 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. For a further discussion of our liquidity profile and in the impact of the conflict between Russia and Ukraine, see —
Future Liquidity and Capital 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 to freely distribute
the accumulated retained earnings of our operating company in Algeria.
The consolidated financial statements included in this Annual Report have been prepared on a going concern basis of
accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in
the normal course of business. As such, the consolidated financial statements included in this Annual Report do not include any
adjustments that might result from an inability to continue as a going concern. If we cannot continue as a going concern,
adjustments to the carrying values and classification of our assets and liabilities and the reported amounts of income and
expenses could be required and could be material. See —Market Risks—Our independent auditors have included an emphasis
of matter paragraph on going concern in their opinion as a result of the effects of the ongoing conflict between Russia and
Ukraine for a further discussion on our going concern disclosure that has been included in the consolidated financial statements
included in this Annual Report .
Consolidated Cash Flow Summary
(In millions of U.S. dollars)
Net cash flows from operating activities from continuing operations
Net cash flows from operating activities from discontinued operations
2021
2020*
2,376
263
2,231
212
2019*
2,643
305
Net cash flows from / (used in) investing activities from continuing operations
(1,067)
(1,764)
(1,789)
Net cash flows from / (used in) investing activities from discontinued operations
Net cash flows from / (used in) financing activities from continuing operations
Net cash flows from / (used in) financing activities from discontinued operations
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
(114)
(676)
(68)
714
(23)
(102)
(84)
(33)
(70)
474
(51)
(1,483)
(156)
(564)
(8)
1,661
1,238
1,810
2,239
1,661
1,238
*Prior year comparatives for the years ended December 31, 2020 and 2019 are adjusted following the classification of Algeria as a
discontinued operation (see Note 10–Held for Sale and Discontinued Operations in our Audited Consolidated Financial
Statements).
For more details, see Consolidated Statement of Cash Flows in our Audited Consolidated Financial Statements.
Operating Activities
For the year ended December 31, 2021, net cash flows from operating activities increased to US$2,376 million from
US$2,231 million for the year ended December 31, 2020. The increase was primarily attributable to higher group EBITDA and an
improvement in working capital as compared to 2020.
For the year ended December 31, 2020, net cash flows from operating activities decreased to US$2,231 million from
US$2,643 million for the year ended December 31, 2019. The decrease was mainly due to a one off cash inflow of US$350
million in 2019 relating to a revised arrangement with Ericsson and lower revenues during 2020 when compared with 2019.
Investing Activities
For the year ended December 31, 2021, net cash outflow from investing activities was US$1,067 million compared to
net cash outflow of US$1,764 million for the year ended December 31, 2020. This decrease was primarily due to the proceeds
115
received from the sale of our tower assets in Russia. Our total payments for the purchase of property, equipment and intangible
assets amounted to US$1,796 million in 2021 compared to US$1,677 million in 2020 due to an acceleration in our investments in
our 4G networks.
For the year ended December 31, 2020, we recorded an outflow of US$1,764 million from investing activities, compared
to an outflow of US$1,789 million for the year ended December 31, 2019. This decrease reflects the reclassification of amounts
pledged as collateral for the Mandatory Tender Offer (MTO) with respect to the acquisition of non-controlling interests in GTH as
a discontinued operation, which was offset by the continued high levels network investments in Russia. Our total payments for
the purchase of property, equipment and intangible assets amounted to US$1,677 million in 2020 compared to US$1,582 million
in 2019.
Financing Activities
For the year ended December 31, 2021, net cash outflow from financing activities was US$676 million compared to net
cash outflow of US$33 million for the year ended December 31, 2020. The higher net cash outflows for financing activities in
2021 was mainly driven by higher lease payments and the acquisition of non-controlling interests in PMCL. The lower cash
outflow from financing activities for 2020 was mainly driven by the higher net inflows from bank loans and bonds, which was
partially offset by dividends paid to VEON shareholders and non-controlling interests.
For the year ended December 31, 2020, net cash outflow for financing activities was US$33 million compared to net
cash outflow of US$1,483 million for the year ended December 31, 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, 2021, the principal amounts of our external indebtedness represented by bank loans and bonds
amounted to US$7,595 million, compared to US$7,678 million as of December 31, 2020. As of December 31, 2021, our debt
includes overdrawn bank accounts related to our cash-pooling program of US$13 million.
As of December 31, 2021, VEON had the following principal amounts outstanding for interest-bearing loans and bonds
as well as cash-pool overdrawn bank accounts:
116
Entity
Type of debt/ original lenders
Interest rate
Debt
currency
Outstanding
debt (mln)
Outstanding
debt (USD mln)
Maturity
date
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.
Loan from VTB
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Notes
VEON Holdings B.V. Total
7.50%
5.95%
7.25%
4.95%
4.00%
6.30%
CBR Key Rate +
1.85%
6.50%
8.13%
3.38%
VEON Finance
Ireland DAC
VEON Finance
Ireland DAC
VEON Finance
Ireland DAC
Loan from Sberbank
CBR Key Rate +
1.9%
Loan from Alfa Bank
10.10%
Loan from Alfa Bank
CBR Key Rate +
2.15%
VEON Finance Ireland DAC
USD
USD
USD
USD
USD
RUB
RUB
RUB
RUB
USD
RUB
RUB
RUB
417
529
700
533
1,000
20,000
30,000
10,000
20,000
1,250
45,000
30,000
417 03.01.2022
529 02.13.2023
700 04.26.2023
533 06.16.2024
1,000 04.09.2025
269 06.18.2025
404 07.09.2025
135 09.11.2025
269 09.16.2026
1,250 11.25.2027
5,506
605 12.22.2026
404 12.23.2026
15,000
202 12.23.2026
PMCL
PMCL
PMCL
PMCL
PMCL
PMCL
PMCL
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
Loan from United Bank Limited
3M KIBOR + 0.55% PKR
Syndicated Loan Facility
6M KIBOR + 0.55% PKR
Syndicated Loan Facility
3M KIBOR + 0.88% PKR
Other
Pakistan Mobile Communications Limited Total
PJSC Kyivstar
Loan from Alfa Bank
NBU Key Rate + 3% UAH
PJSC Kyivstar
Loan from OTP Bank
10.15%
PJSC Kyivstar
Loan from JSC Credit Agricole
Bank
NBU Key Rate +
3.5%
PJSC Kyivstar
Loan from JSC CitiBank
Treasury Bill Rate +
3%
PJSC Kyivstar
Loan from Raiffeisen Bank
11.00%
UAH
UAH
UAH
UAH
PJSC Kyivstar
Others
PJSC Kyivstar Total
4,279
33,848
14,369
5,000
15,000
10,000
1,677
1,250
1,275
1,350
1,400
1,211
24 06.15.2022
191 09.02.2026
81 09.02.2026
28 05.18.2028
85 05.18.2028
57 07.05.2031
33
499
61 12.14.2023
46 12.22.2023
47 02.29.2024
50 03.15.2024
51 11.26.2025
1
256
Banglalink
Syndicated Loan Facility
Average bank
deposit rate + 4.25%
BDT
3,948
46 09.24.2022
Other
Banglalink Digital Communications Ltd. Total
Other entities
Total VEON
Cash-pool overdrawn accounts
and other
46
77
7,595
We may from time to time seek to purchase our outstanding debt through cash purchases and/or exchanges for new
debt securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any,
will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts
involved may be material.
The following table reflects our financial liabilities, net of derivative assets, classified further by maturity date, as of
December 31, 2021.
117
Less than 1
year
1-3 years
3-5 years
More than 5
years
Total
Bank loans and bonds
Lease liabilities
Purchase obligations
1,050
545
767
Total financial liabilities, net of derivative assets
2,362
3,200
1,111
62
4,373
3,652
1,393
763
—
751
—
9,295
3,170
829
4,415
2,144
13,294
For further discussion of these contractual obligations, please refer to Note 12—Property and Equipment, Note 13—
Intangible Assets, Note 16— Investments, Debt and Derivatives and Note 18—Financial Risk Management of our Audited
Consolidated Financial Statements attached hereto. 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.
For additional information on our outstanding indebtedness, please refer to Note 16 — 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 Risk Factors—Liquidity and Capital Risks—Our substantial amounts of indebtedness and
debt service obligations could materially decrease our cash flow, which could adversely affect our business and financial
condition.
Cash Subject to Currency and Contractual Restrictions
We 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, 2021. We are 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, 2021, VEON Ltd. had restricted net assets of
102%, compared to 390% in 2020, of total net assets. The relative change in restricted net asset was primarily due to the
impairment of our Russia and Kyrgyzstan CGUs in 2020, 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.
Following the onset of the conflict between Russia and Ukraine, our ability to exchange U.S. dollars and other
currencies into Russian rubles was adversely impacted due to certain restrictions imposed on Russian financial institutions,
Russian counter-measures and the instability of the Russian financial sector in general. For more information on these risks,
see —Risk Factors—Operational Risks—As a holding company with a number of operating subsidiaries, we depend on the
performance of our subsidiaries and their ability to pay dividends or make other transfers to VEON Ltd., as well as the ability to
make certain intercompany payments and transfers.
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 2021, our capital expenditures (excluding licenses and right-of-use assets) were US$1,825 million compared to
US$1,794 million in 2020 and US$1,633 million in 2019. The increase in 2021 was primarily due to investments in high-speed
data networks in Russia, Pakistan, Ukraine and Kazakhstan, and the increase in 2020 was primarily due to investments in our
networks in Russia, Pakistan, Ukraine and Bangladesh.
While our medium-term plan for capital expenditures (excluding licenses and right-of-use assets) is to invest in high-
speed data networks to continue to capture mobile data growth, including the continued roll-out of 4G/LTE networks in Russia,
Pakistan, Ukraine and Bangladesh, and upgrade of our 3G networks in Bangladesh, the ongoing conflict in Russia and Ukraine
has caused us to reconsider our capital outlay to ensure we have sufficient liquidity for maintenance capital expenditures and
other key operational spend while at the same time servicing our indebtedness. As a result, capital expenditures that are more
discretionary in nature may be put on hold until the impact of the ongoing conflict between Russia and Ukraine, and particularly
its effects on our liquidity and financial profile, becomes more certain.
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 continue to come from:
•
•
•
cash we currently hold;
operating cash flows;
proceeds of assets classified as held for sale;
118
•
borrowings under syndicated bank financings, including credit lines currently available to us and issuances of debt
securities on local and international capital markets.
Following the onset of the conflict between Russia and Ukraine, our ability to generate cash to service our indebtedness
has been materially impaired, due to expected lower revenues in Ukraine, the significant volatility of the Russian ruble and
tightened currency controls within Russia and Ukraine. The availability of external financing depends on many factors, including,
but not limited to, the success of our operations, contractual restrictions, the financial position of international and local banks,
the willingness of international and local banks to lend to our companies and the liquidity and strength of international and local
capital markets. Due to the adverse impact the ongoing conflict between Russia and Ukraine has had on us, including our credit
ratings downgrade, the terms of such external financing may be less favorable than our existing financing, including due to the
reputational harm we have suffered. See Risk Factors—Market Risks—We have suffered reputational harm as a result of the
ongoing conflict between Russia and Ukraine.
As of December 31, 2021, we had an undrawn amount of US$1,479 million under existing credit facilities, of which US$
1,250 million under VEON Holdings B.V.’s revolving credit facility. For additional information on our outstanding indebtedness,
please refer to Note 18 — Financial Risk Management of our Audited Consolidated Financial Statements attached hereto. On
April 13, 2022, VEON announced that it had approximately US$1.3 billion of cash held at the level of its headquarters (“HQ”) in Amsterdam,
which was deposited with international banks and fully accessible at HQ, with approximately US$700 million available under its RCF. In
addition, VEON’s operating companies had a total cash position equivalent to over US$500 million. As of the date of this Annual Report
on Form 20-F, VEON Holdings B.V. is in the process of drawing down the remaining committed amounts under the RCF, with a
portion of the related utilization request having been received as of such date. Once the drawdown is complete, the RCF will be
fully drawn. The proceeds of this drawing will be used for general corporate purposes. However, there can be no assurance that
our existing cash balances and revolving credit lines will be sufficient over time to service our existing indebtedness, including to
address our upcoming bond maturities in February 2023 and April 2023. See Risk Factors—Liquidity and Capital Risks—Our
substantial amounts of indebtedness and debt service obligations could materially decrease our cash flow, which could adversely
affect our business and financial condition.
Our future cash needs are subject to further 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. See Risk Factors—Market
Risks — We are exposed to foreign currency exchange loss, fluctuation and translation risks, including as a result of the conflict
between Russia and Ukraine. In addition, remittances from our subsidiaries may be restricted by local regulations or subject to
material taxes when remitted, as discussed above.
While we currently have sufficient liquidity to satisfy our current obligations at least over the next twelve months, our
independent auditors have included an emphasis of matter paragraph in their Independent Auditor’s Report as a result of the
effects of the ongoing conflict between Russia and Ukraine. See —Market Risks—Our independent auditors have included an
emphasis of matter paragraph on going concern in their opinion as a result of the effects of the ongoing conflict between Russia
and Ukraine and Note 24—Basis of Preparation of the Consolidated Financial Statements for our going concern disclosure.
Below is the reconciliation of capital expenditures (excluding licenses and right-of-use assets) to cash flows used to
Purchase of property, plant and equipment and intangible assets:
2021
2020
2019
Capital expenditures (excluding licenses and right-of-use assets) *
1,825
1,794
1,633
Adjusted for:
Additions of licenses
Difference in timing between accrual and payment for capital expenditures
(excluding licenses and right-of-use assets)
482
53
38
(511)
(170)
(89)
Purchase of property, plant and equipment and intangible assets
1,796
1,677
1,582
*Prior year comparatives for the years ended December 31, 2020 and 2019 are adjusted following the classification of Algeria as a discontinued
operation (see Note 10—Assets Held for Sale and Discontinued Operations of our Audited Consolidated Financial Statements)
* 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.
Research and Development
119
We now have the capacity to launch 4G/LTE services 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—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.
Related Party Transactions
We have entered into transactions with related parties and affiliates. See -—Related Party Transactions and Note 22—
Related Parties to our Audited Consolidated Financial Statements.
120
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 June 10, 2021.
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, 2021, 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. See Note 19 — Issued Capital and Reserves to our Audited Consolidated Financial Statements
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 CTC.
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 registered 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.
121
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 registered 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 and our bye-laws, 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 propose for consideration 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.
122
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 business 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 for the election of directors, 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
123
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 registered 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 11 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 CEO.
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 CTC. We may repay to any director such reasonable costs and expenses as he or she
may properly 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 include mandatory offer provisions, which provide that any person who, individually or together with any of its affiliates
or any other members of a group, acquires 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.
124
Interested Party Transactions
The Board of Directors have the right to approve transactions with interested parties, subject to compliance with
Bermuda law and our bye-laws. Prior to consideration by the Board of Directors, to determine whether, on such transaction, the
arrangements with the interested party may be approved, all interests must be fully disclosed at the earliest opportunity.
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.
125
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, 2021, 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 53% of our cash and bank deposits in U.S. dollars in order to hedge against the risk of local
currency devaluation, in addition at December 31, 2021 we had RUB 30 billion of USD forwards outstanding to hedge part of our
RUB cash balance against depreciation of the Russian ruble against the U.S. dollar.
To reduce balance sheet currency mismatches, we hold part of our debt in Russian ruble, Pakistani rupee, Ukrainian
hryvnia 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 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 and Results of Operations—Foreign Currency Translation and Note 18—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, including those associated with the
ongoing conflict between Russia and Ukraine, see — Risk Factors—Market Risks—We are exposed to foreign currency
exchange loss, fluctuation and translation risks, including as a result of the ongoing conflict between Russia and Ukraine.
The following table summarizes information, as of December 31, 2021, 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,
2021
2022
2023
2024
2025
2021
Total debt:
Fixed Rate (in US$ millions)
Average interest rate
Variable Rate (in US$ millions)
Average interest rate
TOTAL
348
9.38%
—
—%
348
348
9.38%
—
—
348
297
9.36%
—
—
297
824
9.26%
—
—
824
269
9.66%
—
—
269
338
—
338
As of December 31, 2021, the variable interest rate risk on the financing of our group was limited as 75% 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 16—Investments, Debt and Derivatives and Note 18—Financial Risk Management to our Audited Consolidated
Financial Statements.
126
DECLARATIONS
Introduction
This 2021 VEON’s Ltd. Annual Report dated April 29, 2022, 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 CEO, 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 2021 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, 2021, 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 2021 financial statements, which are audited by PricewaterhouseCoopers Accountants N.V.,
has been presented to the Board. The 2021 financial statements and the independent auditor’s report relating to the audit of the
2021 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 2021 financial
statements included in this Annual Report.
Amsterdam, the Netherlands
April 29, 2022
Kaan Terzioğlu CEO
127
Consolidated Financial Statements
128
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 .. Held for sale and discontinued operations .....................................................................................................................
11 ... Impairment Of Assets .........................................................................................................................................................
12 ... Property And Equipment ....................................................................................................................................................
13 ... Intangible Assets .................................................................................................................................................................
14 ... Investments In Subsidiaries ..............................................................................................................................................
Financing Activities Of The Group .......................................................................................................................................
15 ... Other non-operating gain / (loss) .....................................................................................................................................
