Q2 2026 Kyivstar Group Ltd Earnings Call
Speaker #2: Good afternoon. Good morning. Thank you for joining us to discuss Kyivstar Group's, s, or Kyivstar's, first quarter results. First, we're going to pass off to our moderators to provide you a few introductory instructions and then we'll return to the table.
Speaker #3: Hello and welcome to Kyivstar's Q2 2026 results presentation. Today's presentation will be followed by a Q&A session, where we will take questions from the room as well as from virtual attendees.
Speaker #3: For those of you who have joined, the Zoom webinar: if you would like to ask a question, you can use the raise hand button, which can be found on the black bar at the bottom of your screen at any time to join the queue to ask a question, and you'll be called upon during the Q&A session.
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Speaker #3: Cole Axon, you may begin.
Speaker #2: Thank you. As noted, I am Cole Akeson, Group Director for Kyivstar Investor Relations. Joining me today are Executive Chairman Conte Ziolu and CEO Alexander Kamarov. Thank you, Conte.
Speaker #2: Alexander Kamarov, CFO of Tanner Kyzyltoprak, and Anand Ramachandran, the Chief Corporate Development Officer for Beyond. Before we begin, please note the date in your calendars.
Speaker #2: We will be hosting our first capital markets day on November 16 in New York City. Details will follow. Returning to earnings. Alexander will begin with strategic and operational highlights, followed by Tanner with a review of our financial performance.
Speaker #2: We will then open the line for your questions. Before we begin, please note that today's presentation contains forward-looking statements, which involve risks and uncertainties.
Speaker #2: Further details are available in our SEC filings, including our Form 20-F filed March 16, 2026. Our earnings release and presentation are available on our investor relations website.
Speaker #2: With that, I'll hand over to Oleksander.
Speaker #4: Thank you, Cole. Hello, everyone. I'm very pleased to see some of you here in New York in person. Okay, so we delivered another strong quarter.
Speaker #4: Our telecom core is resilient. Our digital ecosystem keeps scaling. The two businesses fit each other, and we are rising our full-year outlook for the second time this year.
Speaker #4: Let me start with the numbers. Revenue reached $339 million up more than 19% year over year. EBITDA grew nearly 14% to $188 million with healthy margins in both businesses.
Speaker #4: Equity free cash flow grew more than 32% to $104 million. Cash generation funds our growth. Second, our digital transformation—digital revenue grew 83% year over year.
Speaker #4: This is one first quarter with a clone in both comparison periods. So the comparison is clean. Digital reached 21.7% of total revenue from just over 14% a year ago.
Speaker #4: This is a structural shift, not a side project. Third, our Multiply strategy—8.1 million Multiply customers, up almost 24% year over year. They pay more and they churn less.
Speaker #4: I will come back to the mechanics. Finally, three strategic developments during this quarter. The first one is Starlink. More than 6 million customers have used direct-to-cell, which now also carries live data for essential applications even without terrestrial signal.
Speaker #4: The second one is energy. We acquired six solar power plants in the Lviv region, strengthening our energy independence and hedging our electricity costs. The third one is sovereign AI infrastructure.
Speaker #4: More about this when we discuss the Digital Enterprise vertical. As for the scorecard, telecom and infrastructure revenue grew nearly 9% to $265 million, on rising IRPU and data usage.
Speaker #4: With EBITDA, telecom and infrastructure generated $157 million at a 59% margin, and digital generated $31 million at a 42% margin. Both engines are profitable.
Speaker #4: Net profit declined nearly 6% year over year to $77 million, or $0.33 per share. The cost of the paper declined, and one of the non-cash items was a $21 million fair value change charged on our listed warrants.
Speaker #4: Tanner will walk you through the mechanics and more later. Let's look at the mobile business, starting with subscribers. Our mobile base declined nearly 3% year-over-year to 21.8 million customers.
Speaker #4: The main mechanism is double SIM users. Many Ukrainians carry secondary, low-IRPU SIM cards. When they stop using extra cards, these fall out of the customer base.
Speaker #4: Demographics and seasonality play a role. Internal and third-party estimates put our market share steady at approximately 47%. We focus on the quality of the base, not the volume.
Speaker #4: The quality shows in three numbers. The first one is churn, down almost a full point year over year to just over 14% annualized. The second one is IRPU.
Speaker #4: It grew more than 11% to $3.90. The third one is usage. 4G penetration passed 70%, and monthly data consumption grew more than 18% to almost 15 gigabytes per customer.
Speaker #4: These drive our double-digit telecom revenue growth in Grivna. Fixed broadband grew nearly 11% to 1.3 million customers—households. Nearly half of them also subscribe to Kyivstar TV.
Speaker #4: One product pulls the other into the household. The fragmented market leaves room for organic and inorganic growth. Multiplay is a core part of our engagement model, so let me explain the mechanics.
Speaker #4: A multiplay customer uses voice, data, and at least one of our digital applications. These customers now represent almost 40% of our one-month active base, up more than 8 points from a year ago and a stable quarter-on-quarter at 8.1 million.
Speaker #4: The economics are simple. A multiplay customer generates $5.80 in monthly IRPU, compared to $3.90 for a mobile-only customer—a difference of nearly 50%.
