VEON Ltd. (VEON) Q2 2026 Earnings Report, Transcript and Summary

Hello, and welcome to VEON'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. 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 will be called upon during the Q&A session. For those of you watching on the webcast, if you would like to submit a written question, please use the ask a question tab at the top right of your screen. These questions can also be sent in at any time during the presentation. As a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Anand Ramachandran, you may begin.

Thank you, Lucy. Good morning, and good afternoon to everyone joining us for VEON's second quarter results. We are the largest Nasdaq-listed company on the ground in Dubai. And we are taking this opportunity to host this call out of New York, and we are very pleased to be able to do that. So we thank the people in the room who have joined us. Thank you for the people who have joined us on the webcast. My name is Anand Ramachandran, Chief Corporate Development Officer. Let me introduce management in the room. Next to me is Kaan Terzioglu, Group CEO. Next to him, Burak Ozer, Group CFO. As usual, Kaan will begin with the strategic and operational highlights, followed by Burak with a review of our financial performance. We will then open up the call for Q&A. Before we begin, do note that today's presentation contains some forward-looking statements involving risks and uncertainties. Further are available in our SEC filings, including our Form 20-F. Our earnings release and presentation are also available on our Investor Relations website. With that, let me hand the call over to Kaan.

Thank you, Anand. Good morning, everyone. So exciting to have you in the room here in New York and do this earnings release here. Beyond excellent financial results, this quarter marks another important milestone in VEON's transformation. We are becoming much more than a telecommunications company. Today, VEON is building one of the world's largest digital ecosystems across emerging markets. Combining connectivity, financial services, digital consumer platforms, and enterprise solutions. Our telecom networks connect more than 150 million customers. Our digital platforms deepen those relationships every day. The result is stronger growth, stronger cash generation, and increasing shareholder returns. Most importantly, today's results give us the confidence to raise the outlook for the year. Let me explain how we think about VEON today. Everything begins with connectivity. Connectivity is not the destination. It is our foundation. It is our competitive advantage. It gives us scale. It gives us distribution edge. It gives us trust. And it gives us daily engagement with millions of customers. On top of that foundation, we have built three digital growth engines. Financial services, digital life, digital enterprise. They reinforce one another. Every new service strengthens the customer relationship. Customers stay longer. They spend more. They generate more data. Better data improves AI. Better AI creates better products. Better products create more cash. That cash allows us to invest again. That is the VEON flywheel. Once you understand the flywheel, results are much easier to understand. Growth is broad based. Telecommunications continues to grow, twice as fast compared to traditional players. Digital is growing substantially faster. Multiple times faster. Digital now contributes almost 27% of our total revenues. Cash generation continues to improve. Since August 2024, we have already bought back $183 million worth of shares. Today, we are taking the next step. Starting with this year, we commit to canceling at least $100 million of shares every year. Not as a one-time action. But as a sustainable capital allocation framework. I am particularly pleased with the consistency of our execution. That consistency is why we are raising our full-year guidance. A little color. Reported EBITDA growth was affected by three exceptional accounting items. Bangladesh benefited from a provision release last year. Profit comparisons include the Pakistan tower transaction last year. And this year, it includes the noncash fair value adjustment on Kyivstar Group warrants. If you adjust for these items, our underlying business is even stronger. Revenue grew 18%, EBITDA grew more than 15%. Like-for-like earnings per share actually grew 88% year on year. This is the clearest measure of our true momentum. On the subject of consistency, Pakistan continues to deliver outstanding performance. Ukraine continues growing with extraordinary circumstances. Kazakhstan, Uzbekistan, and Bangladesh all delivered. This matters. It tells us that VEON operating model is becoming repeatable across markets. Only a few years ago, digital represented a relatively small part of. Today, digital has become one of our main growth engines. Our digital platforms now reach more than 227 million customers. Importantly, all three digital businesses are profitable. Financial services, digital life, digital enterprise. They scale efficiently. They require less capital. And they generate attractive returns. Digital revenues grew more than 53%. Digital EBITDA increased more than 66%. Digital is now generating profits and cash more than telecom business. Financial services best demonstrates how the flywheel works. We do not begin with lending. We begin with engagement. Customers use payments every day. Daily engagement builds trust. Trust creates data. Data improves underwriting. Underwriting enables lending, insurance, and wealth management. Pakistan demonstrates this model at scale. JazzCash has evolved from a payments application into a complete financial ecosystem. Our acquisition of TPL Insurance represents another important milestone in that journey. And our Mastercard partnership will accelerate AI-enabled financial products across every market. If there is one slide, I hope you will remember. It is this one. Connectivity brings customers and digital deepens engagement. Engagement increases loyalty. Higher cash generation funds better products. Every turn of the wheel strengthens the next. That is why multi-play customers already generate significantly higher value. And why we believe we are still in the early chapters of the story. With that, I will hand over to Burak to take you through the financials in more detail. Burak?