16 ... Investments, Debt and Derivatives ..................................................................................................................................
17 ... Cash And Cash Equivalents .............................................................................................................................................
18 ... Financial Risk Management ..............................................................................................................................................
19 ... Issued Capital And Reserves ............................................................................................................................................
20 ... Earnings Per Share ............................................................................................................................................................
21 ... Dividends Paid And Proposed ..........................................................................................................................................
Additional Information .............................................................................................................................................................
22 ... Related Parties ....................................................................................................................................................................
23 ... Events After The Reporting Period ..................................................................................................................................
24 ... Basis Of Preparation Of The Consolidated Financial Statements ..............................................................................
25 ... Significant Accounting Policies .........................................................................................................................................
130
131
132
133
135
137
137
139
139
140
142
143
145
146
150
155
155
156
158
163
166
168
171
171
172
181
182
188
189
190
191
191
197
199
203
129
CONSOLIDATED INCOME STATEMENT
for the years ended December 31
(In millions of U.S. dollars, except per share amounts)
Note
2021
2020*
Service revenues
Sale of equipment and accessories
Other revenues
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
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
3
9
4
12
13
11
9
15
8
10
20
20
20
7,147
6,786
508
133
388
117
7,788
7,291
4
4
(1,393)
(487)
(2,579)
(1,545)
(308)
(20)
(17)
101
1,544
(690)
16
34
4
908
(258)
650
151
801
605
69
127
801
(1,334)
(378)
(2,432)
(1,432)
(310)
(784)
(36)
(78)
511
(673)
23
111
(54)
(82)
(313)
(395)
79
(316)
(384)
35
33
(316)
2019*
7,472
463
154
8,089
350
(1,366)
(476)
(2,736)
(1,512)
(333)
(108)
(44)
1
1,865
(876)
52
21
(18)
1,044
(462)
582
101
683
576
45
62
683
$0.35
$0.04
$0.39
($0.22)
$0.02
($0.20)
$0.33
$0.03
$0.36
*Prior year comparatives for the years ended December 31, 2020 and 2019 are adjusted following the classification of Algeria as
a discontinued operation (see Note 10)
The accompanying notes are an integral part of these consolidated financial statements.
130
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
Other
Items reclassified to profit or loss
Reclassification of accumulated foreign currency translation reserve to profit
or loss upon disposal of foreign operation
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
16
The accompanying notes are an integral part of these consolidated financial statements.
2021
801
(200)
—
—
(3)
(203)
598
513
85
598
2020
(316)
(623)
1
96
(15)
(541)
(857)
(800)
(57)
(857)
2019
683
49
26
—
(19)
56
739
733
6
739
131
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
Assets classified as held for sale
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
Liabilities associated with assets held for sale
Total equity and liabilities
* Certain comparative amounts have been reclassified, refer to (note 24) for further details.
The accompanying notes are an integral part of these consolidated financial statements.
132
Note
2021
2020
12
13
16
8
6
5
16
8
6
17
10
19
16
7
8
6
16
7
8
6
10
6,717
3,244
99
228
216
6,879
4,152
305
186
179
10,504
11,701
111
690
86
70
344
2,252
3,553
1,864
111
572
90
73
335
1,669
2,850
—
15,921
14,551
586
919
1,505
163
850
1,013
9,404
8,832
87
115
36
141
127
28
9,642
9,128
2,031
1,242
109
228
773
4,383
391
1,946
1,255
151
175
883
4,410
—
15,921
14,551
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended December 31, 2021
(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
1,749,127,404
2
12,753
(1,898)
(1,919)
(8,775)
163
850
1,013
As of January 1, 2021
Profit / (loss) for the period
Other comprehensive income / (loss)
Total comprehensive income / (loss)
Dividends declared
Acquisition of non-controlling interest
Acquisition of subsidiary
Other
21
9
As of December 31, 2021
1,749,127,404
for the year ended December 31, 2020
—
—
—
—
—
—
2
—
—
—
—
—
—
—
(1)
(1)
—
(76)
(16)
1
674
(2)
672
0
0
1
—
(158)
(158)
—
—
—
12,753
(1,990)
(1,246)
(8,933)
674
(161)
513
0
(76)
(16)
2
586
127
(42)
85
(89)
69
6
(2)
801
(203)
598
(89)
(7)
(10)
—
919
1,505
(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
1,749,127,404
2
12,753
(1,887)
(1,330)
(8,312)
1,226
994
2,220
As of January 1, 2020
Profit / (loss) for the period
Other comprehensive income / (loss)
Total comprehensive income / (loss)
Dividends declared
Other
21
As of December 31, 2020
1,749,127,404
—
—
—
—
—
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
—
—
—
—
—
—
—
—
—
—
—
* Certain of the consolidated entities of 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.
133
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended December 31, 2019
(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, 2018
1,749,127,404
2
12,753
Adjustments due to new accounting standards
—
—
—
As of January 1, 2019
1,749,127,404
2
12,753
(1,412)
(8,416)
3,670
(891)
2,779
(3)
—
(3)
(1)
(4)
(1,415)
(8,416)
3,667
(892)
2,775
Profit / (loss) for the period
Other comprehensive income
Total comprehensive income
Dividends declared
Changes in ownership interest in a subsidiary
that do not result in a loss of control
21
9
Others
As of December 31, 2019
—
—
—
—
—
—
1,749,127,404
—
—
—
—
—
—
2
621
1
622
(525)
—
(12)
—
105
105
—
—
(1)
621
112
733
62
(56)
6
683
56
739
(525)
(108)
(633)
(2,594)
1,986
(55)
2
994
(608)
(53)
2,220
12,753
(1,887)
(1,330)
(8,312)
1,226
743
—
743
—
6
6
—
(2,594)
(42)
—
—
—
—
—
—
* Certain of the consolidated entities of 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.
134
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31
(In millions of U.S. dollars)
Operating activities
Note
2021
2020
2019
Profit / (loss) before tax from continuing operations
908
(82)
1,044
Non-cash adjustments to reconcile profit before tax to net cash flows
Depreciation, amortization and impairment loss / (reversal)
1,873
2,526
1,953
(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
Net cash flows from operating activities from continuing operations
Net cash flows from operating activities from discontinued operations
Investing activities
17
(101)
690
(16)
(34)
(4)
(259)
(7)
202
(1)
(619)
16
(289)
2,376
263
36
78
673
(23)
(111)
54
(17)
39
38
(35)
(640)
23
(328)
2,231
212
44
(1)
876
(52)
(21)
18
(158)
(28)
(13)
97
(708)
58
(466)
2,643
305
16
Purchase of property, plant and equipment and intangible assets
(1,796)
(1,677)
(1,582)
Receipts from / (Payments) on deposits
Receipts from / (Investment in) financial assets****
Proceeds from sales of share in subsidiaries, net of cash
Other proceeds from investing activities, net
Net cash flows from / (used in) investing activities from continuing
operations
Net cash flows from / (used in) investing activities from discontinued
operations
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
9
16
16
16
21
Net cash flows from / (used in) financing activities from continuing
operations
Net cash flows from / (used in) financing activities from discontinued
operations
Net increase / (decrease) in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents classified as discontinued operations/held for sale
at the end of period
Cash and cash equivalents at beginning of period****
Cash and cash equivalents at end of period, net of overdraft ***
17
(58)
(78)
861
4
(72)
(45)
36
(6)
(222)
(11)
—
26
(1,067)
(114)
(1,764)
(1,789)
(102)
(84)
2,090
(2,466)
(281)
—
(19)
(676)
(68)
714
(23)
(113)
1,661
2,239
4,621
(4,351)
(1)
(259)
(43)
(33)
(70)
474
(51)
—
1,238
1,661
2,610
(2,891)
(613)
(520)
(69)
(1,483)
(156)
(564)
(8)
—
1,810
1,238
* Prior year comparatives for the years ended December 31, 2020 and 2019 are adjusted following the classification of Algeria as a discontinued operation (see Note
10)
135
** Fees paid for borrowings were US$32 (2020: US$29, 2019: US$23)
*** Overdrawn amount was US$13 (2020: US$8)
**** Certain comparative amounts have been reclassified ,refer to Note 24 for further details.
The accompanying notes are an integral part of these consolidated financial statements.
136
GENERAL INFORMATION ABOUT THE GROUP
1
GENERAL INFORMATION
VEON Ltd. (“VEON”, the “Company”, and together with its consolidated subsidiaries, the “Group” or “we”) was incorporated
in Bermuda on June 5, 2009. The registered office of VEON is Victoria Place, 31 Victoria Street, Hamilton HM 10, Bermuda.
VEON’s headquarters and the principal place of business are located at Claude Debussylaan 88, 1082 MD Amsterdam, the
Netherlands.
VEON generates revenue from the provision of voice, data and other telecommunication services through a range of mobile and
fixed-line technologies, as well as selling equipment and accessories.
VEON’s American Depository Shares (“ADSs”) are listed on the NASDAQ Global Select Market (“NASDAQ”) and VEON’s
common shares are listed on Euronext Amsterdam, the regulated market of Euronext Amsterdam N.V. (“Euronext
Amsterdam”).
The consolidated financial statements were authorized by the Board of Directors for issuance on April 29, 2022. The Company
has the ability to amend and reissue the consolidated financial statements.
The consolidated financial statements are presented in United States dollars (“U.S. dollar” or “US$”). In these Notes, U.S.
dollar amounts are presented in millions, except for share and per share (or ADS) amounts and as otherwise indicated.
Due to the ongoing conflict between Russia and Ukraine, material uncertainties have been identified that may cast significant
doubt on the Company’s ability to continue as a going concern which are discussed in detail in Note 24 of these consolidated
financial statements.
Major developments during the year ended December 31, 2021
Financing activities
In March 2021, VEON successfully entered into a new multi-currency revolving credit facility agreement (the “RCF”) of US$1.25
billion. The RCF replaced the revolving credit facility signed in February 2017, which is now cancelled. For further details, refer
to Note 16.
In March 2021, VEON successfully amended and restated its existing RUB30 billion (US$396), bilateral term loan agreement
with Alfa Bank by adding a new floating rate tranche of RUB15 billion (US$198). For further details please refer to Note 16.
In March 2021, PMCL successfully entered into a new PKR 15 billion (US$98) syndicated facility with MCB Bank as agent and
PKR 5 billion (US$33), bilateral term loan facility with United Bank Limited. Both facilities have a tenor of seven years.
In April 2021, the proceeds from Alfa Bank new tranche of RUB 15 billion (US$198) were used to early repay RUB 15 billion
(US$198) of loans from Sberbank, originally maturing in June 2023.
In June 2021, PMCL secured a PKR 50 billion (US$320) syndicated credit facility from a banking consortium led by Habib Bank
Limited. This ten years facility will be used to finance the company’s ongoing 4G network rollouts and technology upgrades, as
well as to address upcoming maturities.
In September 2021, VEON Holdings B.V. issued senior unsecured notes of RUB 20 billion (US$273), maturing in September 2026.
The notes were issued under the Global Medium Term Note Programme established in April 2020 (the “GMTN Programme”) and
proceeds were used for the early repayment of RUB 20 billion (US$273) of outstanding loans to Sberbank that were originally
maturing in June 2023.
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$612) Term Facilities
Agreement with Alfa Bank which includes a RUB 30 billion (US$408) fixed rate tranche and a RUB 15 billion (US$204) floating
rate tranche, both with a maturity date of December 2026. The facilities are guaranteed by VEON Holdings B.V.. The proceeds
from the Alfa Bank facilities have been used to finance intercompany loans to PJSC Vimpel-Com.
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$611) Term Facility
Agreement with Sberbank with a floating rate. Maturity date of the facility is December 2026 and it is guaranteed by VEON
Holdings B.V.. The proceeds from the Sberbank facility have been used to finance an intercompany loan to PJSC Vimpel-Com.
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$611) of outstanding loans to Alfa Bank, comprising of a RUB
30 billion loan (US$407) originally maturing in March 2025 and a RUB 15 billion (US$204) loan originally maturing in March
2026.
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$612) of outstanding loans to Sberbank, comprising of a RUB
15 billion (US$204) loan originally maturing in June 2023 and a RUB 30 billion (US$408) loan originally maturing in June 2024.
Other developments
In March 2021, VEON successfully concluded the acquisition of the 15% minority stake in PMCL from the Dhabi Group for
US$273. For further details please refer to Note 16.
In March 2021, VEON's operating company in Bangladesh acquired spectrum following successful bids at an auction held by the
BTRC. For further details please refer to Note 9.
137
In September 2021, VEON's operating company in Pakistan recognized the ex-Warid license. For further details please refer to
Note 9.
Exercised Put option to sell entirety stake in Omnium Telecom Algerie SpA
On July 1, 2021, VEON exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary, Omnium Telecom
Algerie SpA (Algeria" to the Fonds National d'Investissement (FNI). Omnium owns Algerian mobile network operator, Djezzy.
Under the terms of the Shareholders' Agreement, the transaction is expected to be completed in 2022.
The Company classified its operations in Algeria as held-for-sale and discontinued operations. In connection with this
classification, the Company no longer accounts for depreciation and amortization expenses of Algeria assets. The results for
Algeria in the consolidated income statements and the consolidated statements of cash flows for 2021, 2020 and 2019 have
been presented separately (see Note 10 Held for Sale and Discontinued Operations).
Agreement between VEON and Service Telecom regarding the sale of its Russian tower assets
On September 5, 2021, the Company and VEON Holdings B.V., a subsidiary of the Company, signed an agreement for the sale
of its direct subsidiary, National Tower Company ("NTC"), with Service Telecom Group of Companies LLC, (“ST”), which was
completed on December 1, 2021 (see Note 9 Significant Transactions).
138
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.
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.
Reportable segments consist of Russia, Pakistan, Ukraine, Kazakhstan, Uzbekistan and Bangladesh. We also present our
results of operations for “Others” and “HQ and eliminations” separately, although these are not reportable segments. “Others”
represents our operations in Kyrgyzstan and Georgia and “HQ and eliminations” represents transactions related to management
activities within the group. Financial information by reportable segment for the periods ended December 31 is presented in the
following tables. Inter-segment transactions 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
2021
2020
2019
2021
2020
2019
2021
2020
2019
Russia
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Bangladesh
Others
HQ and eliminations
3,950
3,819
4,481
1,476
1,504
1,957
1,019
1,017
1,408
1,233
1,321
1,055
569
194
564
81
(33)
933
479
198
537
125
(33)
870
486
258
537
172
643
704
307
89
612
630
265
68
235
228
41
22
(36)
(162)
(178)
669
572
270
136
222
63
(28)
318
203
134
34
89
25
3
249
179
119
52
126
33
19
976
213
156
108
53
82
38
7
Total
7,788
7,291
8,089
3,333
3,151
3,861
1,825
1,794
1,633
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 Adjusted EBITDA
2021
908
1,545
308
20
17
(101)
690
(16)
(34)
(4)
2020
(82)
1,432
310
784
36
78
673
(23)
(111)
54
2019
1,044
1,512
333
108
44
(1)
876
(52)
(21)
18
3,333
3,151
3,861
139
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 presented ‘Service revenue’ (Mobile and Fixed) separately from ‘Sale of equipment and accessories’ and ‘Other
revenue’, for each reportable segment.
Service revenue
Mobile
Fixed
Sale of Equipment
and accessories
Other revenue
Total revenue
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Russia
Pakistan
Ukraine
Kazakhstan
Uzbekistan
Bangladesh
2,916 2,917 3,485 552 523 539 472 366 446
10
13
11 3,950 3,819 4,481
1,285 1,134 1,229 — — —
18
11
6 105
88
86 1,408 1,233 1,321
980 869 812
68
59
52 — — —
459 392 379
91
78
66
17
7
2
7
2
193 196 255
1
1
2 — — — —
5
2
1
6 1,055 933 870
39 569 479 486
1 194 198 258
553 527 525 — — — — —
1
11
10
11 564 537 537
Others
81 102 135 —
19
27 —
4
8 — —
2
81 125 172
HQ and eliminations
(15)
(31)
(34)
(17) — —
1 — —
(2)
(2)
(2)
(33)
(33)
(36)
Total
6,452 6,106 6,786 695 680 686 508 388 463 133 117 154 7,788 7,291 8,089
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)
Receivables (unbilled)
Contract liabilities
Capitalized costs
Customer acquisition costs
December 31,
2021
December 31,
2020
789
49
(232)
728
41
(233)
149
128
140
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 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 as services are rendered.
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 contract assets mostly relate to amounts due from other operators and postpaid customers. Contract assets,
often referred to as ‘Unbilled 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).
141
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
2021
2020
2019
764
792
654
28
81
260
2,579
727
750
602
56
55
242
2,432
723
808
658
54
153
340
2,736
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.
Short-term leases and leases for low value items are immediately expensed as incurred and are immaterial in the aggregate.
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.
142
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
** Certain comparative amounts have been reclassified, refer to Note 24 for further details.
2021
838
(159)
679
11
690
2020
769
(225)
544
28
572
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 as held for sale
Foreign currency translation adjustment
Other movements
Balance as of December 31
2021
225
35
(9)
(28)
(56)
(4)
(4)
2020
198
76
(13)
(17)
—
(19)
—
159
225
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, 2021
Expected loss rate, %
Trade receivables
Expected credit losses
Trade receivables, net
December 31, 2020
Expected loss rate, %
Trade receivables
Expected credit losses
Trade receivables, net
ACCOUNTING POLICIES
0.0 %
49
—
49
1.0 %
41
—
41
1.8 %
550
(10)
540
1.3 %
468
(6)
462
3.6 %
56
(2)
54
33.3 %
45
(15)
30
95.7 %
138
(132)
6
13.6 %
88.9 %
100.0 %
44
(6)
38
27
(24)
3
189
(189)
—
838
(159)
679
769
(225)
544
143
Trade and other receivables
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.
