VEON - Q3 2022

Transcript

Nik Kershaw (Group Director of Investor Relations)

Good morning and good afternoon, ladies and gentlemen, and welcome to VEON's third quarter trading update for the period ending 30 September 2022. I'm Nik Kershaw, VEON's Group Director for Investor Relations. I'm pleased to be joined in the room today by Kaan Terzioğlu, our Group CEO, as well as Serkan Okandan, our Group CFO. Today's presentation will begin with an operational overview from Kaan, followed by a financial review from Serkan, and then Kaan will come back and close before we move to the Q&A. All participants will be in listen-only mode, and the question and answer session today will be facilitated through the Q&A function in the web link. If you could please share any questions you have in the Q&A function, we will look to answer as many of the questions we can in the time allotted.

Before getting started, I would like to remind you that we may make forward-looking statements during today's presentation, which involve certain risks and uncertainties. These statements relate in part to the company's anticipated performance and operational guidance, future market developments and trends, operational network developments and network investments, and the company's ability to realize its targets and commercial and strategic initiatives, including current and future transactions. Certain factors may cause actual results to differ materially from those in the forward-looking statements, including the risks detailed in the company's annual report on Form 20-F and other recent public filings made by the company with the SEC. The trading update in the presentation can be downloaded from our website. With that, let me hand over to Kaan.

Kaan Terzioğlu (Group CEO)

Thank you, Nik. Once again, we started today with a song from Pakistan. We condemn the assassination attempt on Imran Khan and wish him quick recovery. Good morning and good afternoon to all, and welcome to the presentation of our third quarter trading update. The third quarter has been another quarter of solid operational execution, despite the numerous macro and geopolitical challenges. Our teams continue to show exceptional focus, and our business as a whole continues to deliver growth, as we will share with you in today's presentation. Before starting, I would like to thank all of our teams, especially our colleagues in Ukraine, who are keeping Kyivstar's customers and the broader communities connected at home and abroad. I would like to also thank our shareholders and investors for their continued confidence in our business.

You would also have seen our announcement from yesterday that VEON is conducting a competitive sales process in relation to its Russian operations. This is being done in a manner that we hope will ensure that an optimal outcome is achieved for all relevant stakeholders. Now, let's review some key figures for the third quarter. Group revenues grew by 3.6% year-on-year on a reported basis, with service revenue growth of 7.9%. In local currency terms, revenues grew up 3.4%, and service revenues were higher by 7.8%. Excluding Russia and Ukraine, our local currency revenue growth was up by 14.6%. Our mobile ARPU grew in all markets, supported by the implementation of inflationary pricing measures and execution of digital operator strategy.

EBITDA for the quarter was up 0.7% year-on-year in local currency and flat on a reported basis. Please keep in mind, Georgia contributed to results last year, having a -0.6 impact on reported year-on-year growth. With more subscribers, higher 4G penetration, and an expanded portfolio of digital services supporting multi-play conversion, we are driving revenue growth across our countries. With inflationary pricing and good cost management, our operations withstood tough headwinds, in particular the rising energy costs, changing tax regimes, and natural disasters in Pakistan and ongoing humanitarian crisis in Ukraine. Our CapEx intensity was down from 25.2% to 21.6%, a 3.6 percentage points year-on-year decline with a CapEx of $404 million in third quarter. We continue to prioritize maintaining a healthy cash position.

We have $3.3 billion in cash at the group level, and out of this, $2.6 billion at headquarters level, and our operations remain largely self-funded. Now, let's move on to our operational performance. We delivered another quarter of balanced growth as we expanded our total customer base, adding almost 1.7 million subscribers within the last twelve months, while increasing ARPU across all our markets at rates ranging from 1%-12% year-on-year. Our 4G users increased by 15%. With over 107 million 4G subscribers, we have expanded 4G penetration to almost 53%, and we continue to make progress towards the 70% penetration mark that is our target for the group. With significantly higher ARPU and lower churn, 4G users remain key to our growth.