Speaker #4: Multiplay customers also churn less. Engagement drives the top line and retention protects it. Now, the digital ecosystem. This chart shows figures in Grivna to eliminate currency effects from the comparison basis.
Speaker #4: But I will focus my comments on our reporting currency, the US dollar. Digital revenue reached $74 million, up 83% year over year, and now makes up almost 22% of total revenue.
Speaker #4: $3.10 behind this performance. The first one is the broad base of our growth that spans all five verticals, with a clone the biggest contributor.
Speaker #4: The second one is profitability. Digital EBITDA reached $31 million at a 42% margin, compared with almost 44% a year ago. The small decline reflects investment in new services as we scale the business.
Speaker #4: These platforms pay their own way. The third one is structure. Our telecom base gives us customer acquisition at near-zero cost, and multiplay bundles are our distribution channels.
Speaker #4: Moving to aClone, our mobility platform. aClone generated almost $33 million in revenue this quarter, up more than 50% year over year, and more than $12 million in EBITDA, up more than 35%.
Speaker #4: Real scale in Ukraine. A growing operation in Uzbekistan. Active customer grew 8% to $5.2 million rides grew more than 4% to $43 million and deliveries grew almost 26% to $1.4 million.
Speaker #4: A clone is becoming a one-stop solution for movement around and between cities. There are three moves to note. The first one is multimodal transport.
Speaker #4: We agreed to acquire E-Wings, which adds electric scooters in 11 Ukrainian cities. With the travel service for intercity buses, a clone covers more of the journey.
Speaker #4: Remember, Ukraine remains a no-flying zone, so buses and trains carry the country. The second one is autonomy. Aclone ran Ukraine's first live testing of autonomous vehicle technology. Aclone leader Sergey and I tested it personally, which you can watch on our YouTube channel.
Speaker #4: This technology is still at an early stage, but our testing places us first in this space at home. The third one is commerce. Our clone store pilot starts with same-day flower delivery in Kyiv, applying a clone's expertise in spaces adjacent to mobility.
Speaker #4: On the healthcare. Healthy is Ukraine's leading health touch platform. Healthy served 5 million customers this quarter and revenue grew almost 36% year over year to $2.4 million.
Speaker #4: The engine behind this growth is premium subscription. From 57,000 subscribers at the end of last year to more than 109,000 today. Family medical care plans and health insights, automatic interpretation of test results, and biomarker tracking drive the conversion. And our Healthy Superpower bundle inside the Kyivstar mobile plan is a core channel to distribute.
Speaker #4: The foundation keeps widening. More than 43,000 doctors and specialists around 1,800 healthcare institutions and 2.4 million patient appointments booked in the quarter. Healthy is deeply embedded in the state e-health system.
Speaker #4: Convenient to join and hard to leave. It also eases access to healthcare during the war, which we are considering as a national priority. Then, Tabletki.
Speaker #4: The leading online marketplace for pharmaceuticals and other healthcare products is in its first full-fat quarter with us after consolidation in February. The quarter was strong.
Speaker #4: Revenue reached $7.8 million, and EBITDA reached $6.2 million, with an implied margin close to 80%. The margin follows from the model. Customers booked $376 million of gross merchandise value, but we recognize as revenue only our commission and service fees.
Speaker #4: Low capital, very, very high conversion. The scale is national: 6.3 million customers, 15 million average monthly bookings, and more than 14,500 partner pharmacies across all of Ukraine.
Speaker #4: Healthy and Tabletki have natural synergies, and we are building toward a more connected patient journey—from doctor's appointment, to prescription, to a medicine order.
Speaker #4: And we are evaluating whether delivery could join that flow. We are taking a deliberate approach so that any changes serve customers well, create shareholder value, and comply with regulatory requirements.
Speaker #4: Moving to entertainment. Kyivstar TV remains the largest media streaming service in Ukraine. The customer base grew almost 48% year over year to 3.6 million.
Speaker #4: And revenue reached nearly $14 million. To be clear, the growth rate mainly reflects the move to gross revenue recognition last September. But the underlying drivers are real.
Speaker #4: A bigger customer base and high-demand exclusive content. Last quarter I told you we would broadcast world boxing champion Oleksandr Usyk’s latest high-profile boxing match.
Speaker #4: We deliver it, with exclusive rights to the Usyk-Verhoeven fight in Ukraine, alongside premieres such as Kilhouse, and a deep library of international and Ukrainian content.
Speaker #4: Local exclusive local content acquires customers, and the ecosystem keeps them inside. From B2C to B2B, digital enterprise serves companies and institutions from small businesses to the largest.
Speaker #4: Revenue grew almost 16% year over year to $16.9 million. Active contracts grew more than 29% to 2,400. Two product lines drive the growth: big data and AI services, and cloud.
Speaker #4: Advisor, our self-service advertising platform passed 4,100 registered clients. Now sovereign AI. Two milestones this quarter: The first one is Cyva, our Ukrainian large language model in the Kyivstar Tech portfolio.
Speaker #4: The latest model 4B, a kind of pilot model, entered beta testing and has achieved high marks in local competitive testing. The second one is infrastructure.
Speaker #4: In June, at the Ukrainian Recovery Conference, we signed a memorandum with Ukraine's Ministry of Economy to explore expanded cooperation in sovereign AI infrastructure. Any investment would be faced within our existing CapEx framework.