Thank you. In the second quarter, revenue grew 17% to $1.27 billion, with growth across all of our five markets. First half revenue also grew 17% to $2.47 billion. Telecom revenue grew 7.6% to $929 million, driven by disciplined pricing and rising customer engagement. Digital revenue grew 53.6%, reaching $342 million, reflecting growth adoption across platforms and products, plus our recent acquisitions. EBITDA reached $552 million, up 6.2% at a 43.4% margin. Half-year EBITDA grew 11.5% to $1.07 billion. Telecom and infrastructure EBITDA were $428 million. Down 3.8%. At a 46.1% margin. As Kaan noted earlier, year-on-year comparison reflects last year's Bangladesh provision release. Digital EBITDA grew 66.2% to $123 million. Digital is less capital intensive than telecom. And that is driving strong cash conversion as it scales. Profit and EPS for the period reflects $489 million of gain on the Pakistan tower sale, second quarter of last year. And a $22 million fair value loss on KGL warrants in this quarter. Cash generation was strong in the period. Operating cash flow rose 238% in the quarter to $463 million and 51% for the first half to $860 million. Equity free cash flow after leases and licenses grew 47.5% for the first half to $320 million. EFCF for the second quarter was impacted by prepayment of taxes in Pakistan, that will not reoccur. Now turning to balance sheet and capital allocation. We ended the quarter with $2.2 billion in cash. Including $468 million at headquarters. Net debt, excluding leases, was $1.8 billion, with lease-adjusted leverage at 1.1 times. We completed the $1.4 billion bond offering this quarter. Substantially addressing our 2027 maturities ahead of schedule and extending every headquarters debt maturity beyond four years. With that, I will hand the call back to Kaan.

Thank you, Burak. Let me return to capital allocation. Since August 2024, we have bought back $183 million of shares. We delivered exactly what we said we would. Now we are institutionalizing that discipline. Beginning this year, we will cancel at least $100 million of shares annually. Returning capital to shareholders is now part of our long-term financial framework. We are seeing strong execution. Digital is scaling faster than expected. Cash generation continues to strengthen. And as a result, we are increasing our guidance. Revenue growth is now expected to be 15% to 18%. EBITDA growth is now expected to be 9% to 12%. Our capital expenditure outlook remains unchanged. These revisions reflect confidence in the underlying strength of our business. Looking ahead, please join us at our Capital Markets Day in New York on November 16. There, we will present the next chapter of VEON's long-term strategy and value creation. Let me leave you with one thought. Connectivity provides the foundation. Digital creates the growth. And the flywheel generates the returns. Our second quarter results demonstrate that this strategy is working. And I believe we are only at the beginning. Thank you very much. Operator, now we can take the questions.

Maybe, operator, we start with questions in the room. And then I will probably queue in to get questions from online attendees. Thank you. In the room would be great if you could put your hand up. There is a mic which will come around to you. If you could state your name and your institution and then your questions, that would be great. Tim?

Always. So as I mentioned, consistency was one of the key drivers. You may notice a little bit out of cycle results from Kazakhstan. But this is normal. And it is fundamentally due to the VAT regulations change in the country, which was a six-percentage-point increase. Now the concept of how much of this devaluation, how much is performance. Our business model is very simple. The way to do business in frontier markets, emerging markets, relies on your ability to continuously in a disciplined way adjust your prices with nominal GDP growth. And we rely on the fact that GDP and GDP growth is the best indicator of our wallet share success. Now devaluation and inflation will converge in three-, five-, seven-year cycles. We are keeping our discipline on that front, and currently, we are expecting actually about 9.5% inflation in weighted average in our markets. This is up from 8% and the overall devaluation is 3% less than what we have expected to happen. From a currency perspective, the currency assumptions in Q1 versus Q2 did not change. So it was mainly organic. From a growth perspective.