144
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
2021
2020
149
33
34
216
102
160
24
58
344
128
33
18
179
91
159
43
42
335
2021
2020
20
16
36
318
154
58
52
153
38
773
17
11
28
372
158
58
95
168
32
883
145
7
PROVISIONS AND CONTINGENT LIABILITIES
PROVISIONS
The following table summarizes the movement in provisions for the years ended December 31:
Non-income
tax provisions
Decommi-
ssioning
provision
Legal
provision
Other
provisions
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
As of January 1, 2021
Arising during the year
Utilized
Unused amounts reversed
Reclassification as held for sale
Transfer and reclassification
Discount rate adjustment and imputed interest (change in
estimate)
Translation adjustments and other
As of December 31, 2021
Non-current
Current
126
24
(48)
(10)
—
—
(6)
86
—
86
86
19
(12)
1
—
—
—
(6)
88
—
88
138
10
(1)
—
—
9
(15)
141
141
—
141
31
(1)
(19)
(69)
—
7
(3)
87
87
—
26
—
—
(3)
—
—
(1)
22
—
22
22
4
—
(1)
(12)
—
—
1
14
—
14
70
1
(22)
(6)
—
—
—
43
—
43
43
13
—
(58)
—
—
—
9
7
—
7
Total
360
35
(71)
(19)
—
9
(22)
292
141
151
292
67
(13)
(77)
(81)
—
7
1
196
87
109
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, the ultimate outcome may differ from
VEON’s current expectations.
See ‘Source 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 ‘Source 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.
146
CONTINGENT LIABILITIES
The Group had contingent liabilities as of December 31, 2021 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. On April
8, 2021, two parties filed motions for appointment as Lead Plaintiff. At this stage of the suit, the claim remains unquantified. 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$90) 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 by 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 Banglalink’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$89). The operators refused to sign the supplementary
report.
147
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$62) 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 filed an appeal before the Appellate Division and the appeal is pending
for hearing. If the Appellate Division rejects the appeal, then Banglalink will be obligated to deposit 10% of the disputed amount
in order to continue its challenge.
As of December 31, 2021, the Company has recorded a provision, for the cases discussed above of, US$11 (2020: US$11).
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 16 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 and in Note 8, amounts to US$442 (2020: US$484). Due to the high level of estimation uncertainty, as
described in ‘Source of estimation uncertainty’ in this Note 7 and in Note 8, the Company is unable to make a reliable estimate
of 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.
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 reliably 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.
148
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.
149
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
2021
2020
70
158
228
30
145
175
The 2020 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 an increase of the prior period provision by US$10, with the gross amount being US$155. No such
adjustment is required in 2021.
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$158 (2020:
US$175) . 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 with respect to VEON’s uncertain tax provisions and tax risks, please refer to the ‘Accounting policies’
and ‘Source of estimation uncertainty’ disclosed below.
Income tax assets
The Company reported current income tax assets of US$70 (2020: US$73).
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 the 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
2021
2020
2019
300
43
343
(65)
—
—
(22)
2
(85)
258
374
(1)
373
(71)
—
2
9
—
(60)
313
439
5
444
(16)
(1)
39
3
(7)
18
462
*In 2021, a tower sale and subsequent lease transaction took place for which a deferred tax asset of US$146 was recorded in relation to the lease liability and
a deferred tax liability of US$23 was recorded in relation to the Right of Use asset
150
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:
2021
2020
2019 Explanatory notes
Profit / (loss) before tax from
continuing operations
Income tax benefit / (expense)
at statutory tax rate (25%)
908
(82)
1,044
(227)
21
(261)
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
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
lower tax rates (i.e. Russia, Ukraine) has a positive impact on the effective tax
rate, partially offset with profitability in countries with higher rate (i.e. Pakistan,
Bangladesh).
The Group incurs certain expenses which are non-deductible in the relevant
jurisdictions. In 2021, such expenses mainly include intra-group
expenses (i.e. interest on internal loans), certain non-income tax
charges (i.e. minimum tax regimes) and other. 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 intra-group expenses (i.e. interest on internal loans).
The Group earns certain income which is non-taxable in the relevant
jurisdiction. In 2021, non-taxable income included gain from sale of NTC Tower
company. 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 16 and Note 7, respectively.
In 2021, adjustments mainly relates to corrections in prior year filings in
Pakistan, as part of the Alternative Dispute Resolution Committee (“ADRC”)
process. The effect of prior years’ adjustments relates to various updated tax
positions.
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 (2021: US$73,
2020: US$101, 2019: US$42) and in GTH (2021: US$(5)), 2020: US$—, 2019:
US$43.
Withholding taxes are recognized to the extent that dividends from foreign
operations are expected to be paid in the foreseeable future. In 2021, similar
to previous years, expenses relating to withholding taxes were primarily
influenced by dividends from Pakistan, Russia, Ukraine, Algeria and
Uzbekistan.
The tax legislation in the markets in which VEON operates is unpredictable
and gives rise to significant uncertainties (see ‘Source of estimation
uncertainty’ below). During 2021, provisions were made for disputes in Russia,
Italy. The impact of movements in uncertain tax positions is presented net of
any corresponding deferred tax assets recognized.
7
(28)
21
(44)
(209)
(90)
198
37
5
(21)
(3)
(49)
(76)
(89)
(13)
(73)
(56)
(50)
(21)
(1)
6
Change in income tax rate
Other
—
—
1
Changes in tax rates impact the valuation of existing temporary differences.
The nominal tax rate as of 2022 will change in the Netherlands, however, this
had no significant impact. Nominal tax rate changes occurred in Pakistan in
2019.
(1)
15
(32)
In 2019, the Group recorded an increase in income tax liabilities of 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)
(258)
(313)
(462)
Effective tax rate
28.4 % -381.7 % 44.3 %
151
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 2021:
2021
228
(115)
113
2020
186
(127)
59
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
Held for sale
Other
movements
(274)
(14)
43
28
140
(60)
2,221
(2,025)
—
59
125
33
7
2
7
(39)
35
(88)
3
85
7
19
(15)
(6)
(23)
—
—
—
—
(18)
42
(2)
(3)
(7)
(34)
1
(64)
49
5
(13)
Closing
balance
(100)
36
32
17
90
(98)
2,192
(2,064)
8
113
In 2021, a tower sale and subsequent lease transaction took place for which a deferred tax asset of US$146 was recorded in
relation to the lease liability and a deferred tax liability of US$23 was recorded in relation to the Right of Use asset.
The following table shows the movements of net deferred tax positions in 2020:
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)
(4)
60
37
5
(5)
(4)
(23)
—
82
(85)
(1)
6
(274)
(14)
43
28
140
(60)
2,221
(2,025)
—
59
152
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, 2021
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
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
(15)
3
—
—
(2)
2
—
—
—
—
—
—
(73)
73
—
—
—
—
(707)
131
—
—
—
—
(174)
50
(8,553)
1,796
—
—
(567)
137
(189)
53
(9,260)
1,927
(75)
75
(567)
137
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
Losses mainly relate to our holding entities in Luxembourg (2021: US$6,431; 2020: US$6,285) and the Netherlands (2021:
US$2,360; 2020: US$2,659).
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$98 (2020: US$60), relating to the tax effect of the undistributed profits that will be
distributed in the foreseeable future, primarily in its Russian, Ukrainian and Pakistan operations.
As of December 31, 2021, 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$7,404 (2020: US$5,241). Accordingly, no deferred
tax liability is recognized for this amount of undistributed profits.
153
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 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.
154
INVESTING ACTIVITIES OF THE GROUP
9
SIGNIFICANT TRANSACTIONS
SIGNIFICANT TRANSACTIONS IN 2021
Agreement between VEON and Service Telecom regarding the Sale of its Russian tower assets
On September 5, 2021, the Company and VEON Holdings B.V., a subsidiary of the Company, signed an agreement for the sale
of its direct subsidiary, NTC, with Service Telecom Group of Companies LLC, ST, for RUB 70,650 (US$945). The transaction was
subject to regulatory approvals which was obtained on November 12, 2021, and consummation of other customary closing
conditions which were completed on December 1, 2021. Under the terms of the deal, Russia, an operating segment of the
Company, entered into a long-term lease agreement with NTC under which Russia will lease space upon NTC's portfolio of
15,400 towers for a period of 8 years, with up to ten optional renewal periods of 8 years each. Under the same agreement, an
additional 5,000 towers are committed to be leased. The lease agreement was signed on October 15, 2021.
On September 5, 2021, the Company classified NTC as a disposal group held-for-sale, including goodwill allocated of US$215 to
NTC from Russia based on its relative fair values as NTC is a subset of the Russia CGU. Following the classification as disposal
group held-for-sale, the Company did not account for depreciation and amortization expenses of NTC assets.
On December 1, 2021, upon completion of the sale agreement with ST, control of NTC was transferred to ST. As a result of
applying sale and leaseback accounting principles to the lease agreement under the terms of the deal, the Company recognized
a gain on sale of subsidiary of US$101 and Russia recognized right-of-use assets of US$101 representing the proportional fair
value of assets retained with respect to book value of assets sold and lease liabilities of US$718 based on an 8 year lease term,
which are at market rates, as well as a proportionate amount of goodwill, with respect to the portion of cash generating assets
retained through the lease, of US$168. A portion of goodwill was also retained within Russia as assets held-for-sale for future
sites to be sold under the agreement, refer to Note 10.
The following table shows the assets and liabilities disposed of relating to NTC on December 1, 2021:
Property and equipment
Goodwill
Other current assets
Total assets disposed
Non-current liabilities
Current liabilities
Total liabilities disposed
2021
264
222
24
510
127
23
150
Lease commitments for the additional 5,000 towers to be leased in the duration of the lease term at December 31, 2021 are
US$263. For further details on the total commitments at December 31, 2021, refer to Note 12.
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 Bangladesh Telecommunication
Regulatory Commission (BTRC). The newly acquired spectrum will see Banglalink increase its total spectrum holding from
30.6MHz to 40MHz. Banglalink total investment will amount to BDT 10 billion (US$115) to purchase the spectrum.
VEON completes the acquisition of majority shareholding in OTM
In June 2021, VEON successfully acquired a majority stake of 67% in OTM (a technology platform for the automation and
planning of online advertising purchases in Russia) for US$16.
PMCL Warid License Capitalization
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. . As a result, PMCL
deposited US$326 including the initial 50% payment of license as well as subsequent installments in order to maintain its appeal
in the Islamabad High Court regarding the PTA's underlying decision on the license renewal.
On July 19, 2021, Islamabad High Court dismissed Jazz's appeal. Based on the dismissal of appeal by the court, subsequent
legal opinion obtained and acceptance of the total license price, the license was recognized amounting US$384, net of service
155
cost liability of US$65. Consequently, the security deposit balance of US$326 was also adjusted. Subsequently, on October 18,
2021 PMCL and PTA signed the license document.
SIGNIFICANT TRANSACTIONS IN 2020 AND 2019
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 was 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 movements in exchange rates
An increase in demand for hard currencies, in part due to the coronavirus outbreak, resulted in the devaluation of exchange rates
in the countries in which VEON operates. As such, in 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 the Statement of Comprehensive Income.
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 16 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.
10
HELD FOR SALE AND DISCONTINUED OPERATIONS
The following table provides the details over assets and liabilities classified as held-for-sale as of December 31, 2021:
156
Algeria
Other individual assets
Total assets and liabilities held for sale
Assets held-for-
sale
Liabilities held-
for-sale
1,846
18
1,864
391
—
391
Exercised Put option to sell entirety stake in Omnium Telecom Algerie SpA
On July 1, 2021 VEON exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary, Omnium Telecom
Algerie SpA (Algeria) to the Fonds National d'Investissement (FNI). Omnium owns Algerian mobile network operator, Djezzy.
Under the terms of the Shareholders' Agreement, the transaction is expected to be completed in Q2 2022 for a sale price of
US$682.
The Company classified its operations in Algeria as a held-for-sale and discontinued operations. In connection with this
classification, the Company no longer accounts for depreciation and amortization expenses of Algeria assets as of July 01, 2021.
The results for Algeria in the consolidated income statements and the consolidated statements of cash flows for 2021, 2020 and
2019 have been presented separately.
There were no triggering events indicating any impairment or decline in the fair value of Algeria subsequent to its measurement
as held for sale and discontinued operation. As such, the net assets of Algeria are presented at lower of cost and fair value less
costs to sell.
The following table shows the profit/(loss) and other comprehensive income relating to Algeria operations for the period ended
December 31, 2021:
157
Income statement and statement of comprehensive income
2021
2020
Operating revenue
Operating expenses
Other expenses
Profit / (loss) before tax for the period
Income tax benefit / (expense)
Profit / (loss) after tax for the period
Other comprehensive income / (loss)*
Total comprehensive income / (loss)
659
(470)
(17)
172
(21)
151
(68)
83
*Other comprehensive income is relating to the foreign currency translation.
The following table shows the assets and liabilities classified as held-for-sale relating to Algeria as of December 31, 2021:
2021
Property and equipment
Intangible assets excl. goodwill
Goodwill
Deferred tax assets
Other current assets
Total assets held for sale
Non-current liabilities
Current liabilities
Total liabilities held for sale
689
(564)
(17)
108
(29)
79
(157)
(78)
527
111
1,001
35
172
1,846
106
285
391
Net assets of the discontinued operations of Algeria includes US$667 relating to cumulative currency translation losses as of December 31,
2021, which will be recycled through the consolidated income statement upon the completion of the sale.
ACCOUNTING POLICIES
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction or loss of control rather than through continuing use, and a sale is considered highly probable. They
are measured at the lower of their carrying amount and fair value less costs to sell.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified
as held for sale. Assets and liabilities of a disposal group classified as held for sale are presented separately from the other
assets and liabilities in the statement of financial position without restating the prior period comparatives.
A discontinued operation is a component that is classified as held for sale and that represents a separate major line of business
or geographical area of operations. Discontinued operations are excluded from the results of continuing operations and are
presented as a single amount in the income statement and cash flow statement with in operating, investing and financing
activities. All other notes to the financial statements include amounts for continuing operations, unless otherwise mentioned.
158
11
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 13 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.
Impairment losses in 2021
2021
Kyrgyzstan
Russia
Other
Impairment losses in 2020
Property and
equipment
Intangible
assets
Goodwill
Other
Total
impairment
12
(7)
8
13
5
—
—
5
—
—
—
—
2
—
—
2
19
(7)
8
20
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
Impairment losses in 2019
Property and
equipment
Intangible
assets
Goodwill
Other
Total
impairment
—
38
5
43
—
8
—
8
723
—
—
723
—
18
(7)
11
723
64
(2)
785
During the third quarter of 2019, due to operational underperformance of its operations in Kyrgyzstan, the Company revised its
previous estimates and assumptions regarding the future cash flows of the Kyrgyzstan CGU. Based on a recoverable value of
US$42, the Company recorded an impairment of US$90 against the carrying value of the CGU. The impairment loss for
Kyrgyzstan was allocated first to the existing carrying value of goodwill (US$54) and then subsequently to property and
equipment (US$33) and intangible assets (US$3), based on relative carrying values.
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$18.
159
2019
Kyrgyzstan
Other
Property and
equipment
Intangible
assets
Goodwill
Other
Total
impairment
33
18
51
3
—
3
54
—
54
—
—
—
90
18
108
160
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 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)
2021
2020
2019
9.3 %
— %
14.7 %
9.4 %
—
11.8 %
10.1 %
11.6 %
18.2 %
10.3 %
— %
13.8 %
9.1 %
10.4 %
14.5 %
9.2 %
14.1 %
14.5 %
Russia
Algeria**
Pakistan
Kazakhstan
Kyrgyzstan *
Uzbekistan
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore discount rate was not determined
**In 2021 no parameters were estimated for Algeria as it was classified as held for sale and discontinued operation, please refer to Note 10
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
2021
2020
2019
2021
2020
2019
4.6 %
— %
6.4 %
6.6 %
—
3.7 %
4.3 %
4.3 %
9.7 %
5.3 %
— %
3.2 %
1.4 %
1.0 %
3.9 %
5.3 %
1.6 %
4.1 %
1.6 %
— %
5.5 %
1.0 %
—
3.0 %
1.8 %
1.0 %
5.8 %
3.1 %
— %
5.1 %
1.6 %
1.0 %
2.7 %
3.3 %
5.0 %
6.0 %
Russia
Algeria**
Pakistan
Kazakhstan
Kyrgyzstan *
Uzbekistan
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore revenue growth rates were not determined
**In 2021 no parameters were estimated for Algeria as it was classified as held for sale and discontinued operation, please refer to Note 10
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
161
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
2021
33.1 %
— %
43.4 %
48.8 %
—
40.9 %
2020
31.2 %
39.9 %
42.0 %
49.5 %
— %
34.0 %
2019
34.7 %
42.6 %
47.3 %
49.9 %
31.4 %
51.4 %
2021
35.5 %
— %
42.0 %
47.0 %
—
34.0 %
2020
35.7 %
40.4 %
44.6 %
50.0 %
— %
34.0 %
2019
34.5 %
43.1 %
47.3 %
50.1 %
33.0 %
52.4 %
Russia
Algeria**
Pakistan
Kazakhstan
Kyrgyzstan *
Uzbekistan
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore operating margin assumptions were not
determined
**In 2021 no parameters were estimated for Algeria as it was classified as held for sale and discontinued operation, please refer to Note 10
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
2021
25.5 %
— %
22.0 %
19.9 %
—
20.2 %
2020
27.9 %
15.2 %
19.6 %
19.8 %
— %
21.4 %
2019
19.9 %
12.5 %
17.2 %
20.0 %
26.9 %
19.4 %
2021
21.0 %
— %
20.0 %
20.0 %
—
21.0 %
2020
21.0 %
14.0 %
18.9 %
19.0 %
— %
21.0 %
2019
18.5 %
12.0 %
17.1 %
19.5 %
20.0 %
20.1 %
Russia
Algeria**
Pakistan
Kazakhstan
Kyrgyzstan *
Uzbekistan
* In 2020, VEON fully impaired the carrying value of all operating assets of Kyrgyzstan, therefore CAPEX assumptions were not determined
**In 2021 no parameters were estimated for Algeria as it was classified as held for sale and discontinued operation, please refer to Note 10
SOURCE OF ESTIMATION UNCERTAINTY
The Group has significant investments in property and equipment, intangible assets, and goodwill.