Supported by increasing penetration of 4G, our data and digital revenues were up 14.9% year-on-year in local currency terms. This is almost double the pace of overall local currency service revenue growth. Our continued investment in 4G is an important enabler of this growth and our digital operator strategy, which I'll expand on the next slide. On slide 8, we will talk about our digital operator strategy execution. Our multi-play subscribers, who are users of at least one of our digital services on top of being a 4G data and voice customer, have increased 25% year-on-year and reached 33 million. They account for 21% of our subscriber base, but deliver 41% of our subscriber revenues, showing the high revenue generation potential of our digital operator strategy.

In the third quarter, ARPU of multi-play customers was 4.3 times the ARPU of voice-only users, while their churn was only 40% of the churn of voice-only users. Let's talk about the details of some countries. We achieved service revenue growth across all our operations, supported by a higher subscriber base, higher 4G penetration, increased engagement with our digital applications, and disciplined inflationary pricing. We also saw good momentum across most of our markets in terms of underlying EBITDA, which I will cover on the upcoming slides. Let me now take you through the individual performances of each of our large markets. I will start with Ukraine. Our team in Ukraine continues to do extraordinary work. They are doing a tremendous job keeping Ukraine connected and rebuilding the country's infrastructure. Around 90% of Kyivstar network sites are operational at the end of September.

Since February, Kyivstar has built around 400 new 4G base stations, upgraded around 1,200 base stations to 4G, and modernized around 4,800 4G base stations for higher throughput. In Q3 2022, 121 settlements were reconnected to the Kyivstar network. More than 250 damaged sites were repaired, and more than 11 km of broken fiber-optic cable were replaced. Supported by extraordinary effort maintaining the 4G network, Kyivstar continuously increased its 4G customer base, serving more customers with essential high-quality mobile internet connectivity. Outside of Ukraine, millions of Ukrainians continue to be supported by Kyivstar's roam-like-home services with the partnership of European operators and regulators in Ukraine and Europe. These services were extended until the end of this year, and we would like to thank all our partners and industry associations for their continued support.

Inside and outside of Ukraine, we have an unwavering focus on keeping our customers connected, as well as enabling them with access to essential services such as healthcare and education, while protecting their privacy and data. In August 2022, Kyivstar announced its investment in Helsi, Ukraine. Helsi is the country's largest medical information system and the leading digital healthcare provider with some 698,000 monthly active users on its digital app, making more than 550,000 appointments in September. In these exceptional circumstances, Kyivstar has delivered another quarter of solid results, with revenue growth of 5.2% year-on-year. Given the current operating environment, including increased energy tariffs, exceptional costs due to our employee support and charity programs, and the change of profile of our revenue streams, EBITDA in Ukraine was down 10.7% year-on-year.

Let's turn to Russia. The Beeline team continues to focus on providing essential connectivity services to its 46 million subscribers. 92% of our Russian revenues are related to provisioning of essential telecom services. Beeline recorded year-on-year growth in both service revenue and EBITDA. Total revenues were impacted by lower handset sales, which declined almost 6% year-on-year. Service revenues rose by 2.2% year-on-year, and EBITDA increased by 7.3% as margins expanded. Today, Beeline has 25.7 million 4G users, and 4G users account for 60% of Beeline Russia's total customers. Today, we announced that VEON has initiated a competitive process for potential sale of its Russian operations. While we have not committed to any particular outcome and cannot be certain yet how this process will develop, I want to emphasize that our priorities have not changed.

We are committed to keeping our customers connected and satisfied and supporting the safety and well-being of our employees. Let's have a look to Pakistan. Jazz is growing at double-digit pace with the total revenue up 12% year-on-year. This is ahead of overall market growth. This was achieved despite 5 percentage point increase in withholding tax and more than 40% reduction in mobile termination rates compared to last year, as well as overall macro challenges that range from the economic environment to recent floods. In the third quarter, local currency EBITDA was down 6.8% year-on-year. In addition to market impact of higher withholding tax and lower termination rates, year-on-year, EBITDA performance was impacted by 25% inflation, as well as a 140% increase in diesel prices and a 70 percentage point increase in electricity prices.

