VEON 3Q26 Earnings: Expanded Reporting Disclosure Highlights Growing Fintech Platform Value; 28% Upside to US$98

VEON Ltd. (Nasdaq: VEON) is a digital operator with telecom and digital businesses in Pakistan, Ukraine, Kazakhstan, Bangladesh and Uzbekistan, serving 152.3m mobile and 221.1m digital customers. Its digital services fall into three verticals: financial services (JazzCash and Mobilink Bank in Pakistan), Digital Life (entertainment, Uklon ride-hailing, Helsi and Tabletki health, premium brands) and Digital Enterprise (cloud, AI and identity services). It owns 83.6% of Nasdaq-listed Kyivstar Group.

For the first time, VEON reported its Pakistan financial services business as a standalone P&L. It combines JazzCash, the mobile wallet, Mobilink Microfinance Bank and JazzSure, the insurer formerly called TPL Insurance. Revenue rose 70.6% YoY to US$156m in 3Q26 and 59.9% to US$417m over nine months. That is 94% of the US$166m the group reports for financial services.

Lending is the largest source of revenue. Credit-related revenue was US$94m, 60% of the total, payments and transaction fees US$35m and investment income on deposits and float US$19m. Operating costs rose 56.0% to US$84m, slower than revenue, so profit before provisions grew 91.8% to US$72m, a 46% margin.

Loan-loss provisions of US$40m took a little over half of that profit, leaving US$32m before tax and US$24m after. Provisions fell to about 26% of revenue from about 32% a year earlier, because they grew 35.6% while revenue grew 70.6%. We see the falling share as the main reason profit before tax quadrupled. Whether it lasts depends on losses on this year's fast loan growth, which the reported credit ratios do not yet capture.

Only 46% of the US$25bn of quarterly transaction value carries a fee. Many transfers are free to drive use, and some are capped by regulation. Management said on the call that it would raise the charged share slowly. Payments revenue therefore has room to grow faster than transaction value, though we do not assume it in our forecasts.

The gross loan book rose 54.4% to US$486m. It has two parts. Banking loans of US$320m average about PKR634,000, roughly US$2,280, with a tenor of about two years, and more than 80% are secured by gold or other collateral. Nano loans of US$166m average PKR5,700, about US$20, and run for four weeks; JazzCash made more than 230,000 a day in the quarter.

The NPL ratio on banking loans fell to 8.1% from 10.4%, but the stock of bad loans did not fall. It was about US$26m in both years (8.1% of US$320m against 10.4% of US$244m), so the ratio fell because banking loans grew 31%. VEON did not disclose provision coverage. The nano-loan recovery rate rose to 93.2% from 91.5%, but a cohort is counted only 236 days after disbursement, so the figure reflects loans made about eight months earlier.

Customer deposits rose 64.1% to US$1,036m, so loans are 47% of deposits. Mobilink Bank's capital adequacy ratio fell to 16.8% from 18.0% as lending grew 54%. Management said it will not let the ratio go below 15% and that retained profit, not parent capital, will fund growth. At the past year's pace the ratio would reach 15% in about 18 months, so lending growth near 54% would need either more retained profit or new capital by then.

We think the nano-loan book is the part to watch. It grew 134.6% in a year, and fast growth in short-tenor unsecured credit is where losses first appear. Loans written this year begin entering the recovery rate in 4Q26, and most of this year's growth shows in the 1Q27 and 2Q27 figures. If the recovery rate falls below about 90%, or the stock of bad banking loans rises, provisions would take a larger share of revenue again and slow profit growth.

VEON is taking the Pakistan model to Bangladesh. Banglalink launched Mukto Pay, a payments wallet, in November after receiving its payment license in August, and Bangladesh Bank approved a digital banking license for a joint venture that VEON owns 71% of, with Square Group owning 29%. Bangladesh has about 180m people, a large remittance inflow and many adults outside the banking system.

On the call, the CEO said the order would follow Pakistan: sign up merchants and deploy QR payments, build the wallet, then use the bank license to take deposits and lend. He added a classifieds marketplace as the piece he wants to bring from Kazakhstan, where VEON closed the US$81m OLX purchase on 6 November.

Management said the digital bank's capital would be below US$100m but did not disclose the figure; Bangladesh generated US$49m of EBITDA in 3Q26. Kazakhstan and Uzbekistan are further back: VEON is scaling wallets and lending there, pursuing banking licenses and has signed a payments memorandum with the National Bank of Kazakhstan.