Yeah. Hi. This is Anand from Barings. I just want to talk a bit about your financial services business. So I see that you have achieved about 45% of your growth in the first half. What is the latest in terms of your regulatory kind of, I guess, development outlook? Particularly with Bangladesh? So maybe you could talk about the latest for Pakistan, which I know is much more mature. Bangladesh and Ukraine is very early, but we started out for Ukraine maybe even when new licenses might be available. Etcetera. Thank you.

So let me, first of all, give a little bit of color on our business. Our business is really doing extremely well in Pakistan. We have 60 million bank accounts on a monthly basis, 27 million active users of our platform, JazzCash. We issue 225 thousand nano loans every single day. We transact close to 16% of Pakistan's GDP. We have 1.6 million merchants on our network. We are a financial giant when it comes to the landscape. And, naturally, with that comes responsibility to work hand in hand with the authorities, including finance ministry and central bank, to make sure that we are basically serving the people in the right levels. I am confident that the regulatory environment will also support us expand our capacity to even, you know, grow our lending potential. This success, we believe, is quite repeatable in other markets, in Bangladesh and in Uzbekistan. That is why we are working again with the new government of Bangladesh in terms of creating the right platform for us to launch, which we will start with payment services and later on move into full financial ecosystem in Bangladesh as well. And I expect that to happen in Q3. With regard to our operations in Pakistan, in order to accelerate deployment of similar services in all the countries, we are looking forward to getting necessary digital banking licenses in every single market. We do have already payment solutions and digital wallets in Kazakhstan. And in Ukraine, we are looking for the regulatory environment to allow us also to proceed in the same direction.

In Ukraine, is there enough opportunity to work by to kind of have a halfway solution before you can your own full license. Could you work with maybe a bank to have to start building a financial services?

It is early to give you an answer on that, but, clearly, we will be looking for every possible business model in terms of how we can serve our customers the way they deserve the service.

Thank you. You have a great relationship with SpaceX and Starlink. Could you just describe that relationship, how it is evolving? Also, how's the quality of the service that they are providing to you? And how do you think that changes, that connectivity changes these value-added services, you know, over time? Based on the fact that we are going to have connectivity almost, you know, almost everywhere.

As I mentioned, connectivity is the foundation. It is our competitive advantage. And there is no excuse for it not to be available. It has to be ubiquitous. It has to be affordable, accessible. Because all our business model relies on that connectivity in the digital services part. Now if you assess the situation in different countries, we operate in emerging markets in frontier markets. In Ukraine, there is an ongoing war going on, and there are cases where our infrastructure, terrestrial infrastructure, may not be accessible due to landmines. It might be on the front line. There might be energy outages. And in those cases, we have observed that it is essential to integrate our terrestrial network with the satellite platforms, and that is exactly what we did. As of last quarter, more than 6 million people utilized the capabilities of connecting their smartphones without any other additional equipment directly to satellites and utilize messaging and light data services. This is remarkable because if you think about it, this allows us to be relevant to our customers literally every single minute in a day. And, also, it gives us the advantage that, you know, being a trusted partner when it comes to connectivity. We are expanding these to other markets to Kazakhstan, to Bangladesh. We do not see Starlink as a substitution. We are complementary to each other. And we are naturally in our markets in sovereign countries with sovereign regulations protected in a way to keep our license and our technical responsibilities in each country to serve the populations in a safe and secure manner. I look forward to extending our partnership with Starlink, but also clearly, there is going to be many other alternatives. And we will do our best to make sure that our customers are always connected so that they can always do financial on our platforms. They can always, you know, access marketplaces, health care services, education services, entertainment services, if they are our customers on connected side.

So I know you have had text for a little while. That sounded like it was working well. You know, how's the data connectivity going? And related that too, do you have an exclusivity for a period of time with them?

First, in terms of quality, we have initiated the light data services in Ukraine, and we are optimizing certain applications and Sasho is also here, our CEO in Ukraine. And those applications are optimized in a way that they can function in this light data environment. We do not have exclusivity. I do not believe in it. Exclusivities. You know, customers have the exclusivity to select their telecom operator when it is necessary.

Thank you.

I do not see any other questions in the room. So, operator, shall we pass to the online attendees for their questions. Thank you.