Speaker #4: Disciplined capital and national capability. All these parts serve one growth strategy. We are a digital and communications service provider with a strong backbone in our telco business.
Speaker #4: In core connectivity, we intend to maintain market leadership. We focus on a high-quality customer base and technological innovation. This quarter's launch of direct-to-sell live data is a good example.
Speaker #4: We grow IRPU by expanding value to the customers, not just through price. In fixed broadband, we aim to expand market share through organic growth and targeted acquisitions.
Speaker #4: Broadband brings entire households into our ecosystem. In digital, we scale through organic growth and strategic acquisitions. We are increasing multiplay adoption and deepening daily engagement with our customers.
Speaker #4: Our loyal telecom base is a launch pad for digital products. The next slide shows how we build the ecosystem, step by step, since late 2024.
Speaker #4: Spectrum. Uklon. Healthy. Starlink direct-to-cell. Solar. Tabletki. Storm. Each move fits the same design. The newest one is energy. In May, we completed the acquisition of six solar power plants in the Lviv region.
Speaker #4: 105 megawatts total power. For roughly 81 million. With our first plant, Sunwin, our capacity now stands at 118 megawatts. Expected output equals roughly 30% of the electricity our telecom operations consume in a year.
Speaker #4: The logic is clear: energy independence that hedges a major operational cost and reduces our exposure to potential grid instability during the war. With that, I will ask Taner to walk you through the financials.
Speaker #1: Thank you, Oleksandr. It's a pleasure to join my first earnings call as Kyivstar's CFO. Let me walk through the mechanics of the quarter.
Speaker #1: Total revenue reached 15 billion hryvnia, up 27% year over year. That's $339 million, up 19%. EBITDA grew 21% to 8.3 billion hryvnia, or $188 million.
Speaker #1: Digital's slower margin comes with lower capital intensity, so its cash conversion is comparable to telecoms. The resulting cash flow funds our expansion. Below EBITDA, one item deserves precision.
Speaker #1: The warrant charge. Our listed warrants are a fair value liability: $49 million at the end of June, compared to $28 million at the end of March.
Speaker #1: The $21 million increase runs through the income statement as a non-cash loss, driven only by the warrants market price at quarter end. Net profit came to $77 million.
Speaker #1: Without the warrant item, it would have been $98 million. On investments, CAPEX was $59 million—57% of revenue for the quarter, and almost 27% over the last 12 months.
Speaker #1: On cash, net cash flow from operating activities reached $170 million. Equity free cash flow after leases and licenses reached $104 million, up 32% year over year.
Speaker #1: $243 million over the last 12 months. Turning to the balance sheet, we ended June with $364 million of cash and equivalents, up from $353 million at the end of March.
Speaker #1: Free cash flow absorbed the solar acquisition payments and still grew the position. Growth steps, excluding leases, stand at $88 million, largely payable to our majority shareholders beyond.
Speaker #1: Lease liabilities total $400 million, mainly from our tower agreements with Ukraine Tower Company recognized under IFRS 16. Excluding leases, we hold a net liquidity position of $277 million.
Speaker #1: The balance sheet gives us room to keep investing from our own cash generation. Let me hand the call back to Oleksandr.
Speaker #2: Thank you, Taner. Let me close with the outlook. We are raising full-year guidance for the second time this year. The first half gives us the confidence.
Speaker #2: In hryvnia, we now expect revenue to grow 21% to 23% and EBITDA to grow 17% to 19%. In dollars, that is 14% to 16% revenue growth and 9% to 12% EBITDA growth.
Speaker #2: There are a couple of important background items to keep in mind here. The first one is the exchange rate. In the past, we have guided in both our reporting and trading currency with a fixed currency assumption.
Speaker #2: This is a factor outside our control, along with the wider geopolitical and macroeconomic environment. The second one is the comparison base. From this quarter, Uklon sits in both periods.
Speaker #2: So, growth rates describe the underlying business. Tabletki and our investment in energy assets add inorganic growth through the second quarter of 2027. CAPEX intensity stays at 21% to 24% of revenue.
Speaker #2: We have passed the peak of our elevated investment cycle, and we allocate within a disciplined framework. And one more item for your calendars: on November 16, we will hold our first City.
Speaker #2: We will present a medium-term update: strategy, the unit economics of the ecosystem, and the capital allocation framework. Details will follow from our Investor Relations team.
Speaker #2: We hope to see you there. To wrap up, the quarter shows our model working. The telecom core generates cash, and the digital ecosystem compounds growth.
Speaker #2: We are delivering double-digit growth in most verticals despite external volatility. Our business remains strong and profitable. Thank you for your support. We can now open the line for Q&A.
Speaker #3: Thank you, Oleksandr. We will, with the assistance of our colleagues, take questions from those in the room first. Once those are exhausted, we will move along to those who have joined us online.
Speaker #4: Hi, everyone. Good morning. Jesse Sovelson with U.S. Bank Corp BTIG. I had a two-parter on the AI initiatives. First, on Sido, can you walk me through why Kyivstar would build out a national LLM?
Speaker #4: And is the value in the model itself, or is it really about your proprietary Ukrainian data and distribution? And then secondly, on the data center MOU, what's actually in scope?
