VEON eyes more satellite deals after Ukraine Starlink tie-up

VEON is actively expanding its direct-to-cell satellite services beyond its initial Ukraine Starlink tie-up, engaging with Amazon's Project Kuiper, AST SpaceMobile, and Eutelsat OneWeb to enhance network coverage and resilience in challenging regions. This strategic initiative follows strong second-quarter earnings, with revenue reaching $1.09 billion and EBITDA $520 million, prompting an upgraded annual outlook for revenue growth of 13-15% and EBITDA of 14-16%. The company also projects a non-cash charge of up to $200 million in Q3 from its Kyivstar U.S. listing and Kyrgyzstan business sale.

Analysis

VEON is executing a strategic expansion into direct-to-cell satellite services to enhance network coverage and resilience in its operating regions, which are often characterized by challenging geographical or geopolitical conditions. Following an initial agreement with Starlink for its Ukrainian operations, the company is now in discussions with Amazon's Project Kuiper, AST SpaceMobile, and Eutelsat OneWeb for broader deployment. This technological pivot is supported by strong financial performance, evidenced by second-quarter revenue of $1.09 billion and EBITDA of $520 million. Consequently, VEON has raised its full-year guidance, now forecasting revenue growth of 13-15% and EBITDA growth of 14-16%. The company is also undergoing corporate restructuring, anticipating a non-cash charge of up to $200 million in the third quarter related to the planned U.S. listing of its Kyivstar subsidiary and the sale of its Kyrgyzstan business. The timeline for the satellite investments remains contingent on securing direct-to-cell licenses from various governments, introducing a degree of regulatory uncertainty.

Key Decisions for Investors

• Investors should view the upgraded annual guidance for revenue and EBITDA as a strong positive signal of the company's current operational health and management's confidence.
• The strategic initiatives in satellite connectivity with major partners like Amazon and Starlink represent significant long-term growth potential, though timelines are uncertain and dependent on regulatory approvals which must be monitored.
• It is important to factor in the expected non-cash charge of up to $200 million in Q3 and track the progress of the Kyivstar U.S. listing, as these corporate actions will impact the company's financial structure and valuation.