For those of you in the Zoom webinar, if you would like to ask a question please click on the raise hand button on the bottom of your screen. When it is your turn to ask a question you will receive a prompt to be promoted as a panelist. Please accept. Wait a moment. Once you have been introduced, you may unmute yourself, turn your video on, and ask your question. 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 Nicholas Paton with Edison Group. Please turn on your video, unmute yourself and ask your question. Nicholas, you might be on mute. Nicholas, please turn.

My apologies. Can you hear me now?

We can.

Excellent. Thank you. A couple of questions. So the first one on the guidance. I am just trying by how much the guidance has changed since the full-year 2025 numbers. So at the low end of the guidance, full year 2025, we are at 9%. We are now at 18% for the top end of the guidance for the second quarter. And on EBITDA, we have gone from 5% at the low end to now 12% at the top end. Can you just run us through briefly the key drivers of that change? And I guess the question from investors is what makes you so sure that you can achieve those numbers now? When you were unsure you could achieve those numbers at the top end of the scale at the full-year 2025 numbers. And the second question is regarding the new businesses. I mean, the numbers, I am going to hate myself for saying this, but they really are an impressive set of numbers, and the digital businesses have been growing like crazy. But when you look at the digital businesses, let's say, three to five years in time, are you still able to leverage the capital returns that come from the established fixed asset base or do you have to invest more in the fixed asset base? And how do those returns on capital change? Between the core telecom business and additional business, let's say, three to five years' time? I am reminded of your answer on, I think it was on the first quarter, and maybe it was the full-year numbers. When you went through the difference between the digital and the core telecom returns on capital. I thought that was a very interesting and instructive answer. So I would be interested to hear an update on that. And to hear how you think those capital returns change through time. Thank you.

Nicholas, thank you very much. Actually, you know, you are absolutely right. You know, I wish we could have been more precise two quarters ago. But flywheel is working. And flywheel is working better than we expected. And as you have rightly pointed in your second part of your question, it is growing. It is growing 50%, 60% year on year. And it is beyond what we have expected. But it is not only about the top line growth. The EBITDA growth of digital services is also above our expectations, significantly above. Actually, EBITDA grew 66%. So the margin on the digital services is expanding as well. So those two things combined gives us the confidence to raise our guidance. And I think, you know, though what we see, it is a sustainable business model. We are systematically seeing that more customers are embracing our solutions, and we still have room to sustain this growth. When it comes to cash generative capacity, you know, our original business idea a year ago when I talked with you, that the digital services will deliver a margin of 20% to 25%. We are at 36%. And digital services has a CapEx revenue ratio of 7%. Yeah. 36 minus 7 makes 29. On the foundation side, we do have a margin of 45%. And 20% goes to CapEx. And you end up with 25. So, that is why I am saying the digital services cash generation capacity has exceeded our expectations as a business model a year ago. Which I am very happy to see. Having said that, please do not forget foundation is our competitive edge, and we will not stop investing in that. And we will keep investing in where it is necessary, just like in Pakistan we have recently bought some spectrum. We are now lighting up the spectrum for 4G, extended 4G, and 5G. We will do exactly the same in other. But the balance of our growth coming from digital will slowly actually put us in a better position in terms of cash generation capacity. And I am happy that it is happening faster than we expected. Apologize that the expectation was not spot on two quarters ago, but I think we are on the right side of that equation.

If I may just add on to that, at the end of the first quarter, I think we pointed out that we wanted to see how the macro impact of what was happening in the Middle East and oil price did in operations. We made the very clear point of, you know, therefore, are holding on EBITDA just to get better clarity on how things evolved. And clearly, seeing it, really, really to see that, you know, they have turned out better than we thought, not just on the margin side, but also on the revenue side. I think that is also the additional fact that I wanted to point out that leads to where we are today relative to year end.

And so I will do a copy question. Whether we will spend more in the future, yes. But the CapEx ratio will not go over 7%. With the growth in revenue accelerating. So, definitely, we will stay with the same CapEx ratios.

Sorry. Just for you, is 7% CapEx to sales for the digital businesses in isolation.

Yes. That is today what we spent. Yeah.

But you were saying that it will not go above that in the future either.

Yes. Because of the growth in the revenue projections. Okay. Okay. Okay. I actually will expect it to decline in a way. Yeah.