The higher utility prices had a drag of almost 6 percentage points on EBITDA margins. Despite these challenges, Jazz was able to achieve double-digit growth in Q3 with continued expansion of 4G users in its customer base and it is accelerating growth of multi-play customers as Jazz expands its digital operator offerings. As of the end of the quarter, Jazz has reached 54% 4G penetration in their customer base. 20% of subscribers are multi-play customers consuming at least one of our digital services like JazzCash and Tamasha. This 20% multi-play subscriber base accounted for 42% of our subscriber revenues in Pakistan. Focusing on growth of specific digital services, JazzCash expanded its monthly active user base by 20% year-on-year, reaching 16.7 million. The ARPU of users of JazzCash among Jazz subscribers is 40% higher than the average Jazz ARPU.

For Tamasha, monthly active users increased 5.4x year-over-year, reaching 3.3 million at the end of the quarter, and at the end of October, reaching 4.8 million after broadcast of the cricket tournament. Total watch time increased an impressive 22-fold year-over-year. With average daily users up 4.2x, reaching almost 500,000. Tamasha users ARPU is 2.5x-4x times higher than the average Jazz ARPU. In Q3, the growth of data and digital revenue in Pakistan was 26.5%, driven by higher use of our digital application and increase in number of multi-play users. It is great to see market share gains in Pakistan. Let's move to Kazakhstan. This was the sixth consecutive quarter of more than 20% top-line growth for Beeline Kazakhstan.

Our team continues to gain market share and maintain leadership in Net Promoter Score. With 69% penetration of 4G users in its customer base, Kazakhstan has nearly reached the group target of 70%. This strong 4G penetration continues to contribute to exceptional performance in revenue and EBITDA growth. Last year's third quarter EBITDA performance was positively impacted by a government grant for radio frequency taxes. Adjusting for this, Beeline Kazakhstan's EBITDA grew by 17.8% year-on-year. Growth of data and digital revenue was 25.3% for the third quarter, driven by higher use of digital applications and an increase in the number of multi-play users. The rising penetration of Beeline Kazakhstan multi-play base and successful monetization of 4G as a whole has pushed ARPU higher by almost 11% year-on-year.

Once again, our digital operator strategy is delivering results, and Beeline Kazakhstan's portfolio of digital services continues to develop. The financial services offering Simply has reached 159,000 monthly active users since its launch in June 2021, and BeeTV now exceeds 634,000 monthly active users. We continue to gain market share in Kazakhstan, Bangladesh. Our decision to accelerate the network investments in Bangladesh continues to deliver results. For the second consecutive quarter, Banglalink recorded double-digit growth of quarterly revenues at 11.6% year-on-year. With its 4G focus strategy and growth rates that are twice what the overall market in Bangladesh is seeing in the first nine months of the year, Banglalink continues to gain market share and transform the market. In the third quarter, our 4G subscriber base up 31.7%, reaching nearly 15 million.

Over the past two years, our 4G penetration almost doubled from 21% to 41%. Driven by higher revenue generation of our 4G users, data revenues increased by 21.4%. Within the 4G customer base, multi-play customers are also growing significantly, accounting for 11% of subscribers and 23% of subscriber revenues. Ongoing expansion in the user bases of Toffee and MyBL healthcare application and their conversion into 4G customers will be among the key drivers of Banglalink future growth. Uzbekistan. Beeline Uzbekistan has delivered another quarter of more than 20% revenue growth and remains the market leader in terms of subscriber market share. In Q3, revenues grew 22.4%. Both revenue and EBITDA were impacted by a number of one-off items.

Adjusted for these one-offs, revenues increased by 27.7%, service revenues grew by 27.9%, and EBITDA was 17.1% higher. 4G subscribers crossed the 5 million milestone, with 4G penetration at 64%, a 7 percentage point increase year-on-year. This in turn supported a 40.8% increase in data and digital revenues, which are key drivers of our overall performance. Let's have a look at our digital products. On the fintech side, JazzCash increased its active user base by 20% year-on-year, serving 16.7 million customers and now also serving more than 160,000 merchants, up by 82% over last year. The total number of transactions processed by JazzCash in the third quarter reached 522 million, 8.7% higher versus last year.