Speaker #4: Does it commit capital, or is it just a feasibility study? Thank you.
Speaker #2: Okay, let me start with the second question, and then I will ask Taner to take the next one. The first one is quite simple.
Speaker #2: Okay. So, we are big believers in the sovereign AI infrastructure. From our perspective, it's just a matter of time. Of course, we are a bit affected by the current war situation and certain mitigation actions.
Speaker #2: But I'm absolutely sure that after the war, Ukraine, like any other country, will return to the sovereignty issue. Okay, this is one aspect. The second aspect: we see a growing market demand, where the government is the main customer—potentially the main customer.
Speaker #2: Okay. And the third one, we are considering the telco business ourselves. We are much better prepared than anyone else to develop, invest in, and run AI infrastructure across Ukraine.
Speaker #2: And at the end, you know, as was stated by the counters at the previous call, at the end, every hour our customer will use AI.
Speaker #2: And taking into account a relatively low income and lower-poor country, we need to find a way to combine and create synergies between global AI providers and local capabilities.
Speaker #2: And at the end, I'm absolutely sure that 90% of all questions and requests will, to some extent, be computed inside Ukraine with the local infrastructure and local LLM, with the most difficult questions and requests, you know, lifted to the global brain.
Speaker #2: So, based on this assumption, we are taking initiative. We see a request from the Ministry of Economy and the Ministry of Digital Transformation, and we are considering how we can develop the national AI infrastructure.
Speaker #1: For the data center side, we are continuously evaluating all the options on the table for timing in terms of the CAPEX intensity side. We directly plan all our investment plans within the guidance of the CAPEX intensity levels during Q1 to Q4.
Speaker #4: Maybe one thing to add, because you mentioned the distribution, and it's a very important point. We consider connectivity as the foundation, and our numbers—22 million telecom customers, 6 million Tabletki customers, you know, 5 million Uklon customers—practically every single person in Ukraine and outside of Ukraine is our customer.
Speaker #4: And that gives us a natural advantage to distribute any additional service at a fraction of the cost.
Speaker #1: Okay, I guess I'll do the next question. So, I'm Vincent Fernando from Is There One Investment Research. So, first question is, I just want to understand a bit how the Starlink service works with your subscribers.
Speaker #1: So you mentioned you had 6 million users who had used the direct-to-sell service. Does every user basically onboard onto Starlink? So if they go off the tower network, then do they roll onto it, or do they have to sign up for a special subscription?
Speaker #1: And I have my second question. Just to understand, you have Helsi, which has a huge footprint across the country, right, in terms of the users.
Speaker #1: And now you have Tabletki, which you've acquired. Obviously, there are a lot of synergies between those two businesses. How should we see that rolling out, in terms of how the synergies will roll out in a timeline?
Speaker #1: Because I know it takes some time for us to kind of integrate and figure things out. And at some point, maybe then you have kind of a revenue lift, as you basically use Helsi to expand Tabletki.
Speaker #1: I just want to understand the timeline of that rollout—those two questions. Thank you.
Speaker #2: Okay. Let me start with the satellites. We are big believers in cooperation between terrestrial and non-terrestrial networks. Right now, our cooperation is with two SpaceX verticals.
Speaker #2: The first one is Starlink Mobile. Okay. With Starlink Mobile, we have two types of services. The first service is SMS, okay? And SMS is available to every Kyivstar customer without any extra charge.
Speaker #2: It's embedded in our telecom value proposition. Okay. And we are considering that this is part of our humanitarian mission. In this very difficult environment, with energy supply issues, we believe we should give our customers opportunities to stay connected.
Speaker #2: The second layer of Starlink Mobile is light data. With the light data, we took a first step to monetize the service. Light data is either embedded into the high-value premium subscriptions as part of the value proposition, or you can connect this service as part of the Superpowers ecosystem available to our customers.
Speaker #2: Okay. For some of them, if they have a free slot, it might be free of charge, but it is a certain competition for the superpowers like Kyivstar TV or Helsi subscription.
Speaker #2: So it's up to the customer to decide, or you can connect this on a paid basis, okay, for an extra monthly fee. And these are the first steps to start monetization of the satellite services.
Speaker #2: And the second pillar that we are developing with SpaceX right now is the resale of fixed satellite broadband services in Ukraine. Kyivstar is the first official reseller of the Starlink services and hardware in Ukraine for businesses and public institutions.
Speaker #2: And this is just a pure resell business. Okay. The second question is about Helsi and Tabletki. You are absolutely right. You should consider, let's say, the Tabletki acquisition from the perspective of strengthening our digital health vertical.
Speaker #2: Yes, there are two different entities, two different businesses, but in our mid-term perspective, it is the digital vertical that is helpful to the clients, from the first symptoms until full recovery.
Speaker #2: And, as I mentioned here, there are plenty of synergies. Yes, we are carefully developing this plan with the first initiatives, but the idea is that the Helsi application is a kind of universal helper, a universal advisor for you, okay? It's a universal window to the health world.
Speaker #2: Okay. So with Tabletki being embedded as part of the value proposition—okay—and yes, the third element of these synergies is potential delivery.
