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Veon’s exclusive employees in air raid shelters keep Ukraine’s largest mobile network running – CEO

FILE PHOTO: The logo of Ukrainian telecommunications company Kyivstar is pictured at the company's headquarters in Kyiv
FILE PHOTO: The logo of Kyivstar, one of Ukraine’s largest telecommunications companies, is pictured at the company’s headquarters in Kyiv, Ukraine March 3, 2016. REUTERS/Gleb Garanich/File Photo

March 18, 2022

By Supantha Mukherjee and Toby Sterling

STOCKHOLM/AMSTERDAM (Reuters) – Thousands of employees at telecom operator Veon are working from air raid shelters in Ukraine and transporting equipment to border areas to maintain a digital lifeline for war refugees, the company’s chief executive said on Friday.

Their work has helped keep around 85% of Veon’s telecom network in Ukraine operational since the February 24 invasion of Russia, Veon CEO Kaan Terzioglu said in an exclusive interview with Reuters. But other risks arise from both the power shortage and the conflict itself.

Veon, listed on the Amsterdam Stock Exchange, operates Ukraine’s largest mobile operator under the name Kyivstar with 4,000 employees and a 25% market share.

Terzioglu, speaking from the Netherlands via Zoom conference call, described how the company is dealing with war, sanctions and financial concerns at the same time.

Terzioglu provided a lens through which a company provides a telephone network to a rapidly expanding diaspora.

Employees “are practically working out of shelters and as soon as they have the opportunity, they go out into the field to do maintenance,” Terzioglu said.

The parts of the network that aren’t working are mainly due to power outages and are not being attacked by Russian forces, he said. To get these parts back in order, workers had to pipe gas to generators, which Terioglu described as “one of the most logistically tough jobs our people try to do.”

Russia’s attack, which Moscow has dubbed a “special operation” to demilitarize the country, has killed hundreds of civilians, reduced urban areas to rubble and sparked a humanitarian crisis. Russia denies attacking civilians in the country of about 44 million people.

More than 3.2 million people have fled and another 2 million have been internally displaced, United Nations data shows.

Using cell phone data, Terzioglu estimated that 4 million refugees had left and 10 million had been displaced.

Besides opening its offices as refugee shelters, Veon has also been topping up mobile accounts for free, said Terzioglu, who became CEO of Veon Group last July. In his previous role as CEO of Turkcell, he dealt with the Syrian refugee crisis.

Veon has also received support from American, Chinese and European companies in the technology and telecommunications industries. While operators like Orange, Tele2 and Vodafone waive interconnection and roaming charges, device manufacturers like Huawei and ZTE help with network maintenance. These and companies like Ericsson, Nokia, Microsoft Corp and Oracle Corp have made a “heroic effort” to keep the networks running, Terzioglu said.

RUSSIAN CONNECTION

Veon also owns the second largest telecommunications network in Russia, operating under the Beeline name, its most profitable market. That means Veon has to manage the impact of sanctions and political concerns on both sides of the border.

Veon has about 29,000 employees in Russia and the company has taken steps to operate its Ukrainian and Russian businesses separately.

The company has also been quick to distance itself from Russian oligarch Mikhail Fridman, whose investment vehicle LetterOne holds a 47.9% stake in Veon and an additional 8.3% economic stake through a Dutch foundation.

The European Union imposed sanctions on Fridman on February 28, a decision he said he was fighting.

Terzioglu said Fridman, who resigned from Veon’s board on February 28 and LetterOne’s board on March 3, now has “no commercial interest in LetterOne”.

LetterOne, which did not respond to a request for comment, said on March 3 that Fridman’s assets had been frozen and that he had been stripped of his shareholder rights.

Terzioglu said he couldn’t speculate on whether the company could eventually face EU sanctions or nationalization by the Russian government, but hoped it would be banned on humanitarian grounds.

“We will do our best to position it as an essential service,” he said.

Veon also faces financial concerns, with its shares down 56% year-to-date and its dollar-denominated debt — $5.4 billion at the end of 2021 — trading at distressed levels.

On March 4, Fitch downgraded the company’s credit rating to junk status, saying Russia and Ukraine together accounted for 62% of its $3.3 billion earnings before interest, taxes, depreciation and amortization (EBITDA) in 2021.

Russian capital controls and the war meant the company might not be able to move funds in or out of either country.

The company has issued several updates to reassure investors that it remains liquid, with $2.1 billion in cash at the end of February, including $1.5 billion in the Netherlands.

Terzioglu said he was aware of reports of a group of bondholders seeking talks and welcomed the opportunity to reach out to them, although none have reached the company so far.

“Having them organized gives us an opportunity to explain why they shouldn’t be worried and that we are well funded to meet our commitments,” he said.

(Reporting by Supantha Mukherjee in Stockholm and Toby Sterling in Amsterdam; Editing by Kenneth Li and Grant McCool)

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DUSTIN JONES

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