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.
162
12 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, 2020
4,306
216
Additions
Disposals
Depreciation charge for the year
Impairment
Transfers
Translation adjustment
As of December 31, 2020
Additions
Disposals*
Depreciation charge for the year
Reclassification as held for sale
Impairment
Transfers
Translation adjustment
As of December 31, 2021
Cost
Accumulated depreciation and
impairment
2
(5)
(28)
(1)
5
(30)
159
3
(1)
(22)
(6)
—
16
2
151
417
32
(10)
(123)
(2)
111
(57)
368
18
(5)
(124)
(9)
(2)
182
(6)
422
416
1,985
7,340
1,626
(12)
—
(7)
(1,396)
446
(14)
2,153
(91)
(416)
(1,576)
(5)
(2)
(43)
—
(59)
(260)
(904)
568
1,734
6,879
1,559
(7)
—
(42)
3
(1,619)
712
(100)
(409)
(80)
(2)
(2)
2,342
(311)
(1,545)
(504)
(13)
5
(11)
(20)
(136)
451
1,833
6,717
47
(50)
(1,009)
(28)
1,282
(498)
4,050
50
(198)
(990)
(367)
(12)
1,428
(101)
3,860
11,233
374
1,428
553
2,864
16,452
(7,373)
(223)
(1,006)
(102)
(1,031)
(9,735)
*This includes disposal of NTC as explained in Note 9.
There were no material changes in estimates related to property and equipment in 2021 other than the impairment described in
Note 11 of US$13 (2020: US$43) and lease term reassessments in Russia (included in ‘Additions’) which had the effect of
increasing right-of-use assets by US$171. Please refer to Note 16 for more information regarding Source of estimation
uncertainty for lease terms.
During 2021, VEON acquired property and equipment in the amount of US$726 (2020: US$601), which were not paid for as of
year-end.
Property and equipment pledged as security for bank borrowings amounts to US$919 as of December 31, 2021 (2020: US$865),
and primarily relate to securities for borrowings of PMCL.
163
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, 2020
Additions
Disposals
Depreciation charge for the year
Impairment
Transfers
Translation adjustment
As of December 31, 2020
Additions
Disposals
Depreciation charge for the year
Reclassification as held for sale
Impairment
Transfers
Translation adjustment
As of December 31, 2021
Cost
Accumulated depreciation and impairment
COMMITMENTS
ROU -
Telecommunicati
ons Equipment
ROU - Land,
Buildings and
Constructions
ROU - Office and
Other Equipment
1,638
339
(14)
(309)
(1)
—
(217)
1,436
642
(100)
(320)
(71)
—
(4)
(16)
1,567
2,334
(767)
344
102
—
(105)
(4)
(2)
(42)
293
65
—
(86)
(9)
(2)
2
(3)
260
518
(258)
3
5
—
(2)
—
—
(1)
5
5
—
(3)
—
—
—
(1)
6
12
(6)
Total
1,985
446
(14)
(416)
(5)
(2)
(260)
1,734
712
(100)
(409)
(80)
(2)
(2)
(20)
1,833
2,864
(1,031)
Capital commitments for the future purchase of equipment are as follows as of December 31:
Less than 1 year
Between 1 and 5 years
More than 5 years
Total commitments
2021
2020
709
62
198
969
747
19
—
766
The above table for 2021 includes future lease commitments relating to the lease agreements between Russia and NTC (Less
than 1 year: US$4, Between 1 and 5 years: US$61 and More than 5 years: US$198). For further details on this transaction, refer
to Note 9 (Agreement between VEON and Service Telecom regarding the Sale of its Russian tower assets).
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
164
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.
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.
Where applicable, the Company has applied sale and leaseback accounting principles, whereas the right-of-use asset arising
from the leaseback is measured at the proportion of the previous carrying amount of the asset that relates to the right of use
retained by VEON. Accordingly, VEON recognizes only the amount of any gain or loss that relates to the rights transferred to the
buyer-lessor.
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 16 for more information regarding Source of estimation uncertainty for lease
terms.
165
13
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
Goodwill
As of January 1, 2020
1,100
316
149
142
22
3,959
Additions
Disposals
Amortization charge for the
year
Impairment
Transfer
Translation adjustment
53
—
(139)
(5)
—
(88)
188
(6)
(159)
(3)
6
(41)
3
—
(23)
—
—
(12)
As of December 31, 2020
921
301
117
Additions
Disposals*
Amortization charge for the
year
Reclassification as held for
sale
Impairment
Transfer
Translation adjustment
As of December 31, 2021
Cost
Accumulated amortization and
impairment
482
(1)
(162)
(34)
(4)
40
(40)
184
(1)
(135)
(9)
(1)
11
—
1,202
2,455
350
1,014
—
—
8
(73)
—
(39)
1
14
240
5
—
(7)
—
(6)
1
15
29
1
(4)
—
—
(6)
1
13
—
—
(723)
—
(567)
—
(7)
(62)
2,682
4,152
14
(51)
—
710
(52)
(308)
(1,034)
(1,150)
Total
5,688
—
267
(6)
(343)
(731)
—
(723)
—
(5)
(1)
(102)
3,244
8,037
36
102
1,542
3,539
5
—
(15)
—
—
(16)
116
1
—
(15)
—
—
—
(2)
100
687
(1,253)
(664)
(226)
(587)
(66)
(1,997)
(4,793)
*This includes disposal of NTC as explained in Note 9.
During 2021, there were no material change in estimates related to intangible assets other than the impairment described in Note
11 of US$5 (2020: US$731).
During 2021, VEON acquired intangible assets in the amount of US$171 (2020: US$56), which were not yet paid for as of year-
end.
Additions for the period include capitalization of ex-Warid license in Pakistan amounting to US$384, please refer to Note 9 for
further information.
GOODWILL
During the year, the movement in goodwill for the Group, per CGU, consisted of the following:
CGU*
Russia**
Algeria
Pakistan
Kazakhstan
Uzbekistan
Total
December 31,
2021 Impairment
Translation
adjustment
Addition
Reclassification
as held for sale
Disposal
Other
December 31,
2020
1,084
—
287
136
35
1,542
—
—
—
—
—
—
(10)
(19)
(30)
(4)
1
(62)
14
—
—
—
—
14
—
(51)
(1,034)
—
—
—
—
—
—
—
(1,034)
(51)
—
—
(7)
—
—
(7)
1,131
1,053
324
140
34
2,682
166
CGU
Russia
Algeria
Pakistan
Kazakhstan
Uzbekistan
Total
December 31,
2020
Impairment
Translation
adjustment
Addition
December 31,
2019
1,131
1,053
324
140
34
(723)
—
—
—
—
(424)
(114)
(11)
(14)
(4)
2,682
(723)
(567)
13
—
—
—
—
13
2,265
1,167
335
154
38
3,959
* There is no goodwill allocated to the CGUs of Ukraine, Bangladesh, Kyrgyzstan or Georgia
** In 2021, VEON acquired a majority stake in OTM, a technology platform for the automation and planning of online advertising
and IBS DataFort, a cloud IT infrastructure provider in Russia.
COMMITMENTS
Capital commitments for the future purchase of intangible assets are as follows as of December 31:
Less than 1 year
Total commitments
ACCOUNTING POLICIES
2021
2020
58
58
31
31
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 11 for further details.
SOURCE OF ESTIMATION UNCERTAINTY
Refer also to Note 12 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.
167
14
INVESTMENTS IN SUBSIDIARIES
The Company held investments in material subsidiaries for the years ended December 31 as detailed in the table below. The
Company.
equity
represents
presented
economic
available
interest
rights
the
the
to
Name of significant subsidiary
Country of
incorporation
Nature of
subsidiary
2021
2020
Equity interest held by the
Group
VEON Amsterdam B.V.
VEON Holdings B.V.
PJSC VimpelCom
JSC “Kyivstar”
LLP “KaR-Tel”
LLC “Unitel”
LLC “VEON Georgia”
VEON Finance Ireland Designated Activity Company
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
Netherlands
Netherlands
Russia
Ukraine
Holding
Holding
Operating
Operating
Kazakhstan
Operating
Uzbekistan
Georgia
Ireland
Operating
Operating
Holding
Kyrgyzstan
Operating
Luxembourg
Luxembourg
Luxembourg
Egypt
Algeria
Algeria
Pakistan
Holding
Holding
Holding
Holding
Holding
Operating
Operating
Banglalink Digital Communications Limited
Bangladesh
Operating
100.0 %
100.0 %
100.0 %
100.0 %
75.0 %
100.0 %
100.0 %
100.0 %
50.1 %
100.0 %
100.0 %
100.0 %
99.6 %
45.6 %
45.6 %
100.0 %
100.0 %
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' 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. Further restrictions on
dividend distributions relate to withholding tax in respect of dividends mainly from Russia, Kazakhstan and Uzbekistan. The total
amount of dividend restrictions amounts to US$ 1 billion (PY: US$525 million). The increase as compared to prior year relates
mainly to the increase of the withholding tax from 5% to 15% for dividends from Russia to the Netherlands.
MATERIAL PARTLY-OWNED SUBSIDIARIES
Financial information of subsidiaries that have material non-controlling interests (“NCIs”) is provided below:
Name of significant subsidiary
2021
2020
2021
2020
2021
2020
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 %
96
732
97
783
29
29
26
43
The summarized financial information of these subsidiaries before intercompany eliminations for the years ended December 31
are detailed below.
168
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
Summarized statement of financial position
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
Kar-Tel
OTA
2021
2020
2019
529
(370)
(9)
150
(32)
118
118
29
—
446
(316)
4
134
(28)
106
106
26
—
461
(319)
(6)
136
(29)
107
107
27
—
Kar-Tel
2021
300
213
28
29
46
33
(102)
(6)
(158)
383
287
96
2021
658
(567)
(16)
75
(21)
54
54
29
(43)
2020
276
233
23
21
37
31
(75)
(6)
(152)
2020
689
(564)
(17)
108
(29)
79
79
43
46
OTA
2021
442
1,100
35
31
113
28
(122)
(37)
(250)
2019
775
(621)
(17)
137
(36)
101
101
55
69
2020
492
1,168
18
31
67
50
(102)
(23)
(267)
388
1,340
1,434
291
97
608
732
651
783
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
2021
231
(106)
(114)
(1)
10
2020
184
(88)
(97)
(2)
(3)
2019
199
(84)
(104)
—
11
2021
263
(114)
(99)
(5)
45
2020
211
(102)
(103)
(5)
1
2019
305
(84)
(205)
(1)
15
169
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. On
July 1, 2021 VEON exercised its put option to sell the entirety of its 45.57% stake in its Algerian subsidiary, Omnium Telecom
Algerie SpA (Algeria) to the Fonds National d'Investissement (FNI). 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.
170
FINANCING ACTIVITIES OF THE GROUP
15 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
2021
2020
2019
3
(4)
7
—
28
34
15
6
12
—
78
111
20
(17)
21
—
(3)
21
Included in ‘Other gains / (losses)' in 2021 a gain of US$21 relating to the fair value adjustment of Shop-up and a US$3 write off
of certain payables.
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.
171
16
INVESTMENTS, DEBT AND DERIVATIVES
INVESTMENTS AND DERIVATIVES
The Company holds the following investments and derivatives assets as of December 31:
At fair value
Derivatives not designated as hedges
Derivatives designated as net investment hedges
Other investments
At amortized cost
Security deposits and cash collateral
Other investments
Total investments and derivatives
Non-current
Current
Security deposits
Carrying value
2021
2020
—
—
37
37
49
99
148
185
99
86
20
3
8
31
325
39
364
395
305
90
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.
On July 19, 2021, Islamabad High Court dismissed Jazz's appeal. Based on the dismissal of appeal by the court, subsequent
legal opinion obtained and acceptance of the total license price, the license was recognized and accordingly the security deposit
balance of was also adjusted against the license fee payable.
172
DEBT AND DERIVATIVES
The Company holds the following outstanding debt and derivatives liabilities as of December 31:
At fair value
Derivatives not designated as hedges
Derivatives designated as net investment hedges
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
Carrying value
2021
2020
4
4
8
52
1
53
7,595
7,678
86
(15)
7,666
2,667
16
289
10,638
10,646
9,404
1,242
85
(5)
7,758
1,912
273
91
10,034
10,087
8,832
1,255
.*Certain comparative amounts have been reclassified, refer to Note 24 for further details.
Bank loans and bonds
The Company had the following principal amounts outstanding for interest-bearing loans and bonds at December 31:
173
Borrower
Type of debt
Guarantor
Currency
Interest rate
Maturity
2021
2020
Principal amount
outstanding
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Holdings
VEON Finance Ireland
DAC
VEON Finance Ireland
DAC
PJSC VimpelCom, via VIP
Finance Ireland
PMCL
PMCL
PMCL
PMCL
PMCL
PJSC Kyivstar
PJSC Kyivstar
PJSC Kyivstar
PJSC Kyivstar
Banglalink
Loans
Loans
Notes
Notes
Notes
Loan
Notes
Notes
Notes
Notes
Loans
Loan
Notes
Loans
Loans
Loan
Loan
Loan
Loan
Loan
Loan
Loans
Loans
None
None
PJSC
VimpelCom
None
None
None
None
None
None
None
VEON Holdings
RUB
RUB
US$
US$
US$
RUB
US$
RUB
RUB
US$
RUB
VEON Holdings
RUB
None
None
None
None
None
None
None
US$
PKR
PKR
PKR
PKR
PKR
UAH
7.35% to 7.50%
CBR Key Rate + 2.20%
7.50%
5.95% to 7.25%
4.95%
CBR Key Rate + 1.85%
4.00%
6.30% to 6.50 %
8.13%
3.38%
CBR Key Rate + 1.90% to
2.15%
10.10%
7.75 %
6M KIBOR + 0.35%
6M KIBOR + 0.55%
3M KIBOR + 0.55%
6M KIBOR + 0.55%
3M KIBOR + 0.88%
NBU Key rate + 3.00%
VEON Holdings
UAH
NBU Key rate + 3.50%
VEON Holdings
UAH
Treasury Bill Rate +
3.00%
2021
2021
2022
2023
2024
2025
2025
2025
2026
2027
2026
2026
2021
2022
2026
2028
2028
2031
2023
2024
2024
None
None
UAH
BDT
10.15% to 11.00%
2023-2025
Average bank deposit rate
+ 4.25%
2022
Other bank loans and bonds
Total bank loans and bonds
—
—
417
812
677
417
1,229
1,229
533
404
533
406
1,000
1,000
404
269
406
—
1,250
1,250
807
404
—
24
272
28
85
57
61
47
50
97
46
—
—
262
80
273
—
—
—
56
—
—
85
80
111
112
7,595
7,678
174
SIGNIFICANT CHANGES IN DEBT AND DERIVATIVES
Reconciliation of cash flows from financing activities
Balance as of January 1, 2020
Cash flows
Proceeds from borrowings, net of fees paid
Repayment of debt
Interest paid
Repayment of debt relating to Algeria discontinued operations
Interest paid relating to Algeria discontinued operations
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
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
Held for sale - Note 10
Foreign currency translation
Other non-cash movements
Bank loans and
bonds Lease liabilities
7,588
2,083
4,621
(4,054)
(494)
—
—
546
—
(398)
(51)
—
(297)
(146)
(25)
(4)
156
432
(286)
—
Total
9,671
4,621
(4,351)
(640)
(25)
(4)
702
432
(684)
(51)
7,758
1,913
9,671
2,090
(2,129)
(472)
513
—
—
(68)
(26)
—
(337)
(147)
144
1,224
(122)
(8)
—
2,090
(2,466)
(619)
657
1,224
(122)
(76)
(26)
Balance as of December 31, 2021
7,666
2,667
10,333
FINANCING ACTIVITIES 2021
Acquisition of minority stake in PMCL
In March 2021, VEON successfully concluded the acquisition of the 15% minority stake in Pakistan Mobile Communications
Limited ("PMCL"), its operating company in Pakistan, from the Dhabi Group for US$273. This transaction follows the Dhabi
Group’s exercise of its put option in September 2020 and gives VEON 100% ownership of PMCL. The transaction is presented
within 'Acquisition of non-controlling interest' within the Consolidated Statement of Cash Flows.