Gross transaction value for the last twelve months was close to PKR 3.99 trillion, which is almost 30% year-on-year growth. This transaction volume represents approximately 6% of Pakistan's 2022 GDP. Looking at entertainment services, Banglalink's Toffee is the number one entertainment platform in the country. It grew 11% year-on-year, and enjoys increasing engagement rates, with daily active users increasing 55.1% year-on-year to reach 3.3 million. Football lovers from all across Bangladesh will be able to watch the live stream of all FIFA World Cup matches this year on Toffee from any network with any internet connection. Similar high engagement trends are also visible in the performance of Tamasha, the largest homegrown video streaming platform in Pakistan.

Tamasha now has 3.3 million monthly active users as of Q3 end, a 5.4-fold increase year-on-year, with increasing levels of customer engagement. In October, Tamasha brought high definition and exclusive ad-free streaming of the Cricket World Cup to all mobile subscribers in Pakistan, which contributed to the further growth of its monthly active user base, reaching 4.8 million end of October. In Kazakhstan, our Simply offering has reached almost 160,000 monthly active users, and overall fintech business achieved more than 1.5 million monthly active users. The total value of transactions grew 3.5-fold year-on-year to KZT 74 billion tenge. I am very happy to see the traction with our digital services and execution of our digital operator strategy.

Let me pause here and hand the call over to Serkan to discuss our third quarter financial results in more detail.

Serkan Okandan (Group CFO)

Thanks, Kaan. Good morning and good afternoon to all the participants. On the following slides, I will elaborate on the financial highlights for our third quarter and nine months results in more detail. For the first nine months of 2022, we reported solid local currency growth in both revenues and EBITDA. Service revenues and EBITDA were up by 4.7% and 2.8% year-on-year in reported currency, respectively. As we noted previously, CapEx for this year will be lower than we originally anticipated and also lower than last year. For the first nine months, CapEx was $1.2 billion, down by 8.4% year-on-year. Moving now to slide 19, which covers the same metrics but for the third quarter.

Similar to the nine months results, we saw strong local currency performance in revenues, while group EBITDA year-on-year performance was impacted by a number of extraordinary non-recurring items in the third quarter this year and in the third quarter last year, as noted in the country performance section or the trading updates. Excluding these one-off items, group EBITDA increased by 1.9% year-on-year in local currency. On the coming slides, I will discuss the quarterly performance in more detail. Moving first to revenues on slide 20, third quarter saw solid service revenue performance across all our markets, especially with Kazakhstan, Uzbekistan, Kyrgyzstan, Bangladesh, and Pakistan all delivering double-digit growth. In Ukraine, we achieved 5.2% year-on-year revenue growth despite the current operating environment. As Kaan already mentioned, this is a testament to our team in Ukraine.

In Russia, reported revenue was negatively impacted by lower handset sales due to supply chain issues, while service revenues were up by 2.2% year-on-year. Our non-telecom related revenues in Russia continued to decline and constituted 7.9% of total group reported revenues in the third quarter this year versus 10.4% in Q3 last year. In Pakistan, revenues were up by 12% year-on-year. This strong revenue growth in Pakistan comes despite the negative impacts of changes in taxation legislation and the reduction in mobile termination rates. Overall revenue performance for the quarter was supported by strong 4G adoption, continued increasing usage of our digital services and various pricing initiatives. Moving on to slide 21, which outlines our EBITDA performance in greater detail.

Local currency EBITDA was up by 0.7% year-on-year, although this was impacted by a number of one-off items which Kaan has already covered. The underlying performance remains balanced, and adjusting for these one-off items, normalized EBITDA would be up by 1.9% year-on-year, which is an encouraging result considering the headwinds we face. Uzbekistan, Kyrgyzstan, Pakistan and Russia all reported strong local currency EBITDA growth. It is important to note that the EBITDA growth in Russia now marks the sixth consecutive quarter of year-on-year growth. Similar to the first and the second quarters, energy costs remain a challenge in multiple countries. Energy costs rose by around 44% year-on-year, which is a significant increase for this expense line.