And business is evolving, and I think the message is we are very pleased with the momentum of the business. Business is evolving. Margins are turning out better than where we expected. The flywheel, as Kaan pointed out, is working and working incredibly well, and we take it as we go along. But as things stand, as Burak pointed out, expect this business to continue to generate pretty material cash. And as the business grows, hopefully, you know, we continue and see it progressing in the same direction.

Makes sense. Thank you, guys.

Thank you. Our next question comes from Adrian Francis Cundy with Emerging and Frontier Capital. You may now unmute your audio, turn on your video, and ask your question.

Good morning, Kaan, Burak, Anand. It is good to see you, and congratulations on delivering again this quarter. I have two questions. One about just sort of your use of headquarter liquidity going forward given that you have really turned the corner on the debt restructuring and that you have moved into a positive free cash flow to equity profile. You have nearly $1 billion of cash at the headquarters, and no major repayments until 2027, out beyond what your upstreaming till 2031, 2033. Can we sort of expect further reinvestment of that cash into any of the key countries, particularly if a need to capitalize a digital bank? Or do you think you can continue to grow those opcos with their domestic cash flows? And M&A broadly, is that now new markets that are you keeping an eye on given that you have dry powder at the headquarters? That is my first question. Now my second question comes down to sort of the coming back to the capital and CapEx intensity, and thank you for the 7% number just now. 5G launching in Pakistan. Uzbekistan talking about significant investment in 5G. Post the sale of Mobius. 40% of subs by 2030 something is I saw I had for my Kazakhstan, obviously, Bangladesh, will come and then as Starlink. What do the relative margins look like between a Starlink data ARPU versus a terrestrial ARPU on 5G, which is more profitable? And what do you sort of see the balance of, and where will you focus your 5G investment and are you confident that you can continue to extend 4G, early-stage 5G, and high-density areas at the current CapEx sales ratios.

Adrian, let me first start with the part about M&A. We are extremely disciplined when it comes to decisions about, you know, growing through inorganic means. Now, naturally, there are very accretive in-market consolidation opportunities that we will always be looking after. But I truly believe that our stock price at today trading at 3.5 times EBITDA is not at the level that we would be looking into acquisitions at a broad level. And I will keep that discipline very, very strong over the next couple of years. So that is number one. But, of course, you know, in-market consolidation, naturally accretive synergies, these are, you know, things that we will be in the market continuously. Now you asked about the profitability of Starlink versus our other networks, terrestrial networks? If you look to the cost of producing mobile data, we are terrestrial networks in terms of deployment of, you know, towers, equipment, etcetera. Versus having access to satellite connectivity. And let me give you an example in Kazakhstan. The size of Kazakhstan is probably bigger than the entire United States, and 20 million people live there. If I would try to, you know, deliver license requirements just in railways and roads based on terrestrial networks, it would cost me a fortune. So I do not see actually cost differentials or additional cost when it comes to access to satellite platforms. I consider it actually quite reasonable when it comes to comparing the cost of satellite connectivity versus terrestrial connectivity. Having said that, this is not about substituting terrestrial networks, fiber networks with satellites. It is complementing it when it is needed. And I think, you know, with that regard, the utility value to the customer definitely is much higher than the cost of the technology it brings.

And just to add to that, as Kaan said during the presentation, we will definitely use cash for shareholder return. On top of that, he just mentioned the M&A opportunities that we have in order to grow our business for in-market consolidation. And maybe on the fintech side in priority. Last but not least, we will be addressing some higher-cost debt that is sitting on the balance sheet today. To make sure that we kind of balance the cost-to-debt ratio there in terms of interest expenses.

Good. Thank you very much.

Thank you. Our next question will come from Matthew Harrigan with StoneX. Please unmute and ask your question.

Great. Thank you. Firstly, when you look at the digital side, I mean, clearly, you are a market leader. In some areas where there are very substantial TAMs witnessed in other markets. And you can see a really nice growth curve, you know, all the way around. But you are also involved on the LLM side as a critical player, you know, working with Google, Gemma, and, you know, QazCode, you know, clearly. How do you see the utility of LLM models developing for your frontier markets? And are they eventually monetizable in concert with your partners? And then secondly, clearly, in some other markets, you would be trading people will be talking about targets of 5x EBITDA sales and then five times EBITDA. When you think about valuation without giving out a number, clearly, Pakistan is one of the cheaper in the world. I mean, relative to the Morgan Stanley MSCI mature markets basket. But how do you feel about valuation in terms of, I mean, should people be doing 10-year models rather than five-year models? I mean, growth rates relative to GDP. I mean, do you think you get a fundamental rerating of Pakistan or clearly Ukraine. I mean, if that starts trading like Poland, you have got an immediate hold in Kyivstar. Just kind of playing cap markets, investors' thoughts on valuations. Thank you. And congratulations on the results and the guidance.

