VEON : Reports Full Year 2017 Results With Robust Free Cash Flow Generation Of Over USD 1 Billion And Announces US 17 Cents Final Dividend

AMSTERDAM, Feb. 22, 2018 /PRNewswire/ -- VEON Ltd. (NASDAQ: VEON, Euronext Amsterdam: VEON) a leading global provider of connectivity and internet services headquartered in Amsterdam and serving more than 240 million customers, today announces financial and operating results for the quarter and year ended 31 December 2017.

KEY DEVELOPMENTS

• Supervisory Board approved final dividend of US 17 cents, totalling 2017 dividend to US 28 cents per share, representing approximately 22% year-on-year increase
• Delivered on FY2017 targets for organic¹ revenue growth and underlying free cash flow
• Underlying EBITDA margin² below target due to margin pressure in Russia, Algeria and Bangladesh
• Generated strong underlying equity free cash flow³ of USD 1.1 billion, significantly ahead of guidance, up 31.4% year-on-year
• Successfully repatriated USD 200 million from Uzbekistan enhancing the Group's cash upstreaming capability
• Strengthened spectrum portfolio through acquisition of 4G/LTE licenses in Ukraine and Bangladesh

Q4 2017 KEY RESULTS

• Total reported revenue decreased 1.4% to USD 2,320 million, mainly due to the significant devaluation of the Uzbek som
• Organic¹ revenue grew 1.2%, driven by Russia, Pakistan, Ukraine and Uzbekistan, partially offset by continued pressure in Algeria and Bangladesh
• Reported EBITDA decreased 3.8% to USD 753 million, mainly due to the significant devaluation of the Uzbek som, partially offset by lower exceptional costs
• Underlying EBITDA², which excludes exceptional costs, decreased organically¹ by 6.9% due to a decrease in EBITDA in Russia, Algeria and Bangladesh and increased corporate costs
• Underlying EBITDA margin of 35.1%, down 3.1 percentage points year-on-year
• Underlying equity free cash flow³ excluding licenses totalled USD 101 million in Q4 2017

JEAN-YVES CHARLIER, CHIEF EXECUTIVE OFFICER, COMMENTS:

"Looking back on 2017, I am pleased to report another good year. Our total revenue grew by over 6 percent and EBITDA by 11 percent, supported by organic growth and the strengthening of the currencies in our portfolio. On the back of this solid performance, our underlying equity free cashflow increased significantly to over USD 1 billion. This is a clear testament that the strategy we launched in August 2015 is transforming our business. In the last three months, we successfully repatriated - for the first time - USD 200 million from Uzbekistan and acquired new 4G/LTE spectrum in key markets: Ukraine and Bangladesh. We also delivered on our full year 2017 targets for organic growth in revenue and underlying equity free cash flow, which came far ahead of our original guidance, thus allowing the Board to announce a final dividend of US 17 cents, a total of US 28 cents per share for the full year.

During the fourth quarter of 2017, reported EBITDA declined by 4 percent, mainly due to the Uzbekistan currency liberalization and resetting of the official exchange rate in September 2017, which had a negative impact of more than 6 percent on the Group results. On an underlying basis, the largest contributors to the year-on-year organic decrease in EBITDA were Algeria, Bangladesh and Russia, which, along with an increase in corporate costs, more than offset the positive contribution from Pakistan and Ukraine.

We also delivered on a number of strategic objectives in 2017. This included an agreement to dispose of our tower business in Pakistan; the split of the Euroset joint venture to strengthen our mono-brand strategy in Russia, and the successful refinancing of our WIND Tre joint venture in Italy. The GTH Mandatory Tender Offer, which we submitted in November 2017, remains subject to approval by the Egyptian Authorities. VEON has taken all actions required for such approval and the matter is currently held up in connection with disputed GTH taxes. Our desire is to find a path forward with the Egyptian Authorities and we are considering all options.

Looking ahead to 2018, our financial performance will be impacted by Uzbekistan's currency liberalization and a number of strategic transactions including the Pakistan tower transaction closing and the integration of the Euroset business in Russia. As such, we expect flat-to-low single digit organic growth for both Group revenue and EBITDA. In addition, we forecast a strengthening of equity free cash flow, which we expect to be approximately USD 1 billion compared to USD 804 million in 2017 under the new definition for 2018 targets."