However, inflationary pricing and good cost management have enabled us to withstand rising energy costs, changing tax regimes, natural disasters in Pakistan, and the humanitarian crisis in Ukraine. Turning now to slide 22, I will cover some important balance sheet metrics. Our total cash position stands at $3.3 billion, with $2.6 billion at the headquarters level. This is held in both U.S. dollar and euro, and highlights the group's continued strong liquidity position. Regarding the Algeria put option, the transaction was officially closed in August upon receipt of $682 million. Our leverage ratio was largely impacted by the quarter-on-quarter decrease in net debt due to cash received from the sale of Algeria, as well as the depreciation of ruble, Pakistani rupee, Bangladeshi taka and euro against U.S. dollar during the quarter.

At the group level, gross debt was largely attributed to the quarter-over-quarter depreciation of the same local currencies, resulting in lower reported currency levels of bonds, bank loans, and lease liabilities denominated in these currencies. I would point out that at the headquarters level, our net debt is around $3.3 billion. You will also have seen the announcement that VEON Ltd. invited non-2023 bondholders to contact VEON Ltd. in order to engage in discussions with them. We will update the market further on this in the coming weeks. Moving now to slide 23, which shows our debt and liquidity positions in more detail. Our gross debt excluding leases decreased to $8.3 billion, with a total cash position of $3.3 billion.

As I previously mentioned, $2.6 billion of total cash is at the HQ level. While we are aware of the negative cost implications of carrying such a large cash balance, we believe that this is a reasonable and justified considering the current volatile situation. Our net debt currently stands at $5.1 billion excluding leases, with $3.1 billion in capitalized leases. Looking at the currency breakdown, 43% of net debt before leases and 75% of our leases are denominated in ruble. Moving now to slide 24, which summarizes the debt and liquidity of our operations in Russia. Gross debt excluding leases is $2.5 billion, of which about $900 million represents intercompany debt to HQ. Leverage excluding leases is 1.5 times.

After adjusting for capitalized leases of $2.3 billion, the leverage ratio in Russia is 2.27 times. Moving to slide 25. Here we outline the group's debt maturity schedule. As you can see from this chart, our maturity schedule for the near term is manageable, and we have no further material repayments at the HQ level for the remainder of 2022. The RCF, which we drew down earlier this year, can be rolled each period until final maturity in 2024 and 2025. Our next obligation is a $529 million bond maturing in Q1 next year, followed by a $700 million bond in the second quarter of 2023. You can also see on the left side of the slide that our current cash position is $3.3 billion.

It is important to note that we continue to meet all our legal obligations for all interest and principal payments due on our debt in a timely fashion. Moving to slide 26, which details changes in our cost of debt and average debt maturities. The increase in our cost of borrowing through to first quarter this year was due to increase in local currency funding, which was focused on aligning currencies of our debt with revenues in respective operations. In the third quarter, cost of debt continued to decline to 6.8%, impacted by the drawdown of the RCF in U.S. dollar in the previous quarter. However, rising interest rates globally will put further pressure on our cost of funding in local currency, which have floating interest rate portions as well. Our average debt maturity remains at around three years if the RCF is rolled over until maturity.

Let me now hand over back to Kaan for closing remarks.

Kaan Terzioğlu (Group CEO)

Thank you, Serkan. Let me close our presentation with a reminder of our priorities. As I have reiterated each quarter this year, protecting our people continues to be the number one priority of our group. We are providers of an essential humanitarian service, helping keep more than 200 million customers in seven countries connected. Throughout these challenging times, we will continue to protect the good standing of our company, seeking to maintain appropriate liquidity and capital structure. More on this will be disclosed in the coming weeks. All of our businesses continue to deliver as we successfully transition to becoming an asset-light digital operator. Our active portfolio management has enabled us to further concentrate on markets with significant growth capacity that will have a critical mass of potential customers and regulatory frameworks that are conducive to the digital operator model.