Yep. Thank you, Matthew. Let me start with the second question you asked because, you know, clearly, we will be here. And if you look at the benchmarks, you know, financial services businesses of this nature, five times the revenues. No. Not EBITDA. Yeah. So, clearly, this excites me a lot because it shows the value that we are creating in the marketplace. And now Pakistan is a $2 billion run-rate business for us. And 20 million outside of Pakistan. I think it is a unique market. We are blessed to be given the chance to serve Pakistanis around the world, and we will continue investing. And I think, you know, the question you asked whether the valuations will reflect that. Market is always getting detract, and I come up to this with that. So time will show it. Now looking to the first question you asked, AI. You know, I was reading today the CEO of Pareto making a very relevant comment. Right? But in reality, there is, I believe, a fundamental reality we have to focus on. Right? Company exists because proposal value to customers. Customers matter. The transformation we have been going through for three to four years now sells meaningful digital services. It is not enough. AI will change as well. We will be providing customers an intelligence platform. And I like to talk about this superintelligence. One of the, it is simple. We provide customers a chance to become superheroes at work. And develop a proposition like a better version of yourself. For $2 a month. And that is where we are headed. And that is our AI strategy. It will be all across. We do not have a problem at all customer acquisition costs. We have a speed to market bringing these LLMs at the fingertips of our customers. And I see a huge revenue potential. And, you know, we are working with every single country in our portfolio. We are looking into these. I believe developing sovereign LLMs is our primary business but developing data and inference capacity for the customers. It is a lot of business. And those are the things that we have stock bought back to date.

So I think that is a clear indication of management perception of stock being significantly undervalued. Today, we have announced we are going to do that, should be the clearest vindication and reflection of what we think about the stock price. Clearly, your expert is giving you your numbers. In what is the area that I used to do and then wind it back.

Hi all. Thank you for speaking to us today. My questions are more focused on performance within your different markets. Bangladesh is a split between continuing to be tough market. That you are managing to offset this with some impressive digital performance and cost performance as well. So first, I am gonna tell you before and tell them more. Was very cautious about recovering market, but both from your view, it would be interesting to get your thoughts on how recovery proceeds from that. Secondly, related to Bangladesh Digital grew about $12 million in absolute. Can you provide some color on what contribution came from holding the rights to the World Cup. And what we should expect from this in Q3. And on a broader expectations about the fintech business, which you hope to get by the second half of the year. Then the final question from Kazakhstan, it was also a very difficult quarter there with performance target higher-value customers and to do this by bundling services, but local currency ARPU fell at 0.5 euro cents a year, and margins dropped by 7% year over year in Q1 and maybe 9% this quarter. So I guess the question is, is the shift in customer strategy working? What can we expect in terms of margin recovery in the near term? Thank you very much.