Speaker #2: Okay. Provided by Uklon. Okay. We are taking our first steps here. You are absolutely right. Right now, we are much more focused on the proper integration of the Tabletki business into the group.
Speaker #2: You know, because it's just a four-month-old acquisition. Okay. So, but our plans are very much okay regarding potential synergies.
Speaker #1: Like, can you give any rough color on when that really rolls out, when the synergies can hit? Like, are we talking a couple of quarters, or...?
Speaker #2: It will not roll, like, you know, like a one-off. Okay. What you will see is a gradual improvement of the business metrics, you know, so joint products, okay, and I hope as a result for the investors we will be able to stay with this quite significant, let's say, 35–40% growth rate in hard currency in our Digital Health vertical.
Speaker #1: Great. Thank you.
Speaker #3: Do we have any other questions from the room? If not, if you're all thinking, we can move to some of the questions from our online participants.
Speaker #5: Thank you. For those of you in the Zoom webinar, if you'd like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen.
Speaker #5: When it is your turn to ask a question, you'll receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you have been introduced, you may unmute yourself, turn your video on, and ask your question.
Speaker #5: Written questions can be submitted on the webcast by using the ask a question tab at the top right of your screen. Our first question comes from Max Finlay with Rothschild & Co.
Speaker #5: Please go ahead.
Speaker #6: Hi. Thank you all for your time today. First of all, welcome, Tanner, to your first earnings call as CFO. I'm sure you hope they continue as they did today.
Speaker #6: With guidance upgrades, my first question is on mobile revenues. So, reported mobile growth in U.S. dollars was 7.3%. But that includes revenues, I think, from the energy acquisition made in May, which may have contributed $4 to $5 million to the quarter.
Speaker #6: So it looks like underlying growth has slowed from near 10% in Q1 to about 5% in Q2. And this slowdown seems to be driven by pricing.
Speaker #6: I've noticed the sequential ARPU increases have slowed down a bit. So, the question in short is: is it getting harder to grow pricing? My second question is, there's been another fantastic quarter for digital services growth, as you've talked about on the call.
Speaker #6: And in particular, I noticed Uklon's growth was very strong again, and at 50%, is growing faster than when you acquired the business, which, from memory, was growing at a 30% CAGR.
Speaker #6: How much are the different business lines such as Uklon Travel that you've introduced helping contribute to this accelerated growth? And could you give us some color on what the opportunities are here and also Uzbekistan as well?
Speaker #6: Thank you very much.
Speaker #2: Okay. Let me start with the second one and then I will ask Tanner to address the first question. So Uklon grows of 50% year on year consists of two major elements.
Speaker #2: The first one is the business growth, okay, organic business growth driven by ride-hailing and delivery. Okay. So, and this is around 35 plus percent of the overall growth.
Speaker #2: Okay. And the rest 15% is driven by the new accounting approach as a growth hub of the B2B Uklon revenue. So according to the IFRS that we applied, but it's actually reflected in the past period also.
Speaker #2: So that's why this 50% constitutes of actually two elements. Okay. The growth is mainly provided by ride-hailing business. Okay. Plus delivery. So these are two main growing elements.
Speaker #2: We are doing certain pilots with a bus transportation and ticketings and marketplace embedded into the application, but the impact is marginal at this stage.
Speaker #2: Okay. So Tanner, please.
Speaker #1: Thank you very much first of all. Yeah, we have a strong revenue growth in the second quarter with I mean 27% revenue base and also 19% US dollar base.
Speaker #1: Also, you know that we have acquisition in February Tabletki and also we have a solar power acquisition in the May. So all these, I mean, acquisition is going to have a positive impact for the following months and quarters as well.
Speaker #1: On top of it, also except from these, I mean, impacts, these, I mean, acquisitions, we have directly also strong organic growth, which is, I mean, 23% in revenue base.
Speaker #1: When we directly extract these acquisitions, effects on the table. And please also keep in mind that we have also negative effect coming from the beginning of the year due to this EU regulation.
Speaker #1: Negative impact our revenue. But all, you know, on all in all, I mean, the positive impact coming from these acquisitions, mainly Tabletki and also Energy Assets, we are going to keep our revenue stronger revenue growth for the following quarters.
Speaker #6: Brilliant. Thank you.
Speaker #5: Thank you. Our next question comes from Adrian Kundy with Emerging and Frontier Capital. Please unmute, turn on your video, and ask your question.
Speaker #7: My plan: Alexander, Tanner, nice to meet you, and Cole, hope you're doing well. I wanted to touch on—extend, really—on sort of Uklon and marketplace, and sort of where you see the opportunities in Ukraine and digital financial services.
Speaker #7: Last call, you mentioned that some of the major wallet providers in Ukraine were very robustly valued. At the same time, I've been reading that Ukraine is moving steadily towards open banking.
Speaker #7: And I'm just wondering, should we be expecting to sort of see Uklon evolve into sort of adding on a digital wallet service or where do you sort of see the digital financial services opportunity in the Ukraine going forward?
Speaker #7: And that's just given Chairman Khan's comments on VEON, that DFS is a priority in every single market that the group operates in.
Speaker #1: Okay. So first of all, we are doing just
Speaker #2: first steps to develop a marketplace embedded into the Uklon application. Okay. And this is very much linked to our delivery competitive advantage. You should see the essence, why it is flowers.