VEON entered 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 replaced the revolving credit facility signed in February 2017, which is now cancelled. The RCF has an
initial tenor of three years, with VEON 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 USA agreed as the
replacement risk free rate with credit adjustment spreads agreed for interest periods with a one month, three months and six
months tenor. SOFR will apply to interest periods commencing on and from October 31, 2021. VEON will have the option to
make each drawdown in either U.S. dollars or euro.
PMCL enters into PKR 20 billion (US$131) loan facilities
In March 2021, PMCL successfully entered into a new PKR 15 billion (US$98) syndicated facility with MCB Bank as agent and
PKR 5 billion (US$33) bilateral term loan facility with United Bank Limited. Both these floating rate facilities have a tenor of seven
years.
VEON increases facility with Alfa Bank
In March 2021, VEON successfully amended and restated its existing RUB 30 billion (US$396) bilateral term loan agreement
with Alfa Bank and increased the total facility size to RUB 45 billion (US$594), by adding a new floating rate tranche of RUB 15
billion (US$198). The new tranche has a five years term. In April 2021, the proceeds from Alfa Bank new tranche of RUB15
billion (US$198) were used to early repay RUB 15 billion (US$198) of loans from Sberbank, originally maturing in June 2023.
175
PMCL secures syndicated credit facility
In June 2021, PMCL secured a PKR 50 billion (US$320) syndicated credit facility from a banking consortium led by Habib Bank
Limited. This ten years facility will be used to finance the company’s ongoing 4G network rollouts and technology upgrades, as
well as to address upcoming maturities.
Global Medium Term Note Programme
In September 2021, VEON Holdings B.V. issued senior unsecured notes of RUB 20 billion (US$273), maturing in September
2026. The notes were issued under its existing Global Medium Term Note Programme with a Programme limit of US$6.5 billion,
or the equivalent thereof in other currencies. The proceeds were used for early repayment of RUB 20 billion (US$273) of
outstanding loans to Sberbank that were originally maturing in June 2023.
Loan agreement Alfa Bank
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$612) Term Facilities
Agreement with Alfa Bank which includes a RUB 30 billion (US$408) fixed rate tranche and a RUB 15 billion (US$204) floating
rate tranche, both with a maturity date of December 2026. The facilities are guaranteed by VEON Holdings B.V.. The proceeds
from the Alfa Bank facilities have been used to finance intercompany loans to PJSC Vimpel-Com.
Loan agreement Sberbank
In December 2021, VEON Finance Ireland Designated Activity Company signed a RUB 45 billion (US$611) Term Facility
Agreement with Sberbank with a floating rate. Maturity date of the facility is December 2026 and it is guaranteed by VEON
Holdings B.V.. The proceeds from the Sberbank facility have been used to finance an intercompany loan to PJSC Vimpel-Com.
Alfa Bank loans repayment
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$611) of outstanding loans to Alfa Bank, comprising of a RUB
30 billion loan (US$407) originally maturing in March 2025 and a RUB 15 billion (US$204) loan originally maturing in March
2026.
Sberbank loans repayment
In December 2021, VEON Holdings B.V. repaid RUB 45 billion (US$612) of outstanding loans to Sberbank, comprising of a RUB
15 billion (US$204) loan originally maturing in June 2023 and a RUB 30 billion (US$408) loan originally maturing in June 2024.
FINANCING ACTIVITIES IN 2020
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 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. During 2021, the transaction was completed and VEON indirectly owns 100% of PMCL.
Global Medium Term Note Programme
In April 2020, VEON Holdings B.V. established a Global Medium Term Note Programme for the issuance of bonds (the "GMTN
Programme"), with a programme 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 GMTN Programme, maturing in June 2025, September 2025 and November 2027.
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 %.
176
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).
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.
177
FAIR VALUES
As of December 31, 2021, 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$7,709 (2020: US$8,031); and
• 'Lease liabilities', for which fair value has not been determined.
As of December 31, 2021 and December 31, 2020, 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, 2021 and 2020 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, 2021 and 2020, 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
Foreign currency forward
contracts
Forward
foreign
currency basis
spread
PJSC
VimpelCom
RUB
6,986 **
26,758 **
2021
2020
* 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 less than 1 year as of December 31, 2021 (2020: 1 year ).
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 2021, the Company recorded a loss of US$(18) on derivatives designated as net investment hedge.
178
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, 2020
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
Other movements in foreign currency translation reserve
As of December 31, 2020
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, 2021
Foreign currency
translation reserve
Cost of hedging
reserve **
(8,312)
(615)
178
—
—
(26)
(8,775)
(140)
(18)
—
—
—
(8,933)
9
—
—
7
(15)
—
1
—
—
2
(3)
—
—
* 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.
179
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, except when it is not
reasonably certain at the commencement of the lease that these will be exercised.
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. When determining whether an extension option is
not reasonably certain to be exercised, VEON considers all relevant facts and circumstances that creates an economic incentive
to exercise the extension option, or not to exercise a termination option, such as strategic plans, future technology changes, and
various economic costs and penalties.
180
17 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
2021
1,485
767
2,252
(13)
2020
694
975
1,669
(8)
Cash and cash equivalents, net of overdrafts, as presented in the consolidated statement of cash
flows
2,239
1,661
*Certain comparative amounts have been reclassified, refer to Note 24 for further details.
** Cash and cash equivalents include an amount of US$98 relating to banking operations in Pakistan.
Cash at bank earns interest at floating rates based on bank deposit rates. Short-term deposits are made for varying periods of
between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the
respective short-term deposit rates.
The imposition of currency exchange controls or other similar restrictions on currency convertibility in the countries in which
VEON operates could limit VEON’s ability to convert local currencies or repatriate local cash in a timely manner or at all, as well
as remit dividends from the respective countries. As of December 31, 2021 US$ 71 (DZD) equivalent was considered restricted
and included in cash and cash equivalent balances, as it was pending completion of local regulatory processes and approvals .
The amounts were paid out of Algeria on March 24, 2022 and received in the bank. (2020: nil).
Cash balances include investments in money market funds of US$397 (2020: US$543), 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, 2021, 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$13 (2020: US$8). 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.
181
18
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.
As of December 31, 2021, approximately 75% of the Company’s borrowings are at a fixed rate of interest (2020: 79%).
The Group is exposed to possible changes in interest rates on variable interest loans and borrowings, partially mitigated through
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.
182
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
2021
Russian Ruble
Bangladeshi Taka
Pakistani Rupee
Georgian Lari
Other currencies (net)
2020
Russian Ruble
Bangladeshi Taka
Pakistani Rupee
Georgian Lari
Other currencies (net)
18
(30)
(3)
(37)
(7)
35
(30)
(4)
(36)
8
(25)
33
4
41
7
(39)
33
4
40
(9)
9
—
—
—
—
32
—
—
—
4
(10)
—
—
—
—
(39)
—
—
—
(4)
183
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 17 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, 2021 and 2020, 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, 2021
and 2020 is the carrying amount as illustrated in Note 5, Note 16, Note 17 and within this Note 18.
184
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, 2021, 7% of the Company’s
debt (2020: 5%) 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, except for
the additional risks identified in Note 24. 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
2021
VEON Holdings B.V. – Revolving
Credit Facility
Feb 2024
US$1,250
—
US$1,250
1,250
PMCL - Term Facility
Jun 2022
PKR 50,000 PKR 10,000
PKR 40,000
283
TNS -Plus LLC - Term Facilities*
Oct 2023
KZT 4,000
KZT 2,783
KZT 1,217
9
—
57
6
1,250
226
3
* Facility amount of US$ 0.3 is available until October 2025.
Amounts in millions of transactional currency
US$ equivalent amounts
Final
availability
period
Facility
amount
Utilized
Available
Facility
amount
Utilized
Available
Feb 2022
US$1,586*
—
US$1,586
1,586
—
1,586
2020
VEON Holdings B.V. – Revolving
Credit Facility *
PMCL - Syndicated Term Facility
and Islamic Finance Facility
PMCL - Term Facility
Nov 2023
PKR 10,000
PKR 5,000
PKR 5,000
Sep 2021
PKR 14,369
PKR 9,999
PKR 4,370
90
24
62
12
28
12
* Facility amount of US$1,586 is available until February 2021. Subsequently a reduced facility amount of US$1,382 was available until March 2021. In March 2021,
VEON entered into a new multi-currency revolving credit facility agreement,
185
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, 2021 and 2020, respectively. The total amounts in the table differ from
the carrying amounts as stated in Note 16 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, 2021
Bank loans and bonds
Lease liabilities
Derivative financial liabilities
Gross cash inflows
Gross cash outflows
Trade and other payables*
Other financial liabilities
Put option liability over non-controlling interest
Less than 1
year
1-3 years
3-5 years
More than 5
years
1,050
545
—
8
2,031
120
16
3,200
1,111
3,652
763
1,393
751
—
—
—
144
—
—
—
—
21
—
—
—
—
15
—
Total
9,295
3,170
—
8
2,031
300
16
Total financial liabilities
3,770
4,455
4,436
2,159
14,820
Related derivatives financial assets
Gross cash inflows
Gross cash outflows
Related derivative financial assets
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total financial liabilities, net of derivative assets
3,770
4,455
4,436
2,159
14,820
* Certain comparative amounts have been reclassified, refer to Note 24 for further details.
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
1,946
—
273
—
—
—
60
—
—
—
—
—
—
—
—
—
—
—
9,176
2,299
(228)
237
1,946
60
273
Total financial liabilities
3,595
4,759
3,762
1,647
13,763
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
3,598
4,759
3,762
1,647
13,766
* Certain comparative amounts have been reclassified, refer to Note 24 for further details.
186
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. In September 2019, VEON
announced a dividend policy that targets paying at least 50% of prior year Equity Free Cash Flow after licenses while Company’s
Net Debt to Adjusted EBITDA ratio below 2.4x. See the paragraph below for more information on how the Company’s Net Debt to
Adjusted EBITDA ratio is calculated. Dividend payments remain subject to the review by the Company’s Board of Directors of
medium-term investment opportunities and the Company’s capital structure. There were no changes made in the Company’s
objectives, policies or processes for managing capital during 2021.
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.
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 at or below 3.75x (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.
187
19
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.
2021
2020
As of December 31, 2021, the Company’s largest shareholders and remaining free float are as follows:
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 14). 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 16).
188
20 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
2021
2020
2019
(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
605
(384)
576
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
1,753
$0.35
$0.35
1,749
1,749
($0.22)
($0.22)
1,749
1,749
$0.33
$0.33
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
2021
2020
2019
(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
69
35
45
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
1,753
$0.04
$0.04
1,749
1,749
$0.02
$0.02
1,749
1,749
$0.03
$0.03
189
21 DIVIDENDS PAID AND PROPOSED
Pursuant to Bermuda law, VEON is restricted from declaring or paying a dividend if there are reasonable grounds for believing
that
(a) VEON is, or would after the payment be, unable to pay its liabilities as they become due, or
(b)
the realizable value of VEON assets would, as a result of the dividend, be less than the aggregate of VEON liabilities.
There were no dividends declared by VEON in respect of the year 2021 and 2020. The following table provides an overview of
dividends announced by VEON in respect of the year 2019:
Description
Final for 2019
Interim for 2019
Dividends declared
Dividends paid
Dividends, US$ cents
per share
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 2021, 2020 and 2019, 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
2021
2020
44
27
8
10
89
45
24
16
2
87
2019
69
24
12
3
108
In 2020, PMCL, a subsidiary of the Company, declared dividends to its shareholders, of which US$25 (2019: US$24) was
declared to non-controlling shareholders of PMCL. Dividends declared to non-controlling interests of PMCL reduces the principal
amount of the put-option liability over non-controlling interest on the date of declaration.
190
ADDITIONAL INFORMATION
22 RELATED PARTIES
As of December 31, 2021, the Company has no ultimate controlling shareholder. See also Note 19 for details regarding
ownership structure.
COMPENSATION TO DIRECTORS AND SENIOR MANAGERS OF THE COMPANY
The following table sets forth the total compensation to our directors and senior managers, who are considered to be key
management of the company:
Short-term employee benefits
Long-term employee benefits
Share-based payment*
Termination benefits
Total compensation to directors and senior management**
2021
2020
2019
39
—
9
7
55
35
1
—
4
40
48
—
3
—
51
*Share-based payment in 2021 represent the expense under the Deferred Shares Plan and Long-Term Incentive Plan, see further details below.
** The number of directors and senior managers vary from year to year. Total compensation paid to directors and senior management approximates the amount
charged in the consolidated income statement for that year with the exception of the share-based payment in 2021.
Under the Company’s bye-laws, the Board of Directors of the Company established a compensation and talent committee, which
has the overall responsibility for approving and evaluating the compensation and benefit plans, policies and programs of the
Company’s directors, officers and employees and for supervising the administration of the Company’s equity incentive plans and
other compensation and incentive programs.
Compensation of Key Senior Managers
The following table sets forth the total remuneration expense to the key senior managers in 2021 and 2020 (gross amounts in
whole euro and whole US$ equivalents). For further details on compensation and changes to key senior managers, please refer
to the Explanatory notes below.
191
Kaan
Terzioglu
Sergi
Herrero
Ursula
Burns
Serkan
Okandan
Trond
Westlie
Murat
Kirkgoz
Kjell
Johnsen
Scott
Dresser
Alex
Kazbegi
Group
CEO
Group
Co-CEO
Group
CEO
Group
CFO
Group
CFO
Deputy
Group
CFO
Group
COO
Group
General
Counsel
Group
Chief
Strategy
Officer
Joop
Brakenho
ff
Group
Chief
Internal
Audit &
Complian
ce Officer
Alex
Bolis
Dmitry
Shvets
Michael
Schulz
Group
Head of
Corporate
Developm
ent,
Communi
cations
and
Investor
Relations
Group
Head of
Portfolio
Managem
ent
Group
Chief
People
Officer
In whole euros
2021
Short-term employee
benefits
Base salary
1,323,000
628,199
—
1,296,000
Annual incentive
1,695,094
623,036
—
1,192,320
Other
205,350
5,512,172
—
1,276,225
Long-term employee
benefits
166,518
(144,764)
—
—
Share-based payments 2,158,098
(60,701) (103,954) 1,066,672
—
2,936,759
—
—
5,548,060
9,494,701
(103,954) 4,831,217
—
—
—
—
—
—
—
—
—
—
—
—
1,300,000
143,100
540,000
272,448
365,854
237,741
—
1,300,000
128,437
496,800
239,754
372,351
197,107
—
1,013,859
143,936
96,600
77,000
11,271
27,862
—
—
—
—
—
—
—
(26,417)
—
277,390
—
467,471
330,726
491,760
469,127
—
—
2,625,000
579,675
—
—
—
—
(26,417)
—
6,516,249
995,148
1,600,871
919,928
1,241,236
931,837
1,323,000
1,181,368
1,162,750
864,000
16,810
211,600
—
1,300,000
553,500
224,100
930,418
769,643
540,984
525,730
—
80,302
—
2,300,000
338,378
147,813
439,657
2,158,022
554,328
297,341
212,631
40,360
299,333
24,100
104,124
39,908
Share-based payments
88,056
58,707
111,403
76,316
(217,080)
(7,954) (217,080)
(65,526)
76,366
706,925
—
—
—
—
—
—
—
—
—
—
8,775
—
—
—
—
—
—
—
—
—
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
* Total remuneration expense for 2021 excludes accrued payroll taxes of EUR-3 million (US$-3) (2020: EUR9 million (US$10) recorded in ‘Selling, general and
administrative expenses’ incurred by the Company pertaining to payments made to Ursula Burns (2020: Ursula Burns and Kjell Johnsen).