We maintain our focus on monetizing the tower assets and becoming an asset-light operator. In certain countries, we are already at an advanced stage of this process, having preliminary discussions with potentially interested parties on our tower portfolios. As I already mentioned in the beginning, you would also have seen our announcement from yesterday that we are conducting a competitive sales process in relation to our Russian operations. At this moment, we would not be able to discuss the details of any additional detail on this process. With that, I would like to thank you for your attention, and I will hand over to Nik so that we can move to the Q&A session.

Nik Kershaw (Group Director of Investor Relations)

Thank you, Kaan. We have received a number of questions already through the webinar. Please, if you have any additional questions, please submit them through. We'll do our best to answer as many as we can. Those we don't cover, we'll come back to on an individual basis. Actually, Kaan, the first question for you is why is VEON making this divestment of Russia now, and has this been prompted by any sort of government request?

Kaan Terzioğlu (Group CEO)

Thank you. Thank you for the question. The answer is a clear no. This is not being pushed for a certain type of a decision. We are taking a business and commercial decision, and we basically announced a process, a competitive process that has been ongoing. It's also important to understand that we will make the best interest of company decisions for all stakeholders, including our shareholders, creditors, employees, business partners, and every person that is doing business in Russia with us. I am clearly excited with one fact. Over the last three years, we have built a strong, successful business in Russia. I'm glad to see multiple parties from the spectrum of competitors to Russian businessmen and also our management to be excited about this opportunity. We will run this competitive process, and we will keep the market posted with any other developments. Thank you.

Nik Kershaw (Group Director of Investor Relations)

Thanks, Kaan. Serkan, it's a question for you. Would you consider buying back your longer-dated bonds given the current pricing?

Serkan Okandan (Group CFO)

Thank you, Nik. As we have also discussed in our second quarter results earnings call, our recent priority is to keep a strong liquidity position at the group level, for which we have further increased our cash balance at the HQ level to $2.6 billion at the end of the third quarter. In the meantime, we are also currently evaluating various options around our overall capital structure.

Nik Kershaw (Group Director of Investor Relations)

Thanks. Kaan, back to you. Could you maybe give us an update on the status of the tower transactions?

Kaan Terzioğlu (Group CEO)

Sure. About a year ago, we sold our towers in Russia, and since that disposition, we still have almost 36,000 towers in our portfolio, mostly concentrated in Bangladesh, Pakistan, Kazakhstan, and Uzbekistan and Ukraine. Now, clearly, we have been on this tower potential monetization process, talking to various parties. As I mentioned before, some of these, especially in Pakistan and Kazakhstan, have come to quite a long process to coming to an end. We will continue sticking to our strategy of being an asset-light operator. I strongly believe that towers is not an asset that needs to be owned by the telecom operators. Independent tower companies are much better positioned to create optimization of costs as well as multi-tenancy execution on the sales side. We will stick to that strategy.

Nik Kershaw (Group Director of Investor Relations)

Thanks. Kaan, another question for you. Can you maybe comment on the ability to increase pricing? I think that's particularly relevant in the current environment where we're seeing increasing inflation across the globe.

Kaan Terzioğlu (Group CEO)

Clearly, the macroeconomic environment around the world is having inflationary impact all around the countries. For us, when we look into a market and making market investment decisions, we look to markets with specific criteria. In addition to markets having demographic dividends, population growth, low penetration of services, technology, 4G, openness to adjacent markets to us to be a player, one additional criteria is retail price controls. We will see retail price control capability and our execution capability of inflationary pricing as a must-have in terms of a market criteria. So far, I am very happy with the performance on this. Inflationary pricing is not presented as, you know, just increasing the prices, but also moving to a more for more strategy. We provide more cricket, more football, more music, more financial services, and we access the additional volume share in the markets that we operate.

So far, I am happy with the execution.

Nik Kershaw (Group Director of Investor Relations)

Thanks. Serkan, back to you. Just have you been able to make any interest payments from Russia on the intercompany debt? Could you maybe just update us on the quantum of the current intercompany debt?