Speaker #2: Okay, because people are interested in relatively quick delivery right now. So, this is what we are piloting right now. Maybe it's too early to say how it will evolve.
Speaker #2: Right now, we are servicing hundreds of customers per day. Okay. And we want to understand what are the other categories that might be interested in such type of fast delivery from one side and relatively, let's say, high margin from another side because it's a certain combination of the type of the product.
Speaker #2: With delivering it. Okay. But let me once again stress that we see a very great potential in the delivery business. Our own perception is that this business is underdeveloped in our Uklon portfolio for the time being.
Speaker #2: Okay. And all these steps are about strengthening the delivery, first of all. Okay. The second question is, it seems to be broader than just a Uklon question.
Speaker #2: You know, I have already declared many times that we have two major priorities at KGL in developing our ecosystem. The first one is a marketplace, and the second one is financial services.
Speaker #2: You know, the Ukrainian financial market is well developed. We have a lot of different institutions, and it's a highly competitive market. Okay.
Speaker #2: But taking into account our relationship with the millions of customers engagement, a huge gross merchandise value, okay, that we can effectively manage, okay, we see ourselves in the future as a finance service provider.
Speaker #2: In order to achieve two objectives. The first one is to actually decrease our transaction costs and to manage this gross merchandise value in the most effective way.
Speaker #2: And the second one is to find a value for the potential credit. Okay. We are just at the kind of feasibility stage right now in Ukraine.
Speaker #2: Okay. Because it's a new regulation, it's a very difficult regulator to deal with. There is really extremely high competition with well-developed, almost, let's say, global-scale institutions like Monobank or PrivatBank, that are in front of the privatization.
Speaker #2: But we are actively considering potential scenarios for how we can strengthen the KGL ecosystem and Uklon in particular. By the way, this question becomes even more, let's say, important from 2027, when the new legislation on the right hand will be imposed and we will be able to manage the whole gross merchandise value that is created by the Uklon business.
Speaker #7: So, it's not out of the realm of possibilities that you could start having, taking, and storing capital in Uklon users' accounts in the next couple of years, and then engaging in financial intermediation.
Speaker #2: Yes.
Speaker #7: Okay.
Speaker #2: In general, yes.
Speaker #7: Okay. I have a second question, which is unrelated to digital financial services, but it sort of comes back off the data center comments. And you've expressed in previous calls, you know, sort of a dream of, you know, having a next-gen fiber backbone infrastructure for all players in the Ukraine.
Speaker #7: So, as you look at investing across data centers, obviously that creates significant backhaul needs. You move a lot of data between your towers and through your network.
Speaker #7: How much are you investing in fiber, not just to the home, but for backhaul and that basic level of infrastructure? And is there potential for a NetLink or an industry-wide sort of fiber broad backbone company evolving?
Speaker #2: Let me address this question from a different perspective. From an operational perspective, we are not investing a lot into fiber because we already have one of the largest fiber infrastructures across Ukraine.
Speaker #2: Our current fiber is more than 50,000 kilometers of backbone, backhaul, and last mile. Okay. At the same time, Ukraine has a relatively developed fiber business.
Speaker #2: We have a few players, more or less of the same scale, in Ukraine. And yes, we are considering how we can first optimize our investments. And I can give you—I can't give it, it's going to be a forward-looking statement, sorry.
Speaker #2: Okay. So, what we are looking at is how we can optimize investments into the new infrastructure through a certain level of competition between the major players, number one.
Speaker #2: We are ready to consider non-organic development into the fiber core. Okay. If we see an opportunity to create a kind of a point of valuation based on our fiber core infrastructure, we will consider it.
Speaker #2: Okay, that can be monetized. Okay. So, as a standalone business through certain fiber, core net core, and service core separation. So, we have quite strategic plans.
Speaker #2: But we will act situationally. For the time being, we are very much focused on ensuring readiness for 5G. One of the key elements of this readiness is fiber penetration to the site.
Speaker #2: We are already reached around 50% across the whole country and up to 70% across some of the cities.
Speaker #7: Okay, it sounds like you're making good progress, and congratulations on another successful project.
Speaker #3: As a just in addition to Alexander, we directly, as an inorganic way, we directly in February, we directly acquired Storm to expand our fixed brand, band, marks share with a $10 million.
Speaker #3: As an information.
Speaker #2: And this is including a certain infrastructure in this specific region, of course. So, every acquisition of the fixed broadband business—and this is the second for us during the last two years—is actually coming with certain elements of the infrastructure.
Speaker #7: All right. Thank you, and congratulations again on a solid quarter.
Speaker #2: Thank you very much. Thank you.
Speaker #1: Our next question comes from Matthew Harrigan with StoneX. Please unmute, turn on your video, and ask your question.
Speaker #8: Thank you. Actually, it was fairly amusing a few days ago when the AT&T stock rallied because Starlink hadn't really hurt their business—you know, a little premature to be worrying about that on a backwards-looking basis.
Speaker #8: And clearly, the mobile business is pretty, you know, protected given the penetration issues and latency and all that. But when you get version three deployed, you know, Starlink—2028, 2029—you know, obviously there are a lot of concerns on broadband.