Kaan
Terzioglu
Sergi
Herrero
Ursula
Burns
Serkan
Okandan
Trond
Westlie
Murat
Kirkgoz
Kjell
Johnsen
Scott
Dresser
Alex
Kazbegi
Group
CEO
Group
Co-CEO
Group
CEO
Group
CFO
Group
CFO
Deputy
Group
CFO
Group
COO
Group
General
Counsel
Group
Chief
Strategy
Officer
Joop
Brakenho
ff
Group
Chief
Internal
Audit &
Complian
ce Officer
Alex
Bolis
Group
Head of
Corporate
Developm
ent,
Communi
cations
and
Investor
Relations
Dmitry
Shvets
Michael
Schulz
Group
Head of
Portfolio
Managem
ent
Group
Chief
People
Officer
In whole US dollars
2021
Short-term employee
benefits
Base salary
1,564,015
742,676
—
1,532,096
Annual incentive
2,003,894
736,572
—
1,409,528
Other
242,759
6,516,660
—
1,508,718
Long-term employee
benefits
196,853
(171,144)
—
—
Share-based payments 2,551,245
(71,763) (122,891) 1,260,991
—
3,471,927
—
—
—
—
—
—
—
—
—
—
—
—
—
1,536,825
169,169
638,373
322,081
433,078
281,051
—
1,536,825
151,835
587,303
283,431
440,768
233,014
—
1,198,557
170,158
114,198
91,027
13,342
32,938
—
—
—
—
—
—
—
(31,230)
—
327,923
—
552,631
390,975
582,119
554,589
—
—
3,103,204
685,276
—
—
—
—
6,558,766
11,224,928 (122,891) 5,711,333
—
(31,230)
—
7,703,334
1,176,438
1,892,505
1,087,514
1,469,307
1,101,592
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
Share-based payments 100,394
66,933
127,013
87,009
(247,497)
(9,069) (247,497)
(74,708)
87,066
805,980
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10,005
—
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
192
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Termination benefits
Total remuneration
expense *
2020
Short-term employee
benefits
Base salary
Annual incentive
Other
Long-term employee
benefits
Termination benefits
Total remuneration
expense *
Termination benefits
Total remuneration
expense *
2020
Short-term employee
benefits
Base salary
Annual incentive
Other
Long-term employee
benefits
Termination benefits
Total remuneration
expense *
* Total remuneration expense for 2021 excludes accrued payroll taxes of EUR-3 million (US$-3) (2020: EUR9 million (US$10) recorded in ‘Selling, general and
administrative expenses’ incurred by the Company pertaining to payments made to Ursula Burns (2020: Ursula Burns and Kjell Johnsen).
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 payment expense relates to amounts related to the long-term incentive scheme and the deferred shared plan as
well as 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
Group Co-CEOs with effective from March 1, 2020, having previously served as Joint Group COOs since September 2, 2019
and November 1, 2019, respectively. Sergi Herrero stepped down from the role of Group Co-CEO on June 30, 2021 and Kaan
Terzioğlu has continued his role as Group CEO.
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 and 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, Alex Kazbegi stepped down from the role of
Group Chief Strategy Officer on March 31, 2021, and Scott Dresser stepped down from the role of Group General Counsel on
December 31, 2021.
In addition, Joop Brakenhoff was appointed Group Chief Internal Audit & Compliance Officer, effective July 1, 2020, Alex Bolis
was appointed Group Head of Corporate Strategy, Communications and Investor Relations, effective April 1, 2021, Dmitry Shvets
was appointed Group Head of Portfolio and Performance Management, effective April 15, 2021, and Michael Schulz was
appointed Group Chief People Officer, effective July 1, 2021.
193
Compensation of Board of Directors
The following table sets forth the total remuneration expense to the members of the Board of Directors members in 2021 and
2020 (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
2021
2020
2021
2020
2021
2020
2021
2020
Retainer
Committees
Other compensation
Total
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
Alexander Pertsovsky
Steve Pusey
Leonid Boguslavsky
Sergi Herrero
Irene Shvakman
Vasily Sidorov
487,500
204,167
136,458
72,917 1,098,610
—
105,114
—
155,556
308,333
44,444
—
—
323,864
204,167
—
—
155,556
204,167
66,667
75,000
60,417
—
23,125
68,750
—
87,500
87,500
—
—
—
—
—
—
—
842,708
629,167
57,292
33,333 1,971,749
155,556
204,167
66,667
87,500
75,000
13,350
75,000
60,417
—
—
—
—
350,000
308,333
150,000
118,750
—
350,000
—
—
105,114
308,333
104,167
47,917
—
125,000
—
—
10,511
85,417
12,500
—
189,583
204,167
53,125
58,333
335,417
195,417
195,115
195,115
—
—
—
—
23,958
13,958
27,874
111,494
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,722,568
277,084
—
128,239
200,000
377,083
—
—
323,864
291,667
222,223
291,667
75,000
60,417
2,871,749
662,500
222,223
291,667
75,000
13,350
500,000
75,000
560,417
—
—
—
—
—
—
—
—
—
—
500,000
427,083
—
475,000
—
—
115,625
393,750
116,667
47,917
242,708
262,500
359,375
209,375
222,989
306,609
—
—
—
—
Total compensation
3,832,523 3,395,361
876,937
746,136 3,070,359
500,000
7,779,819 4,641,497
In whole US dollars
2021
2020
2021
2020
2021
2020
2021
2020
Retainer
Committees
Other compensation
Total
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
Guy Laurence
Alexander Pertsovsky
Steve Pusey
Leonid Boguslavsky
Sergi Herrero
Irene Shvakman
Vasily Sidorov
576,323
232,775
161,321
83,134 1,298,776
—
119,843
—
183,898
351,537
52,542
—
—
369,244
232,775
—
—
183,898
232,775
78,813
88,665
68,883
—
26,365
78,383
—
99,761
99,761
—
—
—
—
—
—
—
996,250
717,326
67,730
38,004 2,331,001
183,898
232,775
78,813
99,761
88,665
88,665
15,221
68,883
—
—
—
—
413,770
351,537
177,330
135,389
11,984
97,386
14,252
—
—
—
118,763
54,631
—
—
224,125
232,775
62,804
66,507
396,530
231,022
230,665
230,665
—
—
—
—
28,323
16,502
32,952
131,808
—
—
—
—
—
—
—
—
—
—
—
—
—
—
570,060
—
—
—
—
—
—
—
—
—
—
2,036,420
315,909
—
146,208
236,440
429,920
—
—
369,244
332,536
262,711
332,536
88,665
68,883
3,394,981
755,330
262,711
332,536
88,665
88,665
15,221
638,943
591,100
486,926
—
131,827
561,545
448,923
—
—
133,015
54,631
286,929
299,282
424,853
247,524
263,617
362,473
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Sir Julian Horn-Smith
—
119,843
—
Robert Jan van de Kraats
413,770
351,537
147,775
Total compensation
4,530,809 3,871,123 1,036,713
850,687 3,629,777
570,060
9,197,299 5,291,870
194
Explanatory notes
In 2021, equity-settled awards were granted to Group Chairman Gennady Gazin (1,224,086) and Group Digital and Innovation
Committee Chairman Hans-Holger Albrecht (1,360,095). The share awards will vest on June 10, 2022 and the shares are subject
to a holding period through to July 16, 2023. The fair value of these awards were determined using the Black-Scholes Model and
an expense of US$2 was incurred as of December 31, 2021 which is included in other compensation.
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 through 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
Derby, Amos Genish and Stephen Pusey, as well as seven previously serving directors: Osama Bedier, Mikhail 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 and on October 28,
2020, Yaroslav Glazunov was appointed as an alternate director for Alexander Pertsovsky.
On June 10, 2021, VEON announced the results of the elections conducted at its Annual General Meeting of Shareholders.
Shareholders elected three new members to the Company’s Board of Directors, Vasily Sidorov, Irene Shvakman and Sergi
Herrero, as well as nine previously serving directors: Hans-Holger Albrecht, Leonid Boguslavsky, Mikhail Fridman, Gennady
Gazin, Yaroslav Glazunov, Andrei Gusev, Gunnar Holt, Stephen Pusey and Robert Jan van de Kraats. Stephen Pusey stepped
down as a director from the Company’s Board of Directors on July 15, 2021.
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.
Deferred Share Plan
In 2021, equity-settled awards were granted to certain key senior managers and directors under the Deferred Shares Plan
(“DSP”), which are subject to a two years vesting period from the grant date. The fair value of the awards were determined using
the Black-Scholes Model and an expense of US$5 was incurred as of December 31, 2021.
Long Term Incentive Scheme
In 2021, equity-settled awards were granted to certain key senior managers under the Long-Term Incentive Plan (“LTIP”), which
are subject to a three years vesting period from the date of the grant as well as a performance condition in line with shareholder
interests. The fair value of the awards were determined using the Black-Scholes Model and an expense of US$4 was incurred as
of December 31, 2021.
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.
ACCOUNTING POLICIES
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Equity-settled share-based payments are measured at the grant date fair value, which is expensed over the vesting period,
taking into account expected forfeitures and performance conditions, if any, with a corresponding increase in equity.
Cash-settled share-based payments are measured at the grant date fair value and recorded as a liability. The Company
remeasures the fair value of the liability at the end of each reporting period until the date of settlement, with any changes in fair
value recognized in the income statement.
Other short-term benefits not related to share-based payments are expensed in the period when services are received.
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23 EVENTS AFTER THE REPORTING PERIOD
Ongoing conflict between Russia and Ukraine
As of April 29, 2022, the conflict between Russia and Ukraine remains ongoing. Please refer to Note 24 for further details.
Financing activities
In February 2022, VEON Holdings B.V. repaid RUB 30 billion (US$396) of outstanding loans to VTB Bank originally maturing in
July 2025.
In February 2022, VEON Finance Ireland DAC signed a RUB 30 billion (US$400) Term Facility Agreement with VTB Bank with a
floating rate. This facility is guaranteed by VEON Holding B.V. and has a Maturity of February 2029. The proceeds from this
facility will be used for general corporate purposes, including the financing of intercompany loans to PJSC VimpelCom.
In February 2022, the maturity of the revolving credit facility (RCF) was extended one year until March 2025.
In February 2022, VEON Holdings B.V. has drawn US$430 under the RCF. The outstanding balance can be rolled over until
maturity in 2025.
In February 2022, VEON Holdings B.V. repaid the 7.50% Note of US$417 which became due in March 2022.
In February 2022, Jazz, a subsidiary of the Company in Pakistan, fully utilized the remaining PKR 40 billion (US$222) available
under their line of credit.
In March 2022, VEON Finance Ireland DAC prepaid a RUB 30 billion (US$259) Term Facility Agreement with VTB Bank in
accordance with its terms, and the facility has been cancelled.
In March 2022, Alfa Bank (US$125 commitment) and Raiffeisen Bank Russia (US$70 commitment) notified the Agent under the
RCF that as a result of new Russian currency regulations following a presidential decree, they could no longer participate in the
RCF. As a result, their available commitments were cancelled and the total available credit under the RCF reduced from
US$1,250 to US$1,055.
In April 2022, the drawn portion from Alfa Bank under the RCF (US$43) was repaid. The drawn portion from Raiffeisen Bank
Russia (US$24) is to be repaid by the end of May 2022.
In April 2022, VEON novated two group-level loans, with Sberbank and Alfa Bank respectively, and totaling RUB 90 billion
(US$1,070), to PJSC VimpelCom, with the former borrower, VEON Finance Ireland DAC and the former guarantor, VEON
Holdings B.V., having been released from their obligations.
In March 2022, Kyivstar, a subsidiary of the Company in Ukraine, prepaid a UAH 1,350 million (US$46) loan with JSC CitiBank,
prepaid a portion of a UAH 1,677 million loan with Alfa Bank (UAH 1,003 million (US$34) repaid), and in April 2022 prepaid a
portion of a UAH 1,275 million loan with JSC Credit Agricole (UAH 940 million (US$32) repaid).
In April 2022, Jazz signed a PKR 40 billion (US$220) syndicated loan with a 10 year maturity.
In April 2022, Banglalink, a subsidiary of the Company in Bangladesh, signed a BDT 12 billion (US$139) syndicated loan with a
five years maturity.
As of April 29, 2022, VEON Holdings B.V. is in the process of drawing down the remaining committed amounts under the RCF,
with a portion of the related utilization request having been received as of such date. Once the drawdown is complete, the RCF
will be fully drawn. The proceeds of this drawing will be used for general corporate purposes.
Other developments
On March 31, 2022, Banglalink acquired new spectrum for a fee of US$205 payable in installments over eleven years, doubling
its spectrum holding in Bangladesh. Banglalink acquired 40 MHz of spectrum from the 2,300 MHz band.
On April 12, 2022, Jazz signed a 4G license renewal with the PTA for a fee of PKR 45 billion (US$486) for fifteen years, of which
50% has been settled, and the remaining amount will be paid in five equal annual installments.
Changes to Board of Directors
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On January 5, 2022, VEON announced the appointment of Karen Linehan to the Board of Directors as a non-executive director,
following the resignation of Steve Pusey in 2021.
On March 1, 2022, VEON announced the resignation of Mikhail Fridman from the Board of Directors, effective from February 28,
2022.
On March 8, 2022, VEON announced the resignation of Robert Jan van de Kraats from the Board of Directors, effective from
March 7, 2022.
On March 16, 2022, VEON announced the appointment of Michiel Soeting to the Board of Directors as a non-executive director
and Chairman of the Audit and Risk Committee, following the resignation of Robert Jan van de Kraats on March 7, 2022.
Notification from NASDAQ on Minimum Share Price Requirement
On April 12, 2022, VEON confirmed that on April 7, 2022 VEON received notification from the Listing Qualifications Department
of NASDAQ that VEON is not in compliance with the minimum bid price requirement set forth in NASDAQ’s Listing Rule
5550(a)(2). This does not impact current NASDAQ listing and trading, and VEON will evaluate options to return to compliance.
VEON announced its intention to establish a new parent holding company in the United Kingdom
On February 3, 2022, VEON announced its intention to move its group parent company to the United Kingdom, with the
introduction of a newly formed UK incorporated public limited company (the “new UK Parent Company”) as the top holding
company of the VEON Group. It was expected that the new UK Parent Company would replace VEON Ltd. as the VEON
Group’s ultimate parent company by way of a Bermuda court-approved scheme of arrangement. VEON has since suspended all
activities related to the previously proposed re-domiciliation of VEON Ltd. to the United Kingdom and will continue to consider the
optimal corporate structure for the Group..
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24 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.
Certain comparative amounts have been reclassified. Specifically, the following December 31, 2020 balances were reclassified in
the consolidated statement of financial position:
• Short term investments for treasury bills shorter than three months maturity relating to micro finance bank operations of
US$75 is now presented in cash and cash equivalents. Accordingly the cash flow movement of US$39 (2019:US$15)
relating to treasury bills has also been presented as cash and cash equivalent.
• Short term portion of license fee payable of US$31 is now presented as other financial liabilities within current debt and
derivative liabilities.
• Expected credit losses relating to other trade receivables of US$27 presented as other receivables, is now presented as
expected credit losses trade and receivable.
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 14 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.
Ongoing conflict between Russia and Ukraine
As of April 29, 2022, hostilities continue in Ukraine. One third of our total subscribers are in Ukraine and Russia, where they are
supported by 32,000 employees. VEON’s priority is to protect the safety and well-being of our employees and their families. We
have developed and, in some cases, implemented additional contingency plans to relocate work and/or personnel to other
geographies and add new locations, as appropriate. As of April 29, 2022, most of our Ukraine subsidiary’s employees remain in
the country. As of April 15, 2022, millions of people have fled Ukraine and the country has sustained significant damage to
infrastructure and assets.
If the ongoing conflict persists, we could lose a percentage of our customer base in Ukraine. If Ukrainian refugees choose to
relocate permanently outside of Ukraine and switch to local providers, this could have a significant impact on their use and
spending on our services. We have been and also will incur additional expenditures to maintain and repair our mobile and fixed-
line telecommunications infrastructure in Ukraine as a result of any damage inflicted on our infrastructure due to the ongoing
conflict, as well as for security, increased energy costs, and related operational and capital expenditures. In addition, our ability to
provide services in Ukraine may be impaired if we are unable to maintain key personnel within Ukraine and/or our infrastructure
within Ukraine is significantly damaged or destroyed.
In response to the events in Ukraine, the United States, European Union (and individual EU member states) and, the United
Kingdom, as well as other countries have imposed wide-ranging economic sanctions and trade restrictions which have targeted
199
individuals and entities as well as large aspects of the Russian economy, including freezing the assets of Russia’s central bank,
other Russian financial institutions, and individuals, removing selected Russian banks from the Swift banking system, and
curbing certain products exported to Russia. Furthermore, as a response to the imposed sanctions, Russia recently introduced a
number of counter-sanctions aimed at stabilizing domestic financial markets. These, among others, include restrictions related to
capital and foreign exchange controls, restrictions on lending to foreign (non-Russian) persons, restrictions on foreign persons’
transactions with Russian securities and real estate, and limitations on export and import of certain goods into and outside
Russia.
The ongoing conflict between Russia and Ukraine, and the sanctions imposed by the various jurisdictions, counter sanctions and
other legal and regulatory measures, as well as responses by our service providers, partners, suppliers and other counterparties,
and the consequences of all the foregoing, have negatively impacted and will continue to negatively impact our operations and
results in Russia and Ukraine, and may affect our operations and results in the other countries in which we operate.
The conflict has resulted in the following events and conditions that may cast significant doubt on the Company’s ability to
continue as a going concern:
•
•
•
•
•
The current events in the regions where we operate in Ukraine and where we derive a significant amount of our
business may pose security risks to our people, our facilities, our operations, and infrastructure, such as utilities and
network services, and the disruption of any or all of them could significantly affect our business, financial conditions and
results of operations in Ukraine, and cause volatility in the value of our securities. The conflict has also had a marked
impact on the economies of Russia and Ukraine. Currently, a significant majority of Ukraine’s network infrastructure is
operating effectively and disruptions in service are limited to specific areas where the conflict is most intense.
