What happened
Beeline, VimpelCom, Veon (VEON 2.80%) -- what do these three things have in common? They're the three names that have been used to refer to one of Russia's largest cellphone providers -- before the arrival of Vladimir Putin in the Kremlin, at least. And before the war in Ukraine.
Ever since Putin took the presidency, however, and especially ever since he sent Russian troops and tanks into Ukraine, Veon has been distancing itself from its Russian roots. In 2010, for example, Veon moved its headquarters entirely out of Russia, to Amsterdam, and in 2017, it officially changed its name to Veon.
Now, Veon is cutting ties with Russia entirely -- and as of 10:55 a.m. ET, its stock is up 29%.
NASDAQ: VEON
Key Data Points
So what
Veon broke the news on Thursday that it will sell all of its Russian assets to the local management of VimpelCom, headed by VimpelCom CEO Alexander Torbakhov.
Veon will receive 130 billion Russian rubles in payment for the assets, which are valued at 370 billion rubles, and which generated revenue of 339 billion rubles over the past year, and earnings before interest, taxes, depreciation, and amortization (EBITDA) of 115 billion rubles. And granted, getting just 1.1 times EBITDA doesn't sound like a great price for Veon -- for comparison, AT&T stock sells for more than 5 times EBITDA, and Verizon Communications stock fetches more than 7 times.
But on the plus side, at least Veon is getting something for its Russian assets, which might otherwise remain locked up and sanctioned inside Russia for the foreseeable future.
Now what
Now what will Veon look like after its Russian divestiture? Veon says the bulk of the price it's getting from VimpelCom will come in the form of the latter assuming and paying off Veon debts to Russian creditors. That should reduce Veon's debt load (currently $12.6 billion, according to data from S&P Global Market Intelligence) by about $2.1 billion, resulting in Veon remaining $10.5 billion in debt (or $8 billion in net debt, after cash on hand is taken into account).
Added to Veon's current $1.3 billion market capitalization, that works out to Veon-minus-Russia having an enterprise value of about $9.3 billion -- about 2.4 times Veon's 2021 non-Russian revenue of $3.8 billion -- or about 4.9 times Veon's 2021 non-Russian EBITDA of $1.9 billion.
That's a valuation closer to (but still much less than) what telcos like AT&T and Verizon fetch, and for a company that will now operate mainly in developing nations such as Pakistan, Ukraine, Kazakhstan, Bangladesh, and Uzbekistan.
Ultimately, whether today's news is good or bad for Veon shareholders depends on just one question: Do you want to be invested in telecom growth in these countries, knowing that growth in Russia is no longer an option, or not?