Speaker #8: It’s affected the cable stocks in the US a lot. And clearly, you’ve got some advantages in that your price point doesn’t remotely resemble what it is in the US or even some European markets.
Speaker #8: But how do you feel about the Starlink issue and your broadband business? Again, it's much smaller than digital or mobile, but is that really a developing concern in terms of the competitiveness of broadband?
Speaker #8: I mean, obviously it's the highest-capacity network, but you're still going to have some cheap and cheerful potential price competition. Thanks.
Speaker #2: I don't see any issues with Starlink broadband business development in Ukraine, you know, because of a few reasons. The reason number one: Ukraine has a very, very high penetration of fiber.
Speaker #2: Either it's FTTB or FTTH technology, okay? Ukraine is a relatively low R4 country, okay? From my perspective, I don't see any reason to pay a premium and substitute your home connection—your existing fixed connection—that can be easily upgraded right now from 100 megabit to 1 gigabit, or from 1 gigabit to a few gigabits, you know.
Speaker #2: So and I don't see any reason to do this because in many case, fixed terrestrial broadband is a bit stable. Okay. And high-quality service then let's say Starlink fixed broadband business.
Speaker #2: Okay, but I see a number of very important use cases, taking into account the current war situation in Ukraine—number one. The second one: for relatively semi-fixed or mobile use, you know, because there are people who are using this on their cars.
Speaker #2: Okay. There is a certain market niche that we would like to address with our resale agreement signed between Kyivstar and SpaceX a few months ago.
Speaker #8: And, sort of a fuzzy second question—you know, I think even with some economic growth in Ukraine in the last couple of years, you're still off 20% or so.
Speaker #8: On GDP, you know, from pre-invasion. And you've got a big, you know, diaspora I know you've got some customers there. As well, but when you you know, if we do, you know, hopefully, pray for a settlement in Ukraine, do you think you're going to get a substantial step function improvement in your business?
Speaker #8: I mean, obviously, you'll get some benefits filtered in over a number of years on the reconstruction—a massive reconstruction, funds, and all that. But, and I know it's premature, it seems like it's certainly something that boosts your long-term potential, to say the least.
Speaker #2: For sure. No doubt. You know, so I think that we are ready from many perspectives. The first perspective, we are probably the most compliant international platform.
Speaker #2: Okay. So for the future investments into the reconstruction. We are simultaneously an infrastructure business, critical infrastructure business, and in a consumer digital business. Okay.
Speaker #2: And I'm absolutely sure that there will be, actually, two very big positive outcomes: extra investments into the critical infrastructure—strengthening infrastructure, developing infrastructure across Ukraine—where we can play a significant role.
Speaker #2: But the second one is a certain return of the population. I don't know how many—20, 30, 40 percent of the population will be back.
Speaker #2: And these are our digital customers. As it was underlined by Khan, okay, so we are literally servicing every Ukrainian with a different types of services.
Speaker #2: Okay. And non-organic growing population because of the return will have a positive impact on our business.
Speaker #8: Thanks, Alexander.
Speaker #2: And just an addition, we are also leading most of the pillars in Ukraine—mobile, fixed, TV, healthcare, ride-hailing. So there's also, I mean, this leading advantage as well.
Speaker #8: Thank you.
Speaker #1: Thank you. Our next question will come from Nicholas Patum with Edison Group. Please unmute to ask your question.
Speaker #9: Hello, team. Could you just talk a little bit about the conversion from the earnings growth guidance you've given and the cash flow? How do you see the how do you see the free cash flow moving over the next half and into 2027?
Speaker #2: Talia, please. Yeah, okay. Let me take it. In this quarter, we directly generated $104 million cash, which is nearly— I mean, normally we generate $30 million on a monthly basis.
Speaker #2: Which is normal for us for the following quarter. We also expect, I mean, at least $30 million in cash generation for the quarters.
Speaker #2: And also just for the adding this quarter is, I mean, a bit our capacity intensity is lower. This is totally seasonal things. So we are going to keep our guidance for this capacity intensity for the following quarter as well, to keep our guidance and also continue for this cash generation.
Speaker #9: And a follow-up for Khan. I mean, it's notable that the revenue guidance for Vion is slightly above that for Kyivstar, but the EBITDA guidance is the same.
Speaker #9: How do you reconcile those two things?
Speaker #2: Well, since the beginning of the year, of course, at Vion level, we have raised our both revenue and EBITDA guidance. And the same thing is true for Kyivstar.
Speaker #2: This is their second time on both revenue and EBITDA guidance. I think, you know, reconciliation is not necessarily the way I look at it.
Speaker #2: I look at it as a portfolio of five different countries. We mentioned in the previous call, you know, Kazakhstan, Bangladesh, in terms of our expectations.
Speaker #2: So I would be, you know, looking at it from a portfolio perspective. And I'm actually quite comfortable with where we are as it stands now.
Speaker #2: Thank you.
Speaker #9: Okay. Thanks for that.
Speaker #1: Our next question will come from Jake Ng with New Street Research. Please unmute, turn on your camera, and ask your question.
Speaker #10: Hi, thank you. I just have two questions. I think the first is regarding guidance. Even considering the Yukon acquisition—not fully accounted for in the first half—is this new guidance, especially with regards to EBITDA, conservative considering the first half EBITDA performance?
