VEON's 5G Pilot: Assessing the Infrastructure Bet for Ukraine's Post-War S-Curve

This 5G pilot is not a near-term revenue play. It is a deliberate, long-term bet on the infrastructure layer for Ukraine's post-war digital S-curve. The technical validation in Lviv is a critical first step, with peak speeds exceeding 2.4 Gbps in real-world urban conditions. That performance benchmark is the foundation for a paradigm shift, enabling the high-bandwidth applications that will drive future economic growth.

VEON's commitment frames this as a mission, not just a business plan. The company has pledged $600 million over three years to rebuild Ukraine's telecom infrastructure. This is a capital-intensive, multi-year build-out aimed at restoring and advancing the nation's connectivity backbone. The goal is to ensure that as Ukraine recovers, its digital infrastructure is not merely restored to pre-war levels but leapfrogs ahead, creating the rails for exponential adoption of new technologies.

This aligns with VEON's broader evolution from a traditional telecom operator to a digital infrastructure provider for the next paradigm. The strategy is clear: by investing in the fundamental connectivity layer now, the company positions itself to capture value as the next wave of digital services-smart cities, advanced IoT, and AI-driven applications-ramps up. The pilot in Lviv is the initial test of that future-proofed network, a necessary validation before the full-scale rollout planned for later this year and beyond. The bet is on the adoption curve, not the current quarter.

Financial Reality: Core Growth vs. Strategic Capex

The financial picture for Kyivstar is robust in the near term. In the third quarter of 2025, the operator reported revenue of ₴12.3 billion ($297 million), a 20.9% year-on-year increase. Its EBITDA rose even faster, up 21.5% to ₴7.1 billion ($171 million). This performance, driven by a growing digital user base and strong operational execution, shows a core business that is not only recovering but accelerating. The company's digital services, which now contribute nearly 12% of its revenue, are a key growth engine, with monthly active users surging 49.4% to 13.5 million.

This solid foundation supports VEON's broader strategic push. The parent company's direct digital revenue grew an impressive 63.1% year-on-year in the same quarter. Yet, it is crucial to note that Kyivstar's 5G pilot in Lviv is not yet a material contributor to these headline figures. The pilot is a validation exercise for a future infrastructure layer, not a current profit center. The significant capital deployment is still in the early, pre-rollout phase.

The scale of the investment required is clear from the company's own roadmap. Kyivstar has initiated a large-scale network modernization project that will run throughout 2025–2026. This multi-year build-out is focused on enhancing 4G capacity and preparing the physical infrastructure for 5G. The goal is to upgrade the heaviest-traffic sites first, with early results showing a 30% average increase in data transfer speed. This sets the stage for the planned nationwide 5G rollout later this year. The investment is substantial, but it is being made against a backdrop of strong core cash generation, allowing the company to fund this strategic capex without immediate strain. The financial reality is one of balancing today's growth with tomorrow's paradigm shift.

The Future-Proof Stack: Partnerships and the Open RAN Ecosystem

The true test of VEON's 5G bet lies not just in peak speeds, but in the scalability and resilience of the underlying network architecture. The company's strategy here is to build a future-proof stack, and its recent partnership with Rakuten Symphony is a key move toward that goal. The two signed a Memorandum of Understanding to explore cooperation, with a stated aim of creating "a robust and future-proof telecommunications infrastructure". This collaboration specifically targets open radio access network (Open RAN) solutions, a technology that promises greater flexibility, vendor diversity, and faster innovation cycles compared to traditional, proprietary systems.

This partnership is more than a technical choice; it is a strategic alignment with Ukraine's national reconstruction. By joining forces with Rakuten, VEON leverages the Japanese conglomerate's digital services expertise alongside its own telecom assets. Rakuten's instant messaging app, Rakuten Viber, is already a leading communication tool in Ukraine, providing a deep user base and engagement. This creates a powerful ecosystem play: a modern, open network layer can seamlessly integrate with established digital services, accelerating the adoption of new applications and creating a sticky user experience from day one.

The pilot in Lviv's historical center serves as the initial real-world test for this stack. The goal is to evaluate performance under complex urban conditions, a necessary step before scaling. The expansion plan is deliberate, with pilots set to move to Kharkiv and Borodianka next, before a broader rollout to Kyiv and Odesa later in 2026. This phased approach allows for iterative learning and problem-solving, ensuring the network can handle the demands of Ukraine's most populated areas. The partnership with Rakuten, focused on Open RAN, is designed to make this expansion faster and more adaptable, building the foundational rails for the next digital S-curve in a country that is rebuilding from the ground up.

Catalysts, Risks, and the Post-War Adoption Curve

The path from a successful pilot to a transformative adoption curve is paved with specific milestones and significant uncertainty. The primary catalyst is the phased rollout itself. The completion of the Lviv pilot, followed by expansions to Kharkiv and Borodianka, will provide critical data on scaling performance and user engagement. The ultimate test is the planned availability in Kyiv and Odesa later in 2026. Each step validates the network stack and builds the user base necessary for the next phase of exponential growth in digital services.

Yet the most critical risk is also the most fundamental: the timeline for a full-scale rollout is explicitly contingent on the end of the war. The company's own statement notes that a full-scale 5G rollout across the country will only be considered after end of the war. This introduces profound political and operational uncertainty, directly linking the infrastructure bet to a variable that is outside VEON's control. The investment is a long-term play on Ukraine's post-war digital S-curve, but the start of that curve is itself uncertain.

For investors, the near-term catalyst is clear. VEON's Q4 2025 results, scheduled for March 16, 2026, will be the first major update since the pilot launch. The focus will be on capex allocation, specifically progress against the $1 billion investment commitment through 2027. Management's commentary on the pace of the network modernization project and the integration of the Rakuten partnership will signal whether the foundational work is on track to support the planned 2026 city-by-city rollout. This earnings call is the first concrete check on whether the strategic vision is translating into physical and financial execution.