We anticipate that we will report material impairment charges with respect to assets in Ukraine and/or Russia during
2022. If there is a significant improvement in the current underlying conditions, including a lasting resolution of the
ongoing conflict, this will enable positive adjustments to our business plans. We are still gathering the necessary data
and we are not able at this time to estimate the amount or range of this potential impairment charge to the profit and
loss statement. It is possible these impairment charges may rise to a level as to require additional analysis to determine
the true value of assets as outlined in the provisions of our debt agreements and in the worst scenario, when the true
value of assets is lower than the liabilities, could require early repayments of our long term debt. The conflict is
considered a non-adjusting subsequent event in accordance with IAS 10, Events after the reporting period, and as
such, any impairment charge reported in 2022 does not impact the valuation of our assets and operations as of
December 31, 2021. While the financial performance of Ukraine has been significantly impacted in 2022, our operations
in Ukraine represents 14% of our revenue for the year ended December 31, 2021 and as such, there is no significant
impact to group’s financial performance as a whole. Further, there are no interdependencies of Ukraine’s operations
with the other operating segments.
In Russia, macroeconomic conditions and outlook have deteriorated significantly since the beginning of the conflict. We
expect our results of operations in Russia on a U.S. dollar basis to be lower for the foreseeable future compared to
results prior to the onset of the conflict, largely due to the volatility of the Russian ruble.
As of April 29, 2022, the Company has concluded that neither VEON Ltd. nor any of its subsidiaries is subject to any
sanctions imposed by the United States, European Union (and individual EU member states) and, the United Kingdom.
However, the interpretation and enforcement of these new sanctions and counter-sanctions may result in unanticipated
outcomes and could give rise to material uncertainties, which could complicate our business decisions. For example, to
protect US foreign policy and national security interests, the US government has broad discretion to at times impose a
broad range of extraterritorial “secondary” sanctions under which non-US persons carrying out certain activities may be
penalized or designated as sanctioned parties, even if the activities have no ties, contact with, or nexus to the United
States or the US financial system at all. These secondary sanctions could be imposed on the Company or any of the
Company’s subsidiaries if they were to engage in activity that the US government determined was undertaken
knowingly and rose to the level of material or significant support to, for, or on behalf of certain sanctioned parties. The
broad nature of the financial sanctions targeted at the Russian financial system, including several banks that have
historically provided funding to the Company, along with comprehensive sanctions on investment and vendors in Russia
and the ongoing conflict between Russia and Ukraine may therefore have a material impact on the Company’s
operations and business plans in Russia and Ukraine.
Based on the current state of affairs, the Company currently has sufficient liquidity to satisfy our current obligations at
least over the next twelve months from the issuance of the financial statements without the needs of additional
financing. Our current liquidity forecast assumes the completion of the anticipated sale of our business in Algeria as
disclosed in Note 10, the remaining availability of the revolving credit facility, and no early repayments of our long-term
debt. The Company also expects to meet its financial covenants as required by our debt agreements during the same
period. However, these are highly uncertain times and it is not possible to predict with precision how certain
developments will impact our liquidity position, our financial covenants and non-financial provisions in our debt
agreements, and our equity levels on a regular and continuous basis both at the group and operating company levels.
A continued deterioration in the results or operations of our operating companies could trigger certain financial
covenants or non-financial provisions in our debt agreements, requiring accelerated repayment, potentially triggering a
cross-default across all debt facilities and the revolving credit facility and negatively impact our liquidity. We may also
be impacted by conditions or local legal requirements in international markets that could make it more difficult to service
our existing debt obligations or refinance existing debt. Should we not realize the assumptions behind our liquidity
200
forecast, we may not have sufficient liquidity to continue to operate as outlined above. 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, as is the case when central banks raise benchmark interest rates, 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.
•
In response to the geopolitical and economic situation in both Ukraine and Russia, there is a risk of either country
imposing external administration over foreign companies or assets. For example, there are laws under review by the
Ukrainian government regarding nationalization of property and assets in Ukraine with association to the Russian
Federation. Such measures, if adopted and applied in relation to either our Ukrainian or Russian subsidiary, or both,
could lead to the involuntary deconsolidation of our Ukrainian and/or Russian operations. Additionally, the United States
imposed sweeping export control restrictions on Russia’s ability to obtain goods, software and technology subject to
U.S. export control jurisdiction, including a broad array of foreign-made items, that were previously not subject to U.S.
export control jurisdiction. This could have an adverse impact on our ability to maintain and/or improve our infrastructure
and adversely impact the availability and quality of our services and therefore have a material adverse effect on our
operations and results of operation. In the event of future imposed laws and regulations as a result of the ongoing
conflict between Russia and Ukraine, our business, the operation of our networks, our supply chain stability of items
critical to the telecommunications sector in Russia, and our ability to comply with the terms of our operating licenses
and local laws and regulations could be materially adversely impacted.
Management’s actions to address these events and conditions are as follows:
• We have implemented business continuity plans to address known contingency scenarios to ensure that we have
adequate processes and practices in place to protect the safety of our people and to handle potential impacts to our
operations in Ukraine and Russia.
•
The Company has performed sensitivities on the volatility of the Russian ruble with respect to the impact on our
financial results and does not expect fluctuations to have a significant impact. In the normal course of business, the
Company manages its foreign currency risk by selectively hedging committed exposures and 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. Refer to Note 18 for additional details.
• Management is actively monitoring any new developments in applicable sanctions to ensure that we are in compliance
and to evaluate any potential impact on the Company’s financial performance, operations, and governance. As a result
of current economic sanctions affecting Russian banks, we repaid our RUB 30 billion seven year term loan with VTB
Bank on March 9, 2022 and two of our group-level loans with Sberbank and Alfa Bank respectively, totaling RUB 90
billion in total, were novated to PJSC VimpelCom, within the Russia operating segment, in April 2022. This resulted in
the release of the former borrower (VEON Finance Ireland DAC) and the former guarantor (VEON Holdings BV) from
their obligations. In addition, the novation of these loans has allowed VEON to ensure that the majority of the Group’s
RUB liabilities are held within Russia and as such are matched to the market where RUB revenues are generated,
enabling further review of the capital structure of PJSC VimpelCom.
• Management actively monitors the Company’s liquidity position, our financial and non-financial provisions in our debt
agreements, and our equity levels on a regular and continuous basis both at the group and operating company levels
and should they reach a level considered at-risk, management will take actions to ensure our liquidity position is
sufficient and our financial covenants and non-financial provisions in our debt agreements are met. In the event a
default provision within our debt agreements is triggered, VEON is in regular communication with its relevant lenders
and has an obligation to notify them of any default that occurs and is continuing to occur. Should this occur, VEON will
proactively and promptly respond to queries from lenders on the relevant covenant breach and initiate negotiations with
lenders should the need arise.
• Management is actively monitoring any new developments in new laws and regulations to ensure that we are in
compliance and to evaluate any potential impact on the Company’s financial performance, operations, and governance.
The United States imposed sweeping new export control restrictions on Russia’s ability to obtain goods, software and
technology subject to U.S. export control jurisdiction, including a broad array of foreign-made items, that were
previously not subject to U.S. export control jurisdiction. This could have an adverse impact on our ability to maintain
and/or improve our infrastructure and adversely impact the availability and quality of our services and therefore will
negatively impact our operations and results of operation in Russia. The Company is currently developing contingency
plans to maximize the use of existing equipment in order to minimize the impact on our operations and results while
also analyzing the potential for applying for licenses in order to permit continued procurement of goods, software and
technology subject to U.S. export control jurisdiction.
The accompanying consolidated financial statements have been prepared on a going concern basis. In accordance with
International Accounting Standards (“IAS”) 1, Presentation of Financial Statements, the Company has determined that the
aforementioned conditions and events, considered in the aggregate, may cast significant doubt about the Company’s ability to
continue as a going concern for at least twelve months after the date these consolidated financial statements were authorized for
issuance. Management expects the actions it has taken or will take will mitigate the risk associated with the identified events and
201
conditions. However, given the uncertainty and exogenous nature of the ongoing conflict and potential future imposed sanctions
as well as potential new counter-sanctions, and given the possible future imposition of external administration over our Russian
and Ukrainian operations in particular, management concluded that a material uncertainty remains related to events or conditions
that may cast significant doubt on the Company’s ability to continue as a going concern, such that it may be unable to realize its
assets and discharge its liabilities in the normal course of business.
As a U.S. SEC registrant, the Company is required to have its financial statements audited in accordance with Public Company
Accounting Oversight Board (“PCAOB”) standards. References in these IFRS financial statements to matters that may cast
significant doubt about the Company’s ability to continue as a going concern also raise substantial doubt as contemplated by the
PCAOB standards.
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25 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 11
Note 14
Depreciation and amortization of non-current assets
Note 12 and Note 13
Fair value of financial instruments
Sale and lease back transactions
Measurement of lease liabilities
Note 16
Note 12
Note 16
NEW STANDARDS AND INTERPRETATIONS
Adopted in 2021
During 2021, 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 2021, 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
Not yet adopted by the Group
Certain new accounting standards and interpretations have been published that are not mandatory for December 31, 2021
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.
Amsterdam, April 29, 2022
VEON Ltd.
203
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
2021
2020
1
2
3
4
5
6
7
8
9
6
3
690
699
65
54
119
818
2
11,449
1,033
(8,933)
(3,639)
674
586
9
6
217
818
8
8
138
154
241
79
320
474
2
11,449
525
(8,775)
(2,689)
(349)
163
29
9
273
474
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
205
COMPANY INCOME STATEMENT
for the year ended December 31
(In millions of U.S. dollars)
General and administrative expenses
Recharged expenses to group companies
Operating (loss) / profit
Net financial income / (expense)
(Loss) / Profit before tax
Income tax
Share in results of subsidiaries after tax
Net result for the year
Note
12
13
14
3
2021
(86)
(11)
(97)
2
(95)
(4)
773
674
2020
(101)
3
(98)
(2)
(100)
—
(249)
(349)
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
206
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.
Going Concern
Due to the ongoing conflict between Russia and Ukraine, material uncertainties have been identified that may cast significant
doubt on the Company’s ability to continue as a going concern which are discussed in detail in Note 24 of the Consolidated
Financial Statements
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
207
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
2021
2020
6
6
8
1
(3)
6
72
(67)
8
8
10
1
(3)
8
72
(64)
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 depreciation
2021
2020
3
3
8
1
(4)
(2)
3
20
(17)
8
8
15
—
(4)
(3)
8
28
(20)
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
208
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/Capital distribution / (collection)
Result of participating interests after tax
Acquisition of NCI
Acquisition of 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.
2021
685
5
690
134
36
773
(76)
(16)
(158)
1
(9)
685
2020
134
4
138
1,152
(317)
(249)
—
—
(437)
(14)
(1)
134
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 lease. VEON subleases a portion of an
office building and as they have transferred substantially all of the risks and rewards of ownership of the asset it is classified as
finance lease.
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
RECEIVABLE
Amounts due from group companies
Value added tax
Other receivables and prepayments
Balance as at December 31
2021
2020
2
5
—
—
7
—
7
2021
59
3
1
65
—
4
—
—
4
—
4
2020
233
2
5
240
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, 2021
209
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, 2021
2021
2020
54
54
79
79
(In millions of U.S. dollars)
As at January 1, 2021
Profit for the period
Other comprehensive loss
Total comprehensive loss
Result appropriation
Movement in legal reserve
Acquisition of non-controlling
interest
Acquisition of subsidiary
Dividends declared
Other
As at December 31, 2021
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
525
(8,775)
(2,689)
—
—
—
—
—
—
—
—
—
—
—
—
—
508
—
—
—
—
—
(158)
(158)
—
—
—
—
—
—
—
(2)
(2)
(349)
(508)
(76)
(16)
—
1
(349)
674
—
674
349
—
—
—
—
—
11,449
1,033
(8,933)
(3,639)
674
163
674
(160)
514
—
—
(76)
(16)
—
1
586
for the year ended December 31, 2020
(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
Dividends declared
Other
As at December 31, 2020
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
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
Issued capital
Reference is made to Note 19 (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. During the year withholding tax rate applicable to profit distributions from Russia to Netherlands increased to 15% from
5% contributing to the movement in legal reserve as disclosed above.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
210
Notes to the Company statement of financial position
(in millions of U.S. dollars unless otherwise stated)
Appropriation of result
Pursuant to article 9 of the Articles of Association of VEON Ltd. the General Meeting of Shareholders 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
2021
—
674
674
2020
—
(349)
(349)
During the year an amount of US$ Nil (2020: US$262) was paid as dividend out of the retained earnings/accumulated deficit.
7
PROVISIONS
Legal provisions
Restructuring provision
Balance as at December 31
2021
2020
7
2
9
8
21
29
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$2 (2020: US$21) 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
Balance as at December 31
US$9 (2020: US$29) of the provisions qualify as short-term (in effect less than one year).
8
NON-CURRENT LIABILITIES
Lease liabilities
The movements in loans were as follows:
Balance as at January 1
Repayment
Foreign exchange (gains) / losses
Balance as at December 31
2021
2020
29
2
(22)
9
41
—
(12)
29
2021
6
2020
9
2021
2020
9
(2)
(1)
6
10
(2)
1
9
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
211
9
CURRENT LIABILITIES
Payable to group companies
Lease liabilities
Accounts payable
Taxes and social security contributions
Accruals and other payables
Balance as at December 31
2021
188
3
7
1
18
217
2020
238
3
4
1
27
273
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 2021 was 25 (2020: 41). 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
On September 26, 2019 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
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.
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, 2021
212
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 gain/(losses)
Net financial (expense) / income
14
INCOME TAXES
2021
2020
28
13
5
41
86
44
13
6
38
101
2021
2020
28
—
—
—
28
38
1
1
4
44
2021
2020
—
—
—
—
2
2
2
1
1
—
(1)
(2)
(3)
(2)
The 2021 income taxes relate to a withholding tax expense of US$4 (2020: US$ Nil)
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, 2021 amount to US$1,081
(2020: US$974).
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
213
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 23 (Events after the reporting period) of the Consolidated Financial Statements.
16 ADDITIONAL NOTES TO THE COMPANY FINANCIAL STATEMENTS
Remuneration of 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 22 (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, 2021. The following table presents the aggregate fees for professional services and other services rendered by
PricewaterhouseCoopers Accountants N.V. and their member firms in 2021 and 2020:
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
2021
2020
2021
2020
5.8
0.2
—
—
6.0
4.8
1.0
—
—
5.8
5.1
0.0
—
0.1
5.2
5.1
0.1
—
0.1
5.3
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, April 29, 2022
VEON Ltd.
VEON Ltd I Company financial statements as of and for the year ended December 31, 2021
214
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, 2021
215
Independent auditor’s report
To: the general meeting and the board of directors of VEON Ltd.
Report on the financial statements 2021
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 2021 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 2021 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 2021 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 2021;
the following statements for 2021: the consolidated income statement, the consolidated statements of
comprehensive income, changes in equity and cash flows; and
the notes, comprising significant accounting policies and other explanatory information.
•
The company financial statements comprise:
•
•
•
the company statement of financial position as at 31 December 2021;
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.
VEON Ltd I Independent auditor’s report
218
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 regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en
beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
Material uncertainty related to going concern
We draw attention to the going concern paragraph in Note 24 of the financial statements which indicates that both
the Group and the Company have been negatively impacted and will continue to be negatively impacted by the
consequences of the Russian government’s invasion of Ukraine (the ongoing conflict between Russia and Ukraine).
These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s
and the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
We refer to section ‘Audit approach going concern’ for further information on our audit procedures regarding the
going concern assumption.
Our audit approach
We designed our audit procedures with respect to the key audit matters, fraud, going concern, and the findings
resulting thereof in the context of our audit of the financial statements as a whole and our forming of an opinion
thereon. The information we use in support of our opinion, such as our findings and observations related to
individual key audit matters, the audit approach to fraud risk and the audit approach to going concern, was
addressed in this context. We do not provide a separate opinion or conclusion on these matters.
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 25 of the consolidated financial statements, the Company describes the areas of
judgement in applying accounting policies and the key sources of estimation uncertainty. Given the significant
estimation uncertainty and the related higher inherent risks of material misstatement in the valuation of goodwill
and the valuation of ‘uncertain income tax positions’ and ‘non-income tax provisions’, we considered these matters
as key audit matters as set out in the section ‘Key audit matters’ of this report.
During the year, the Group concluded a transaction for the sale and leaseback of VEON’s Russian mobile network
tower assets to Service Telecom Group of Companies LLC. Given the magnitude and complexity of the transaction,
the judgement required by management in applying accounting policies and the related higher inherent risk of
material misstatement, we considered this to be a key audit matter.
VEON Ltd I Independent auditor’s report
219
The Group operates in countries which pose increased risks of non-compliance with anti-bribery and corruption
laws and regulations. Due to this 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.
We discussed and considered the possible effects of climate change for the purpose of our audit.
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 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 80 million
Audit scope
•
We conducted audit work at the corporate headquarters in the
Netherlands and at significant components of the Group in Russia,
Pakistan, Algeria, Ukraine, Bangladesh and Uzbekistan.
Virtual site visits were conducted with the component auditors of the
six significant components.
Audit coverage: 90% of consolidated Adjusted EBITDA, 90% of
consolidated revenue and 93% of consolidated total assets.
Key audit matters
•
Material uncertainty related to going concern (separate paragraph,
‘Audit approach going concern’)
Valuation of goodwill
Valuation of ‘uncertain income tax positions’ and 'non-income tax
provisions'
Sale and leaseback of Russian tower assets
Compliance with anti-bribery and corruption laws and regulations
Revenue recognition
•
•
•
•
•
•
•
Materiality
The scope of our audit was influenced by the application of materiality, which is further explained in the section ‘Our
responsibilities for the audit of the financial statements’.