Speaker #10: And secondly, may I know if you can share more on the decline in mobile customers, specifically regarding the double or multi-SIM unwind trend? Is it largely completed now, or can we expect more to come?
Speaker #10: Thank you.
Speaker #2: Let me start with the second question, Jameson. We are not declining in subscriber market share; we are stable in subscriber market share.
Speaker #2: You see a certain decline in the number of active SIM cards across the market, and we are declining in line with the market.
Speaker #2: And there are a number of very clear reasons. The first one is the decline in second SIM penetration into the customer base. The second reason is a price increase and, related to this, a decrease in the number of new gross adds.
Speaker #2: Okay. And the third one is the demographic dynamics across Ukraine. These are the three main reasons for the overall active SIMs decline in Ukraine.
Speaker #2: Okay, that we are facing as much as our competitors. Okay. And then I will ask Tania to take the first one.
Speaker #10: Yeah. For the EBITDA, those two expectations in the health fund—you know that the Uklon impact is directly year over year. I mean three months in 2025 and six months in 2026.
Speaker #10: So I mean, in the first half, we directly relative to higher, I mean, inorganic growth coming from the Uklon. But at the second half of the year, in terms of EBITDA, the apples to apples, I mean, comparison and growth for the Uklon side.
Speaker #10: This is one of the major things that we should underline and also we have, I mean, to sum up Kyivstar TV and also Grossup, we directly change our methodology in the starting from the September 2025.
Speaker #10: It directly affects our, I mean, growth rate in the second half of the year. Thank you. Okay.
Speaker #1: Our next question comes from Anand Mustafa with Inam. Please unmute, turn on your video, and ask your question.
Speaker #11: Hello. I have a question. How should we think about the earnings contribution and economic hedge from the expanded solar portfolio?
Speaker #10: Akhmed, I couldn't quite hear you. Could you repeat that, please?
Speaker #11: Yes, sure, sure. I was asking, how should we think about the earnings contribution and economic hedge from the expanded solar portfolio?
Speaker #2: portfolio. So let me start with the hedge. Okay. So our average annual price is around—let me calculate in my mind—but it is around 20 euro cents.
Speaker #2: Per kilowatt. Okay. With the current existing production, we sell to the state at around 11, 12. So you can imagine that at least 30% of our demand is being hedged at this level.
Speaker #2: Okay. And this is a way for us how we can at least manage the inflation for us. Energy cost is the biggest single item in our operational expense.
Speaker #2: And the fastest growing one. Okay. For us, it's a clear way that we can hedge. This is not a limitation. We want to develop.
Speaker #2: Okay. We see that we can actually go into the further elements of the energy business with a certain investments into the best. Okay. So and this is mainly focused on our own infrastructure, but this will let us to further hedge our energy pricing.
Speaker #2: Okay. And the third one, with the current demand and current supply, we can consider ourselves with certain investments into the metering and to play quite a significant role as a potential trader on this market.
Speaker #2: And this will be an extra step in how we can manage future tariffs in the most efficient way. These are three elements that we are very much focused on from the perspective of overall operational efficiency improvement.
Speaker #10: And I would like to add that, with these acquisition green energy investments, we directly hedge our, I mean, consumption. Also, we have a quite high EBITDA margin as well, in terms of the contribution to our financials.
Speaker #2: Thank you.
Speaker #10: We have completed our two online questions, but I know there may be some questions still in the room with the live audience. Would anyone like to ask one last question before we wrap up?
Speaker #10: Okay. We do have one. And if there are any more afterwards, please come speak with us.
Speaker #12: Matt Scheffler from FNK. Thank you. If we can double-click on Kyivstar TV for a moment—with exclusive rights for relevant content, or even the bundling of mobile and broadband—how do you see the business developing over the medium and longer term?
Speaker #12: Maybe a sub-question on that would be with regards to content. What would be prospects for profitability trend become?
Speaker #2: Let me try to explain. We see the benefits of the life support events. It was our first experience, and it definitely paid off.
Speaker #2: Okay. The result is better than our expectations. Okay. So I see the full and formal of success. We need to be competitive with the share of key sports events.
Speaker #2: So, just to attract a new audience to the application—okay. We should be competitive in the overall content, with a certain focus on Ukrainian content, and this is part of our strategy.
Speaker #2: We are during the last years, have exclusive rights for the major let's say produced in Ukraine content, especially series and films. Okay. And the third one, we should provide the best in class experience, for the customer journey, with advised mechanism, with AI embedded in our service, with a certain gaming elements in our service.
Speaker #2: So this is the overall winning formula. Okay. So we are very much dependent on the synergies between our telco business and entertainment business. And I think that the next frontier for us is to go outside of the Kyivstar perimeter.
Speaker #2: Okay. With the proposal to the other mobile operators that say subscribers—yeah.
Speaker #10: Thank you. Thank you. I believe we are out of time, so we'd like to again say thank you to everyone who joined us today.
Speaker #10: Both those of you online and those of us who are able to join here in New York, we look forward to speaking with you a number of times soon, but especially at our next quarterly results and at our November 16 Capital Markets Day.
Speaker #10: Thank you very much again. And Alexander.
Speaker #2: Thank you very much. Thank you.
Speaker #12: Thank you.
