Faisal Ghori: The second part of the question. Can you discuss the opportunities to repatriate cash from each of your markets to HQ?
Joop Brakenhoff: Yes, Faisal, thanks. And these are relevant questions of course. We have no formal limitations to repatriate cash to the center except for operations in Ukraine, of course due to the martial law. But for the other operating companies, there are no formal limitations to upstream cash.
Faisal Ghori: The next question is from [Roman Ivanov]. Can you please clarify your plans with respect to the RCF? Do you plan to repay the facility or at least partially extend it?
Joop Brakenhoff : Yes, as mentioned, we are optimizing our capital structure with a smaller organization. Of course, we are also reviewing our RCF. At this moment, we’re in discussion with our RCF holders to look for possibilities to reduce and extend the current RCF. As mentioned, we also want to increase our debt maturity. That’s a good combination of this discussion.
Faisal Ghori: Our next question is from Stella Cridge from Barclays. Can you explain the move in net debt quarter-over-quarter in between September and October? What other steps need to be taken before VEON can return to debt markets?
Joop Brakenhoff : Yes, these are two questions. The first one, as presented, you’ve seen the numbers of September 2023. These are the numbers where the Russian operations were still part of VEON Group. We’ve also explained, showed you the current cash gross debt and net debt level as per October 2023. And these are, of course, the numbers without Russia. So there you see changes which mainly have to do with the redemption of intercompany balances with Russia.
Faisal Ghori : Our next question is from [Daria Naumenko], could you please provide more updates on asset monetization, and on the recent tower deal, are you planning to upstream proceeds to the HoldCo level?
Kaan Terzioğlu: Sure, Dario. First of all, you would remember that back in two years ago, even actually in 2021, when we set our strategic plans, we said we are going to be an asset-light company. And we believe that there are better specialized, dedicated, independent tower companies to manage the towers rather than keeping them buried in our balance sheets. Since then, we have done actually quite a lot of heavy lifting. We have, as of now, ring fenced and spin out all our towers into separate companies in all the operations that we are currently operating in. Regulatory wise, Bangladesh was an exception because we cannot own a tower company in Bangladesh. It’s a licensed operation. But apart from that, all our other operations already have tower companies, and we are working with and talking to different independent tower companies in terms of how to engage them, managing our towers in a better way and allowing us to crystallize the value.
Since the beginning, we have sold before the war our towers in Russia. Later on, we have now sold one-third of our portfolio in Bangladesh, and we still have close to 30,000 towers in various different operations, which we will be working on.
Faisal Ghori: Thank you, Kaan. Our next question is from Chris Hoare of New Street. Regarding CapEx guidance, do you expect 16% to 18% of sales going forward, or can you reduce it further?
Kaan Terzioğlu: Maybe let me take this question, because if you remember, we said that we are targeting for 70% 4G penetration and we will continue to be elevated at the levels of CapEx. There are two important things happening. First of all, we are growing faster, and we are happy with that naturally, and that is of course releasing the CapEx to revenue sales ratio in favorable way. Secondly, if you, for example, take a country like Pakistan, today 15% of our revenues in Pakistan is actually from mobile financial services and entertainment platforms, which are totally different business models and does not require same level of CapEx. So if you put all these things together, and if you add the fact that we are now getting very close to 70% and actually already exceeded 70% in Kazakhstan and Uzbekistan, you would naturally see a reduction on the CapEx to revenue ratio.
That’s why you see 16% to 18%. And I would expect this figure to go below 16% over the next three to five years as we further generate more revenues from non-telecom businesses, as well as reach the penetration levels that we desire.
Faisal Ghori: Our next question is from [Roman Ivanov]. What actions would you take to crystallize value of digital assets?
Kaan Terzioğlu: We are unique in the sense that the population in the markets that we operate in is more than 510 million. What we observe is the consumer business, consumers in these markets are significantly underserved. There is an unmet demand, especially when it comes to entertainment, financial services, education and healthcare. Therefore, every single investment we do in this area, and as you can imagine, investment in digital services, considering the power of distribution we have through the, thanks to telecom is much smaller in size, it gives us to create the largest player in a vertical over 12 to 18 months. This is what happened with Tamasha. This is what happened with Toffee. What happened with JezzCash, Simply, IZI, and Helsi.
So, what we would like to do is to make sure that to further accelerate the growth of these digital services, we will be seeking out strategic partners who can enhance our offers and create differentiation. And you will see us moving in that direction when it comes to looking for partners that will also, of course, crystallize the value of these assets as well.
Faisal Ghori: Our next question is again from Chris Hoare of New Street Research. He’s asking about the EBITDA margins, specifically regarding our currencies. Normally, when currencies are under pressure, you would normally expect margins to fall. Why aren’t you seeing that? And then secondly, does that imply OpCo margins can rise next year if we have stability in the currencies?
