VEON's 2Q25 Earnings: A Digital Operator's Surge in Frontier Markets

VEON Ltd. (NASDAQ: VEON) has emerged as a compelling case study in the evolution of digital operators in frontier markets. The company's second-quarter 2025 earnings report underscored its transformation from a traditional telecom provider to a diversified digital services powerhouse, with direct digital revenue surging 56.6% year-on-year to $180 million. This growth, coupled with resilient EBITDA margins and strategic capital allocation, positions VEON as a high-conviction investment in a $1.2 trillion frontier-market digital economy.

Digital Revenue Diversification: A New Growth Engine

VEON's direct digital revenue now accounts for 16.5% of total revenue, up from 5.4% in 2024, reflecting a deliberate pivot toward high-margin services like mobile money, cloud infrastructure, and AI-driven analytics. The 56.6% YoY growth in this segment—62.4% in local currency—demonstrates the company's ability to capitalize on digital adoption in markets where smartphone penetration and e-commerce are accelerating. For context, would highlight its outperformance, particularly in regions like Central Asia and Eastern Europe.

This diversification is critical. While traditional telecom services remain a stable cash flow generator, digital services now contribute disproportionately to profitability. With VEON's revised 2025 guidance projecting 13–15% local currency revenue growth and 14–16% EBITDA growth, the company is proving its ability to scale digital offerings without sacrificing margin discipline.

EBITDA Resilience and Capital Efficiency

VEON's EBITDA of $520 million in 2Q25—a 13.2% increase in reported currency and 19.6% in local currency—highlights its operational efficiency. The company's capex of $231 million, or 21.3% of revenue, is notably lower than industry averages, enabling reinvestment in high-impact projects like the Uklon acquisition, a Ukrainian ride-hailing and logistics platform. This strategic move not only expands VEON's digital ecosystem but also taps into the $300 billion e-commerce and mobility market in Eastern Europe.

Moreover, VEON's LTM equity free cash flow of $611 million provides flexibility for further innovation and shareholder returns. The completion of its $100 million share buyback program in 2Q25 signals a commitment to capital efficiency, a factor that may attract long-term investors seeking undervalued growth stocks.

Institutional Confidence: A Mixed but Manageable Picture

Institutional ownership data for Q2 2025 reveals a nuanced landscape. While heavyweights like Gamma Investing LLC and Citigroup Inc. reduced stakes by 97.8% and 92.0%, respectively, others—including Lingotto Investment Management and Wellington Management—increased holdings by 2.6% to 22.3%. This divergence reflects divergent views on VEON's risk profile. However, the net effect is less concerning than it appears: the outflows from Gamma and Citigroup were largely offset by inflows from institutions with a long-term growth mandate.

The share buyback program, which repurchased 722,588 ADSs for $35 million in 2Q25, may also be influencing institutional sentiment. By reducing the float and signaling management's confidence in intrinsic value, such programs often stabilize share prices during periods of volatility.

Long-Term Value in Frontier Markets

The broader context is equally compelling. Frontier markets, home to over 2 billion people, are projected to grow their digital economies at a 12% CAGR through 2030. VEON's deep local partnerships, regulatory expertise, and digital infrastructure give it a first-mover advantage in sectors like mobile payments and cloud services. For example, its mobile money platforms in Uzbekistan and Kyrgyzstan now serve over 10 million users, a testament to its ability to scale in underpenetrated markets.

Investors should also consider macroeconomic tailwinds. As global capital seeks higher returns beyond developed markets, VEON's hybrid model—combining telecom infrastructure with digital services—offers a unique value proposition. The company's ability to generate recurring revenue from both B2C and B2B segments further insulates it from cyclical risks.

Investment Thesis and Risks

VEON's stock trades at a discount to its peers, with a P/E ratio of 8.5x versus the industry average of 12x. This valuation gap reflects lingering concerns about geopolitical risks in its operating regions. However, the company's debt reduction progress (net debt/EBITDA of 1.8x) and digital revenue diversification are narrowing this gap.

For investors with a 3–5 year horizon, VEON presents a high-conviction opportunity. The key risks include regulatory shifts in frontier markets and execution risks in scaling digital services. However, the company's track record of navigating complex environments—such as its successful integration of Uklon—suggests it is well-equipped to manage these challenges.

would illustrate its outperformance, reinforcing the argument that its digital transformation is already translating into market recognition.

Conclusion

VEON's 2Q25 results validate its strategic pivot toward digital services and frontier-market growth. With direct digital revenue growing at nearly 60% YoY, EBITDA margins holding strong, and a capital structure optimized for reinvestment, the company is well-positioned to capitalize on the $1.2 trillion frontier-market digital economy. While institutional outflows in Q2 highlight the need for caution, the net inflows and buyback program suggest that long-term investors are beginning to recognize its potential. For those seeking exposure to high-growth digital operators with margin resilience, VEON offers a compelling, albeit not without risk, investment case.