VEON Ltd I Independent auditor’s report
220
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 80 million (2020: USD 86 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.
Rationale for
benchmark applied
As disclosed in Note 2 of the consolidated financial statements, Adjusted EBITDA is
defined by the Company as 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.
We used Adjusted EBITDA as the primary benchmark based on our analysis of the
common information needs of the 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.
Component
materiality
Based on our judgement, we allocate materiality to each component in our audit
scope that is less than our overall Group materiality. The range of materiality
allocated across components was between USD 15 million and USD 60 million.
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 any
misstatement identified during our audit above USD 4 million (2020: USD 4,3 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 Group operating locations, as disclosed in Note 2 and Note 10 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 centralized processes and significant or higher risk areas, notably the
valuation of goodwill and certain compliance procedures relating to anti-bribery and corruption laws and
VEON Ltd I Independent auditor’s report
221
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.
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’. In order to take responsibility for the work performed by the independent
auditors of the various service organizations, we assessed their objectivity and competence, reviewed their assurance
reports that include the scope and results of the assurance procedures performed and performed 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
90%
90%
93%
None of the remaining components represented more than 9% of total consolidated Adjusted EBITDA, 7% of total
consolidated revenue or 4% 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
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 the scope of the work. We explained to the component audit teams the
structure of the Group, the main developments that were 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 in-scope
component audit teams both during the year and upon conclusion of their work. During these calls, we discussed the
significant accounting and audit issues identified by the component auditors, their reports, the findings of their
procedures and other matters that could be of relevance for the consolidated financial statements.
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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.
After the onset of the Russian government’s invasion of Ukraine, we assessed the related impacts to the audit
performed by our Ukraine component team. The majority of the Ukraine component audit was completed prior to
the invasion and it was determined that local management had the ability to provide all evidence required to
complete the audit. After the relocation of our Ukraine component team members to secure locations, the Ukraine
component audit was completed in line with the original audit approach.
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 whistle-blower
allegations and other cases monitored at the corporate headquarters.
By performing the procedures outlined above at the components, combined with additional procedures exercised 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.
Audit approach going concern
In the going concern paragraph in Note 24 of the financial statements regarding the effects of the Russian
government’s invasion of Ukraine, management disclosed conditions that indicate the existence of a material
uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern and their
actions to address these conditions.
In order to evaluate the appropriateness of management’s use of the going concern basis of accounting, including
management’s expectation that their actions sufficiently address the identified going concern risks and the adequacy
of the related disclosures, we performed the following procedures.
Based on our knowledge obtained regarding the entity, its environment and current financial situation, we assessed
whether the information obtained regarding events or conditions that may result in going concern risks has been
included in management’s assessment. In addition, we have inquired of management as to their knowledge of going
concern risks beyond the period of management’s assessment.
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Regarding management’s actions to address the identified going concern risks, we:
•
used internal and external information such as technical guidance, publicly available media sources and
relevant government websites to consider whether there is adequate support for management’s actions;
read the terms of financing agreements and evaluated management’s assessment as to the extent that
conditions may impact the Company current and future compliance with its financial and non-financial
covenants as required by its financing agreements;
reviewed legal positions taken by the Company and external legal advice received by management, where
applicable, relating to the interpretation of the effects of relevant sanctions, to the novation of group-level
loans with Sberbank and Alfa Bank to the Russia operating segment, and to impacts on financial and non-
financial covenants, and evaluated the competence, capabilities and objectivity of the engaged law firm;
evaluated whether the scenarios and assumptions applied in management’s sensitivity analysis regarding the
expected outcome of management’s actions, including underlying significant assumptions, are reasonable;
evaluated the consistency of management’s actions with known and reasonably knowable information as of
the issuance date of the financial statements; and
evaluated the liquidity headroom as included in the cash flow forecast.
•
•
•
•
•
To consider whether any additional facts or information have become available that may be relevant for the
identified going concern risks, including management’s expectation on the sufficiency of management’s actions to
mitigate the identified risks, we:
•
•
•
read minutes of meetings of those charged with governance;
inquired of management and board members;
consulted publicly available information sources including global media outlets and relevant government
websites;
analyzed and discussed the entity’s latest available interim financial statements and reconciled these with the
underlying accounting records.
•
We evaluated whether the going concern risks including management’s actions to address the identified risks have
been sufficiently disclosed in notes to the financial statements. We found the disclosure in Note 24 of the financial
statements, where management disclosed conditions that indicate the existence of a material uncertainty which may
cast significant doubt about the entity’s ability to continue as a going concern, to be adequate.
Audit approach fraud risks
We identified and assessed the risks of material misstatement in the financial statements due to fraud. During our
audit we obtained an understanding of the entity and its environment and the components of the internal control
system. This includes management’s risk assessment process, management’s processes for responding to the risks of
fraud and monitoring the internal control system, and how the board of directors exercises oversight, as well as the
outcomes. We refer to section ‘How we manage risks’ of the directors’ report for management’s fraud risk
assessment.
We evaluated the design and relevant aspects of the internal control system including management’s fraud risk
assessment, the code of conduct, response to whistle blower allegations and other incidents, vendor due diligence,
and employee access rights. We evaluated the design and the implementation and, where considered appropriate,
tested the operating effectiveness of internal controls designed to mitigate fraud risks.
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We asked relevant executives, directors (including internal audit, legal, compliance, human resources, treasury,
finance, and cybersecurity directors) and the Audit and Risk Committee of the Board of Directors whether they are
aware of any actual or suspected fraud and used this information for our fraud risk assessment.
As part of our process of identifying fraud risks, we, in close cooperation with our forensic specialists, evaluated
fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption.
We evaluated whether these factors indicate that a risk of material misstatement due to fraud is present.
We identified the following fraud risks and performed the following procedures:
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Identified fraud risk
Audit work and observations
The risk of management override of
controls
Management is in a unique position to
perpetrate fraud because of
management’s ability to manipulate
accounting records and prepare
fraudulent financial statements by
overriding controls that otherwise appear
to be operating effectively. For the Group,
we took into consideration the pressures
that may exist for management to meet
certain internal targets or expectations of
external parties, to achieve executive
bonus and compensation schemes, or to
maintain a high degree of competition.
That is why, in all our audits, we pay
attention to the risk of management
override of controls in:
•
The appropriateness of journal
entries and other adjustments
made in the preparation of the
financial statements;
Estimates;
Significant transactions outside
the normal course of business for
the entity.
•
•
We evaluated the design and implementation of the internal control measures and
assessed the effectiveness of the controls over the processes of generating and
processing journal entries and making estimates. We also paid specific attention
to the safeguards over access to IT systems and the possibility that these lead to
violations of the segregation of duties.
We performed journal entry testing by selecting journal entries based on risk
criteria such as unexpected account combinations, the recording of journal entries
by unexpected users, the existence of users with create and post functionality,
unexpected entries to intercompany balances and entries meeting certain
keyword search terms. We conducted specific audit procedures for these entries.
These procedures include, amongst others, inspection of the entries to source
documentation. We also focused on top-side entries recorded by management to
ensure they were not inappropriate, unauthorized, or intentionally misstated to
meet internal targets or expectations of external parties.
We paid specific attention to significant transactions outside the normal course of
business for the entity. We assessed the business rationale and accounting
implications with respect to significant transactions, including the sale and
leaseback of the Russian tower assets as described in the section ‘Key audit
matters’ of this report.
We also performed specific audit procedures to evaluate management estimates,
including a look-back assessment of estimates to identify patterns indicating
potential management bias.
Refer also to procedures performed over estimates involved in the valuation of
goodwill and the valuation of ‘uncertain income tax positions’ and 'non-income
tax provisions' as described in the section Key audit matters’ of this report.
Finally, we performed specific audit procedures to ensure the appropriate
elimination of intercompany accounts and transactions and to ensure proper
identification and treatment of related party transactions.
Our audit procedures did not lead to specific indications of fraud or suspicions of
fraud with respect to management override of controls.
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The risk of fraud in revenue
recognition
As part of our risk assessment and based
on a presumption that there are risks of
fraud in revenue recognition, we
evaluated which types of revenue
transactions or assertions give rise to the
risk of fraud in revenue recognition.
The Company’s executive compensation
agreements include a bonus structure for
senior management based on KPI targets
that are comprised of both strategic and
financial metrics. This results-dependent
bonus structure could potentially
increase pressure on management to
manipulate revenue. As such, we
identified a risk of deliberate
overstatement of revenue occurrence
across operating components.
We also identified a risk of inaccuracy in
postpaid and fixed line business-to-
business (B2B) revenues in Russia, as
these revenue streams include a high
volume of customized, non-public tariffs
with business customers with an
increased inherent risk of manipulation.
We evaluated the design and implementation of the internal control measures
that are intended to mitigate the risk of fraud in revenue recognition and assessed
the effectiveness of the controls in the revenue and receivables processes,
including the processes around the rating and discounting of Russian B2B tariffs.
We also evaluated the design and assessed the effectiveness of internal control
measures in the processes for generating and processing journal entries related to
revenue.
We concluded that we, in the context of our audit, could rely on the internal
control procedures relevant to this risk.
We selected and tested journal entries impacting revenue based on risk criteria
tailored to the Company’s revenue streams across operating components (i.e.,
unexpected account combinations). We paid specific attention to the rationale
behind any such entries. We also focused on top-side entries recorded by
management to ensure they were not inappropriate, unauthorized, or
intentionally misstated to overstate the occurrence of revenue.
To assess the potential for overstatement of revenue, we specifically tested the
end-to-end reconciliations between billing and rating systems and the general
ledger, and reconciled voucher amounts and other top-up transactions to cash
receipts.
Finally, we tested material discounts and agreed invoices to underlying
agreements and subsequent cash payments to assess the accuracy of postpaid and
fixed line B2B revenues in Russia. We also confirmed accounts receivable with
B2B and other corporate customers arising from mobile postpaid and fixed line
services to substantiate the accuracy of revenue transactions.
Our audit procedures did not lead to specific indications of fraud or suspicions of
fraud with respect to the occurrence or accuracy of the Company’s revenue
reporting.
Compliance with anti-bribery and
corruption laws and regulations
Refer to Compliance with anti-bribery and corruption laws and regulations in
section “Key audit matters”.
We incorporated an element of unpredictability in our audit. We reviewed lawyer letters and correspondence with
regulators. During the audit we remained alert to indications of fraud. We also considered the outcome of our other
audit procedures and evaluated whether any findings were indicative of fraud or non-compliance. Whenever we
identified any indications of fraud, we re-evaluated our fraud risk assessment and its impact on our audit
procedures.
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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, one key audit matter was added for the Company’s Russian tower transaction.
The remaining key audit matters are consistent with those reported in 2020 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. In
addition to the matter described in the ‘Material Uncertainty Related to Going Concern section’, we have determined
the matters described below to be the key audit matters to be communicated in our report.
VEON Ltd I Independent auditor’s report
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Key audit matter
Our audit work and observations
Valuation of goodwill
Notes 11 and 13
As described in Notes 11 and 13 to the consolidated
financial statements, the Company’s consolidated
goodwill balance amounts to USD 1,542 million at
December 31, 2021. 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. Based on the annual
goodwill impairment test in the current year, no
impairment charge was recorded.
Potential impairment is identified by comparing the
recoverable value, in particular the fair value less cost of
disposal, of a cash-generating unit (‘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 a cash-
generating unit, 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 focus of our audit effort was the Russia CGU, given
the magnitude of its goodwill balance and its history of
impairment. The amount of goodwill associated with
the Russia CGU as of 31 December 2021 was USD 1,084
million.
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 Russia CGU due to the magnitude of its
goodwill balance and its history of impairment. 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 CGU
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 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 11 to
the financial statements.
Our procedures did not result in material findings.
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Valuation of ‘uncertain income tax positions’
and 'non-income tax provisions'
Notes 7 and 8
As described in Notes 7 and 8 to the consolidated
financial statements, the Company recorded provisions
of USD 158 million related to uncertain income tax
positions and USD 88 million related to non-income
tax at December 31, 2021. 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.
With the assistance of our tax specialists, our audit
procedures included, amongst others:
•
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.
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.
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•
•
•
•
•
Our audit procedures included, amongst others:
•
Testing the design and operational effectiveness of
controls relating to accounting for the sale of the NTC
subsidiary and the leaseback of the tower assets.
Reading the purchase and lease agreements with
Service Telecom Group of Companies LLC.
Evaluating management’s assessment of transfer of
control.
Evaluating management’s assessment of goodwill
allocation and relative fair value method applied.
Evaluating management’s identification of each unit
of account within the transaction.
Evaluating management’s application of sale and
leaseback guidance and the resulting accounting for
and disclosure of the right-of-use assets and related
lease liabilities, including the assessment of the
applied lease term.
Our procedures did not result in material findings.
Sale and leaseback of Russian tower assets
Note 9
As described in Note 9 to the consolidated financial
statements, the Company completed the sale of its
direct subsidiary, National Tower Company (‘NTC’), to
Service Telecom Group of Companies LLC for USD 945
million. Under the terms of the deal, Russia, an
operating segment of the Company, entered into a long-
term lease agreement with NTC under which Russia
will lease space on NTC’s portfolio of towers for a
period of eight years, with up to ten optional renewal
periods of eight years each.
In their assessment of the transaction, the Company
deemed NTC to be a subset of its Russia CGU and, as
such, allocated goodwill to NTC on a relative fair value
basis. The Company applied sale and leaseback
guidance under IFRS 16 and recognized a gain on sale
of subsidiary of USD 101 million. As a result of the
subsequent lease agreement, Russia recognized right-
of-use assets of USD 101 million representing the
proportional fair value of assets retained with respect to
the book value of assets sold and lease liabilities of
USD 718 million, as well as a proportionate amount of
goodwill, with respect to the portion of cash-generating
assets retained through the lease, of USD 168 million.
We consider the sale and leaseback of Russian tower
assets to be a key audit matter based on the significant
judgements made by management in determining the
appropriate accounting to reflect the sale of the NTC
subsidiary and the leaseback of the tower assets,
including the assessment of the subsequent lease
agreement and the determination of the appropriate
lease term. This in turn required significant auditor
attention and effort in performing procedures to
evaluate management’s accounting for and disclosure
of the sale and leaseback of the tower assets and the
identification of each unit of account within the
transaction.
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Compliance with anti-bribery and corruption
laws and regulations
Note 7
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 risk and
therefore have also determined this to be a key audit
matter.
•
•
•
•
•
•
•
•
•
With the assistance of our forensic specialists, our audit
procedures included, amongst others:
•
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 upon identification of
potential instances of bribery or corruption. Our
procedures included the use of forensic expertise
when testing a selection of investigations, including
assessing and challenging management’s
investigatory response to potential instances of
bribery or corruption 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.
Our procedures did not result in material findings.
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Revenue recognition
Note 3
As described in Note 3 to the consolidated financial
statements, the Company’s consolidated revenue
balance was USD 7,788 million at December 31, 2021
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.
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.
With the assistance of our IT specialists, our audit
procedures included, 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.
Report on the other information included in the annual report
The annual report contains other information. This includes all information in the annual report in addition to the
financial statements and our auditor’s report thereon.
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 all the information regarding the directors’ report and the other 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 the 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 procedures
performed in our audit of the financial statements.
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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 and ESEF
Our appointment
We were appointed as auditors of VEON Ltd. on 28 July 2014 by the board of directors. This followed the passing of
a resolution by the shareholders at the annual general meeting held on 28 July 2014. Our appointment has been
renewed annually by shareholders and now represents a total period of uninterrupted engagement of eight years.
European Single Electronic Format (ESEF)
VEON Ltd. has prepared the annual report, including the financial statements, in ESEF. The requirements for this
format are set out in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical
standards on the specification of a single electronic reporting format (these requirements are hereinafter referred to
as: the RTS on ESEF).
In our opinion, the annual report prepared in XHTML format, including the partially tagged consolidated financial
statements as included in the reporting package by VEON Ltd., has been prepared in all material respects in
accordance with the RTS on ESEF.
Management is responsible for preparing the annual report, including the financial statements, in accordance with
the RTS on ESEF, whereby management combines the various components into a single reporting package. Our
responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package,
is in accordance with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (Royal Netherlands Institute of Chartered Accountants),
included amongst others:
•
Obtaining an understanding of the entity’s financial reporting process, including the preparation of the
reporting package.
Obtaining the reporting package and performing validations to determine whether the reporting package,
containing the Inline XBRL instance document and the XBRL extension taxonomy files, has been prepared, in
all material respects, in accordance with the technical specifications as included in the RTS on ESEF.
Examining the information related to the consolidated financial statements in the reporting package to
determine whether all required taggings have been applied and whether these are in accordance with the RTS
on ESEF.
•
•
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 or its controlled entities, for the period
to which our statutory audit relates, are disclosed in Note 16 to the Company financial statements.
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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 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 in the financial statements any events and circumstances that may cast significant doubt on the Company’s
ability to continue as a going concern.
The board of directors is responsible for overseeing the Company’s financial reporting process.
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 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, 29 April 2022
PricewaterhouseCoopers Accountants N.V.
/PwC_Partner_Signature/
W.J. van der Molen RA
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Appendix to our auditor’s report on the financial statements 2021 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.
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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 audits 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 actions taken to eliminate threats or safeguards
applied.
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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