Thank you, Max. Let me start with Bangladesh. You know? Clearly, I am happy to see the stabilization of the business, and we have been consistently growing the last three quarters year on year. And this quarter is an interesting one because I think, you know, it shows the potential of the country. There has been significant power energy load shedding in Bangladesh in April and May. To the level that the entire country has reduced its data consumption by 15%. Now in an emerging market, you would expect data consumption to go up 40% year on year. This happened because of energy outages and practically because the trade crisis, you know, oil being not available in certain places. So despite this, we managed to grow our business. But what really excites me in Bangladesh, we broke all records, and I was talking with Google executives recently. They said, you know, we have never seen such a thing like this. In World Cup, in terms of broadcasting the games to Bangladesh population, in and outside of Bangladesh. I was actually yesterday at a restaurant, and the moment I said, do you know Toffee and Banglalink, he said, yes. I watched Asharfi as well than 20. So it is good to see we are even getting in New York some attention. But, you know, in terms of the monetization potential of services, the growth you see there is thanks to the World Cup. And I think, you know, I congratulate United States. They, I think, they ran the best World Cup that I have seen, but it also had a major impact in Bangladesh, and we are very happy to see that. And I am more positive than other players in the market in terms of the progress and development of Bangladesh. I think when the energy stabilization also normalizes, we will see higher growth rates from the country. Now coming to Kazakhstan. There are a couple of things that we need to bear in mind. First of all, VAT rates have increased. Right? 6%. And 6%, this is a significant change and we were not able to adjust this to the pricing. Normally, we are better in doing this, but in this particular case, 6% disappeared from top line, and you can imagine the impact of that to the EBITDA. The second important issue is we have a model of bundling smartphones into family packages. It is a great idea, but it also has a temporary fluctuation in the marginality because of the way it is accounted for. So those two important dynamics had an impact. I am not concerned. Kazakhstan is the most advanced digitally aligned market that we have in our portfolio. And we are actually doing quite well despite the fact that, you know, we are providing 4G advanced services in Kazakhstan. We have a unique advantage in terms of customer satisfaction and net promoter scores. So overall, I see Kazakhstan as a, you know, a temporary issue in terms of margin erosion, but I am sure that, you know, Kazakh market will prove itself to be an extremely dynamic and successful market as the time passes this year.

And just to add on top, the Bangladesh, on top of the World Cup, there was a pricing adjustment we did year over year for our service. That also impacted revenue growth. And so I think just to complete that digital is 13%. The World Cup helped, and it is 13%, but it is not as if, you know, we are gonna call that a one-off. I mean, the flywheel is in motion. There is a lot of other things, so we are hoping for that momentum to kind of continue to sustain itself.

You know, there are countries which love cricket, like Pakistan. There are countries which like football like Bangladesh. And every Bangladeshi is either a Brazilian fan or an Argentina fan. You can go to during the World Cup time. The country is full of Argentina and Brazil flags. So, you know, it was good that Argentina made it to the last final game for us. Thanks, guys.

It is a shame there is no more Tartan Army supporters in Bangladesh, but you, we live in hope. Just coming back on the EBITDA margin point on Kazakhstan. I mean, is this margin like, depressed at the moment because you are bundling it in with low-margin equipment revenue? So you do not expect further deterioration, but the kind of margins stay around the kind of 40%, 45% kind of range where they were in Q1 and Q2. Is that the right way to interpret that?

Max, first of all, let me correct one thing. We do not subsidize equipment, so it is not a matter of margin dilution because of subsidies of equipment. It is a matter of revenue recognition, which recognizes some of that margin, you know, in the previous quarters. Rather than this quarter. It is a cyclical movement of the volumes of business having the impact because the way the service and equipment integration into packages results in different type of an accounting procedure.

Brilliant. Thank you.

In simple terms, we recognize equipment revenue upfront and the higher-margin service revenue gets recognized over the term. Yeah. Therefore, as the business grows, we recognize more lower-margin revenue upfront and that is the success of the business growing. That we recognize more lower-margin revenue upfront. And then the higher-margin service revenue will come in time. And this combined with the 6% VAT impact, you can understand where we are.

Very clear. Thank you. Thank you both.

Our next question comes from Ahmed Mostafa with EFG Hermes. Please unmute. Turn on your video and ask your question.

Hello, everyone. Thanks for the presentation. Two questions from my side. First, digital EBITDA margin reached 36% this quarter. So what are the main levers and medium-term milestones for further margin expansion? And second, which markets still have the most headroom to increase multi-play penetration? Thank you.

Thank you for the question. Now let me answer it this way. There are markets already where the number of digital service customers outnumbers our telecom customers. And, when I look to advanced markets, especially, you know, Pakistan being the highest, I think we are getting close to 38% of our revenues coming from financial and digital services. And this is just a continuum because, as we bring the right services to each market, on financial services side, entertainment side, health care, education, and AI services, I think we are gonna see a constant increase. Our multi-play customer base was raised this quarter about 4.5%, which is actually the healthy trend that we would like to continue. The biggest upside that I see in this space is still Bangladesh. And this is related to smartphone penetration in the country. You know, there is an interesting metric that I wanna share with you. If you look to GSMA reports, for the five countries that we operate in, this is, you know, 530 million people lives. The number of people connected to Internet is 288 million. The number of digital service customers we have is 228 million people. So basically, six out of 10 people whoever gets connected to Internet is our customers already, one way or the other. Now we need to push for equal inclusion for women on smartphone ownership. That is our number-one priority. And that will mean that, you know, we have to work hand in hand with the governments and equipment producers to increase the smartphone penetration, and especially on female population.