Serkan Okandan (Group CFO)

Thank you, Nik. Regarding the interest payments, during the second quarter of this year, we applied for a license to the Ministry of Finance in Russia. After obtaining the required licenses from the Ministry, we received an interest payment on the intercompany debt from VEON coming through to second quarter. However, in Q3, we haven't received interest payments from Russia. Regarding the quantum of the intercompany debt, following the novation of two commercial loans from HQ level to VEON telecom level in the second quarter, and also recent netting off all various intercompany positions in the first quarter, at tenth of September, the approximate overall outstanding intercompany debt to HQ is around RUB 50 billion, on which we are charging floating and some parts of it fixed interest.

Payment of interest on these intercompany loans remains subject to obtaining required approvals from the Ministry of Finance in Russia.

Nik Kershaw (Group Director of Investor Relations)

Thank you. Kaan, could you maybe update us on some of the process around restructuring the ownership of Kazakhstan?

Kaan Terzioğlu (Group CEO)

Kazakhstan is a market which is actually mimicking our strategy in an excellent way. If you look to Kazakhstan, we have four important businesses running in parallel. One, on one side we have our towers company, which is established this year owning our towers. We have our, a company where we have 50% market shareholders, the fiber business. On the other side, we have our telecom operations, KaR-Tel, and our Fintech company. I am happy with this performance of all companies in this picture. We will continue executing our strategies in terms of being an asset-light company in Kazakhstan, but we have no intentions to sell Kazakhstan. It is one of our blue-chip markets, and we will address this issue in line with our process in Russia.

Nik Kershaw (Group Director of Investor Relations)

Thank you. Kaan, another question for you. Would you consider sort of individual listing considerations such as Pakistan?

Kaan Terzioğlu (Group CEO)

Jazz in Pakistan, Banglalink in Bangladesh, these are blue chip brands, and I'm sure you know, the investors in these countries are dying to be, to own part of these brands. So we will be keeping an open mind into this, and we will explore if there are enough interest in these markets for us to look for local IPOs. Again, nothing decided at this moment, but we will keep the markets updated about this.

Nik Kershaw (Group Director of Investor Relations)

Thank you. Serkan, could you maybe just update us about why you are engaging with bondholders?

Serkan Okandan (Group CFO)

Let me take one step back on this subject. Over the last eight months, since February this year, we have successfully strengthened our HQ liquidity position. This still remains a very key priority for us going forward. In addition to that, we leverage our local operating companies, which continue to be largely self-sufficient from their financing perspective. In the meantime, we have also made good progress optimizing HQ capital structure for the longer term. Taking into consideration the challenges that we may face in the local markets in the current environment, this is very important for us to have a longer-term perspective.

In this context, we would like to engage in discussions with our bondholders or our indirect subsidiary, VEON Holdings B.V., only for the '23 notes, which I mentioned that they will be due in April and February next year, and explore alternatives for the group.

Nik Kershaw (Group Director of Investor Relations)

Thank you. What will you be proposing to bondholders?

Serkan Okandan (Group CFO)

Actually, VEON Ltd., which is in discussions with the 2023 bondholders. First, we intend to discuss this with the larger holders of our 2023 bonds on a private and restricted basis. As soon as such discussions conclude, then we expect to be in a position to update the markets in the coming weeks.

Nik Kershaw (Group Director of Investor Relations)

Thanks, Serkan. Sorry, one more question on the same topic. Just, I mean, are you looking to refinance and, you know, what are you doing around this, and what will happen if you can't reach an agreement with the bondholders?

Serkan Okandan (Group CFO)

In the current circumstances, Nik, it would be very difficult for VEON to access the debt and capital markets, for a variety of reasons, as you know. Hence, refinancing is currently not feasible, from our perspective. Therefore, these discussions relate to our short-term '23 notes only, not the longer one, which represent approximately $1.2 billion of our total debt. Since VEON Ltd.'s discussion with the larger bondholders still ongoing at this stage, we cannot comment in further detail, but we are confident that we can reach a mutually agreed solution with the bondholders.

Nik Kershaw (Group Director of Investor Relations)

Thanks very much. Thank you very much everyone for your time today and for the questions you submitted. I know there are one or two more questions that have come through which we will get back to you individually after this call. I think we're out of time. Thank you very much for your time, and appreciate you dialing in. Thank you.