VEON's Digital Transformation: Riding the Wave Amidst Geopolitical Headwinds

The telecom sector is undergoing a seismic shift, with operators pivoting from traditional voice and data services to digital ecosystems. For VEON, a multinational telecom player with a heavy footprint in emerging markets, this transition has been nothing short of a renaissance. Q1 2025 results underscore its progress, but the path forward is fraught with geopolitical risks, inflationary pressures, and capital demands. Let's dissect whether VEON's digital pivot is a sustainable growth engine or a gamble in turbulent waters.

The Digital Surge: A New Revenue Engine Takes Shape

VEON's Q1 2025 results marked a milestone in its digital transformation. Direct digital revenues jumped 50.2% year-on-year to $147 million, now accounting for 14.3% of total revenue—up from 10.4% in 2024. This acceleration isn't just about top-line growth; it reflects a structural shift. The company's focus on multiplay services—combining mobile, broadband, and digital platforms like Kyivstar TV and Helsi—is resonating. In Ukraine, Kyivstar's multiplay customers surged 40.7% to 6.1 million, while digital monthly active users hit 10.3 million, up 32.9%.

These metrics highlight a compelling value proposition: digital services offer higher margins and recurring revenue streams. For instance, Kyivstar's adjusted EBITDA rose 50.5% year-on-year to $140 million, underscoring the profitability of this shift.

Balance Sheet Strength: A Cushion Against Volatility

VEON's financial discipline is critical to sustaining this transformation. Its net debt dropped to $1.8 billion, with a net debt-to-EBITDA ratio improving to 1.2x—a stark contrast to the 1.9x level in 2023. This deleveraging, coupled with $1.8 billion in total cash, including $662 million at the corporate level, provides ample flexibility for strategic moves.

This metric's steady decline signals a balance sheet robust enough to absorb risks, whether from Ukraine's conflict or regulatory hurdles.

Strategic Moves: Building a Digital Empire in Ukraine

Kyivstar's Nasdaq listing via a business combination with Cohen Circle Acquisition Corp. I is the linchpin of VEON's ambitions. If approved, the $3.5 billion valuation would unlock capital for further digital expansion while boosting visibility in global markets. However, risks loom: the SEC's review of the Form F-4 filing could delay or derail the deal, and shareholder approvals are far from certain.

Meanwhile, Kyivstar's acquisitions—like the $155 million purchase of Uklon (Ukraine's leading ride-hailing platform) and its stake increase in Helsi—signal a clear strategy: dominate Ukraine's digital ecosystem. These moves reduce reliance on volatile macro conditions and position Kyivstar as a one-stop shop for connectivity, health, and mobility.

Risks: Geopolitics, Inflation, and Capital Hunger

The elephant in the room is Ukraine's ongoing conflict, which could disrupt Kyivstar's operations and deter foreign investment. Inflation, though easing, remains a wildcard, squeezing consumer spending on discretionary digital services.

Capex demands also loom large. Building out fiber networks and digital platforms requires sustained investment—$1.1 billion in 2024 alone, per management guidance. If economic conditions worsen, VEON might face trade-offs between growth and profitability.

The Investment Case: A High-Reward, High-Risk Play

VEON trades at a forward P/E of 6.2x, below its 5-year average of 8.5x and far cheaper than peers like Turkcell (P/E 10x) or Vodafone (P/E 9.5x). This valuation discounts both geopolitical risks and execution risks around the Nasdaq listing.

The stock has underperformed peers in 2025, but a successful Nasdaq listing could catalyze a re-rating. Near-term catalysts include:
- SEC approval of the Form F-4 filing (expected Q3 2025).
- Q2 2025 results, likely showing sustained digital growth.
- Helsi's expansion into neighboring markets, leveraging Kyivstar's brand equity.

Backtest the performance of VEON when 'buy on quarterly earnings announcement' and 'hold until 10% gain or 30 days', from 2020 to 2025.

Historically, a strategy of buying VEON on earnings announcements and holding until a 10% gain or 30 days would have resulted in a -34.65% return from 2020 to 2025. This approach faced extreme volatility (32.99%) and a maximum drawdown of -77.26%, with a negative Sharpe ratio (-0.23) underscoring its poor risk-adjusted performance. These results highlight the challenges of timing the stock around these events, reinforcing the need for a long-term view.

The stock has underperformed peers in 2025, but a successful Nasdaq listing could catalyze a re-rating.

Final Analysis: A Compelling Buy on Dips

VEON's digital pivot is no gimmick—it's a strategic realignment with $147 million in quarterly digital revenue and a fortress balance sheet. While geopolitical risks and execution hurdles are real, the company's focus on high-margin digital services and its Ukraine dominance make it a prime candidate for investors willing to stomach volatility.

Buy the dips below $4.50 (a 15% discount to its 52-week high), with a price target of $6.50 if the Nasdaq listing succeeds. The risks are clear, but the reward—owning a telecom disruptor in a digital-first world—may justify the bet.

Risks: Nasdaq listing failure, escalation of Ukraine conflict, inflation spikes.