VEON reported 3Q26 revenue of US$1,307m, up 17.2% YoY and 2.8% QoQ, and up 15.7% in local currency. On a like-for-like basis, excluding acquisitions such as Tabletki and the solar plants, revenue grew 15.8%. EBITDA rose 10.1% to US$577m, a 44.1% margin.

Attributable net profit was US$187m and diluted EPS per ADS US$2.67, against a loss in 3Q25, when US$259m of non-cash charges for the Kyivstar listing and the Kyrgyzstan sale were booked. 3Q26 profit includes US$61m of disposal gains, US$31m of it from selling QazCode software to Amdocs, and a US$25m foreign-exchange gain. Like-for-like profit grew 2.4%.

Free cash flow was US$201m, down from US$303m because 3Q25 included US$230m of asset sale proceeds. Excluding disposals it rose to US$140m from US$73m. Operating cash flow rose 39.4% to US$450m.

Telecom and infrastructure revenue grew 9.2% to US$952m, helped by a 4.7% rise in mobile ARPU to US$1.79. Digital revenue grew 45.9% to US$355m, or 27.2% of revenue. Financial services revenue rose 54.2% to US$166m, Digital Life 60.7% to US$123m and Digital Enterprise 11.9% to US$66m.

Of the US$53m increase in group EBITDA, financial services added US$22m and Digital Life US$23m, while telecom added US$8m. Telecom EBITDA excluding Kazakhstan grew 7.8%, so the slow telecom figure is mostly one market.

Pakistan grew fastest. Revenue rose 28.9% and EBITDA 26.2%, with digital at 40.1% of revenue. Ukraine revenue rose 26.4% in hryvnia and 17.4% in dollars. Bangladesh revenue rose for a fourth straight quarter, by 1.9% in taka, and Uzbekistan EBITDA grew 15.2% in dollars.

Group EBITDA margin fell to 44.1% from 47.0%. Kazakhstan explains most of it: its EBITDA fell 18.4% to US$94m and its margin to 40.6% from 53.9%. With Kazakhstan's EBITDA at the 3Q25 level, the group margin would have been about 45.8%. The rest comes from digital, which earns a 36.0% margin against 47.2% in telecom, rising to 27.2% of revenue.

Three things hit Kazakhstan. The VAT rate rose to 16% from 12% in January, which lowers recognized revenue, bundle revenue weakened and price increases did less than planned, and 3Q25 included a regulatory tax benefit. Mobile ARPU fell 10.6% in tenge. EBITDA did rise 2.1% QoQ in tenge, and management expects the margin to improve.

Within digital, margins rose in two of three verticals. Financial services reached 32.7%, up 3.0pp, and Digital Life 39.6%, up 5.1pp. Digital Enterprise fell to 37.5%. The CEO said he expects the group margin to rise from 44% even as lower-margin digital grows.

Cash was US$2,033m at 30 September, including US$755m at headquarters, down from US$968m in June after VEON repaid a US$210m term loan early. Net debt excluding leases fell to US$1,781m, or 1.05x EBITDA after leases, and the average debt maturity is four years. Operating companies paid US$90m of dividends up to headquarters in the quarter.

In September VEON announced a program to repurchase 3.9% of its outstanding shares, or 2.9m ADSs, valued at about US$200m at the time. By 4 November it had repurchased 1.55m ADSs for US$112.5m and cancelled 1.08m. Management intends to return about US$200m a year through buybacks and will cancel every share repurchased. Capex was US$225m, up 1.0%, and LTM capex intensity fell to 18.2% from 21.6%.

Four deals add to cash outflows in 4Q26: Perfectum in Uzbekistan for about US$207m including US$93m of debt, OLX Kazakhstan for US$81m, GigaCloud through Kyivstar for up to US$50m including deferred payments, and US$5m of cash for Jungo TV. VEON will fund about half of Perfectum from headquarters cash, and its leverage ceiling is 1.5x.