Thank you.

Thank you. Thank you. Our next question comes from Jay Street with New Street Research. Please unmute your audio, turn on your video, and ask your question. Jake, you are on mute.

Yes. Hi. Sorry. Hi. This is Jay. So I understand that VEON currently has a global framework agreement with Starlink. And while Starlink is present in Ukraine, you guys are working with them in Kazakhstan and Bangladesh already. Is there a possibility of us seeing this in Pakistan and Uzbekistan as well? Just this.

Thanks, Jay. I assume Chris is on vacation already, so please pass my regards to him and tell him both you and him invited to the Capital Markets Day. The answer is yes as long as the government allows us to. So there are quite a number of regulations to get to this point, and it takes a while to show the governments that this is an essential need for the populations. I think there should be no country in the world which would not be integrating their terrestrial networks with satellite platforms. And we should not consider this as a threat. This is a responsibility for the populations. And, actually, I wish, you know, the regulatory environment would be forcing every single operator to do this. We are doing ourselves, and we are working with all the country's regulators to also demonstrate the value of doing this. And on top, our contractual terms do give us benefits as we add on more countries with Starlink.

Is it possible to elaborate on some of these benefits you mentioned?

I suggest we keep the commercial details to ourselves. Thanks a lot for the question. But I do not think we can share that.

Okay. Thank you.

Thank you. Our next question will come from Ali Zaidi with EFG Hermes. Please unmute. Turn on your video, and ask your question.

Hi, everybody. Thank you so much for the opportunity. I just have one question. So you have called out that there is a high energy cost in Pakistan and there are also energy-related disruptions in Bangladesh as well. So in Ukraine, you responded to that kind of problem, like, by buying the generation directly. So is it something you would consider in Pakistan and Bangladesh as well?

Good question. You know, of course, in Ukraine, we have a stronger appetite to deploy capital in terms of this type of investments. In other markets, we are looking for alternative methods. Actually, deploying solar farms only works if there is a strong grid distributing the energy in the country, and both in Bangladesh and Pakistan, the grid infrastructure is not at the level that we can do the same playbook. Having said that, more and more, there are site-based technologies that could allow us to do solar and wind generation for the specific sites. Actually, last year, we have deployed one of those sites in Kazakhstan at a very remote location, which still works in a perfect manner. So we will be looking for those. There are already projects in place, especially in Pakistan, to solarize some of our sites. Giving very encouraging results.

Thank you so much.

Thank you.

Thanks. And last question comes from Theodore O'Neill with Litchfield Hills. Please unmute. And ask your question.

Thank you very much. Congratulations on the quarter. I am looking over the results for the quarter, and I am struck by the fact that country by country, you have got, with the exception of Bangladesh, for reasons you already mentioned. You have got double-digit growth in revenue and dollars. But the mobile customer numbers are essentially unchanged. At some point, do you need to see those mobile customer numbers go up? Or is it partly what you just talked about too with the female population? That you are trying to address.

So, you know, first of all, we are focused on the flywheel that I described. You know, how much of that customers are multi-play customers versus just an M2M SIM card or, you know, practically customers who are only using our voice services. And we are very satisfied with that evolution overall. In our markets, there is still a challenge, especially when it comes to Pakistan and Bangladesh, which are big populations in terms of smartphone availability. So our ability to make smartphones affordable and accessible and also penetrating into markets in which there is very low smart ownership, especially the women, I think is a critical success factor. And, of course, we have programs to address those, but you will only see that growth picking up in the way that we want with regard to multi-play customer base, if we can, you know, grow the penetration of smartphones in the markets.

Thank you. See you November 16.

Thank you.

Thank you. We have no further questions at this time. I will now hand back to Anand Ramachandran. Closing remarks.

Thank you so much. I would probably make a last call for any follow-up questions in the room. I do not see any. So with that, guys, thank you very much for your time and attention. As Kaan said, we will have the Capital Markets Day in November and, obviously, the third quarter results before that. Thank you very much for your attention and support to VEON. We will keep talking. But see you as a part of this group again next quarter. Thank you so much. Thank you. Thanks a lot.