Nine-month revenue of US$3,779m is 73.4% of our FY26E US$5,150m, and EBITDA of US$1,645m is 73.6% of our US$2,235m. Our numbers need 4Q26 revenue of US$1,371m, up 17.1% YoY, and EBITDA of US$590m, up 11.9%, both at the midpoints of the raised guidance. Revenue needs a 4.9% rise over 3Q26, in line with the 5.0% of a year ago. EBITDA needs 2.3% against 0.6% a year ago, so the forecast leans on Kazakhstan's margin continuing to recover.

We raise FY26E reported attributable profit to US$529m and EPS to US$7.52 from US$6.61, because the nine months already booked US$408m, including gains, and the ADS count is falling. For FY27E we cut EPS to US$7.76 from US$8.88. Minorities take 16.4% of profit rather than the 12% we had assumed, finance costs run at the higher 3Q26 rate after the June bond refinancing, and D&A rises with the larger asset base.

Excluding US$0.99 per ADS of one-off gains, FY26E adjusted EPS is US$6.53, and FY27E EPS rises 19% on it. Perfectum, OLX Kazakhstan and GigaCloud are not in our forecasts. Management said Perfectum will be included in FY27 guidance, so we will add the deals when that guidance is set.

VEON plans to run remittances and money transfers for all five markets from the center, under one anti-money-laundering control set, and has hired a chief payments and digital assets officer to do it. Management declined to give a medium-term target for financial services ahead of the 16 November Capital Markets Day in New York.

Starlink's direct-to-cell service now reaches more than 13m VEON customers in Ukraine, Kazakhstan and Bangladesh. It runs on VEON's own spectrum and core network, and management presented it as an addition to the terrestrial network for areas with no signal or power cuts. On Perfectum, the CEO cited 115MHz of spectrum and a standalone 5G network, and said network synergies justify the price without further consolidation.

At US$76.42, VEON trades at 11.7x our FY26E adjusted EPS, 10.2x reported, and 9.9x FY27E. On FMP consensus it trades at 4.5x forward EV/EBITDA, against a 4.7x median for emerging-market telecoms and 9.0x for digital financial services companies.

Our target is the midpoint of two sum-of-the-parts values. Kyivstar's 83.6% stake is taken at market and at our US$20.30 target, financial services at 8.8x EBITDA, the four other operators net of HQ at 4.9x, less a 10% holding-company discount on the unlisted parts and US$3,592m of net debt including leases outside Kyivstar.

We keep 8.8x for financial services, the September peer median, against 9.0x today. It sits level with Remitly and dLocal at about 9x forward EV/EBITDA, above Euronet at 4.2x and well below the lending-led digital banks, Nubank and SoFi at 15-19x. Credit supplies 60% of the Pakistan business's revenue, but its 8.1% banking NPL ratio and a 30.9% nine-month EBITDA margin argue against digital-bank multiples.

Re-marked for 3Q26, the parts give US$86.5 and US$106.9 per ADS, a midpoint of about US$97. The first disclosed financial services EBITDA, US$54m in 3Q26 and US$139m over nine months, puts FY26 near US$193m against the US$220m we assumed. Group EBITDA is unchanged, so the difference moves to the telecom operators at the lower multiple, which costs about US$1.3 per ADS. A lower Kyivstar price and higher net debt are roughly offset by fewer ADSs.

We maintain our US$98 target price, 28% above the share price and 15.0x FY26E adjusted EPS, until two things report. Restoring US$220m of FY26 financial services EBITDA needs US$81m in 4Q26, against US$54m in 3Q26. The 16 November investor day may set medium-term targets for the business. If 4Q26 financial services EBITDA stays near the 3Q26 level and the investor day gives no higher target, we would move the target to the re-marked value.

Nano lending grew 134.6% in a year. A rise in defaults would push provisions back up from 26% of revenue and slow profit growth in the fintech business, which our target values at a higher multiple than the telecom operations. The recovery rates reported for 4Q26 to 2Q27 are the first to include this year's growth.

Kazakhstan has not yet recovered from the VAT increase, and mobile ARPU is down 10.6% in tenge. If price increases keep falling short, its margin could stay near 40%, limiting group margin expansion.

Regulation shapes the fintech economics. Fee caps limit how much transaction value can be charged, and tighter know-your-customer rules add friction. In Ukraine the war still affects networks, energy and staff, and currency moves in the hryvnia, rupee and tenge change the dollar results.

VEON agreed or closed four acquisitions in six weeks, and the purchase accounting for Perfectum and GigaCloud is not complete. Each adds integration work and possible impairment risk.