KEY RESULTS: CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS

Contents

MAIN EVENTS......................................................................................................... 5

GROUP PERFORMANCE............................................................................................. 7

COUNTRY PERFORMANCE........................................................................................ 13

CONFERENCE CALL INFORMATION............................................................................. 21

ATTACHMENTS...................................................................................................... 24

PRESENTATION OF FINANCIAL RESULTS
VEON's results presented in this earnings release are based on IFRS and have not been audited.

Certain amounts and percentages that appear in this earnings release have been subject to rounding adjustments. As a result, certain numerical figures shown as totals, including those in tables, may not be an exact arithmetic aggregation of the figures that precede or follow them.

All non-IFRS measures disclosed in the document, i.e. EBITDA, EBITDA margin, underlying EBITDA, underlying EBITDA margin, EBIT, net debt, equity free cash flow, organic growth, capital expenditures excluding licenses, last twelve months (LTM) Capex excluding licenses/Revenue, are reconciled to the comparable IFRS measures in Attachment E.

As at 7 November 2016, VEON Ltd. owns a 50% share of the Wind Tre Joint Venture (with CK Hutchison owning the other 50%) and we account for this joint venture using the equity method as we do not have control. All information related to the Wind Tre Joint Venture is the sole responsibility of the Wind Tre Joint Venture's management, and no information contained herein, including, but not limited to, the Wind Tre Joint Venture's financial and industry data, has been prepared by or on behalf of, or approved by, our management. For further information on the Wind Tre Joint Venture and its accounting treatment, see Note 6 to our audited consolidated financial statements included in our Annual Report on Form 20-F for the year ended 31 December 2016.

All comparisons are on a year-on-year basis unless otherwise stated.

IFRS 15 'Revenue from contracts with customers' — The Group assessed the impact of IFRS 15. The scope of IFRS 15 includes the timing of revenue recognition and costs of obtaining contracts with customers. Under this standard, contract costs are required to be capitalized and amortized over the average customer life. VEON will apply IFRS 15 for the first time in the 2018 financial statements, using the modified retrospective approach. Based on the analysis performed, the Company expects no material impact on revenue recognition, due to currently existing product offering (i.e. prevailing pre-paid service offering). VEON estimates the additional asset stemming from capitalization of contract costs to amount to USD 95 million pre-tax as at 1 January 2018 (i.e. one-off gain to retained earnings in 2018).

IFRS 9 'Financial instruments' — The Group assessed the impact of IFRS 9. The scope of IFRS 9 includes new guidance to classify financial instruments on the balance sheet. VEON will need to introduce the concept of Expected Credit Loss ("ECL"), where an allowance for doubtful debt is required for all debt-like instruments including unbilled receivables. VEON estimates the additional provision for bad debt to amount to USD 20 million pre-tax as at January 2018 (i.e. one-off charge to retained earnings in 2018)

The Group has yet to assess the impact of IFRS 16 "Leases", which may be material. The standard will be adopted in 2019.

MAIN EVENTS

SUCCESSFULLY REPATRIATED USD 200 MILLION FROM UZBEKISTAN
In December 2017, VEON's subsidiary PJSC VimpelCom, successfully repatriated a net amount of approximately USD 200 million from Unitel, its wholly-owned Uzbekistan subsidiary. The repatriation of cash from Uzbekistan for the first time is an important milestone for VEON, further enhancing the cash upstreaming capability of the Group and allowing Unitel to honor its global payment obligations necessary for ongoing operations.

KYIVSTAR SECURED 4G/LTE LICENSE 
In January 2018, VEON's subsidiary in Ukraine, Kyivstar, secured one of three licenses to provide nationwide 4G/LTE services, subject to final regulatory approvals. Kyivstar will pay UAH 0.9 billion (approximately USD 32.2 million) for 2x15 MHz of contiguous frequency in the 2600 MHz band. The Company looks forward to the upcoming 4G/LTE license tender in 1800 MHz band in Ukraine.

BANGLALINK ACQUIRES ADDITIONAL SPECTRUM AND 4G/LTE LICENSE
On 13 February 2018, Banglalink was awarded technology neutral spectrum in the 1800 and 2100 MHz bands. As a result of the auction conducted by the Bangladesh Telecommunication Regulatory Commission, Banglalink has been awarded 5.6 MHz paired spectrum in the 1800 MHz band and 5 MHz paired spectrum in the 2100 MHz band. The spectrum is technology neutral and allows Banglalink to double its 3G network capacity. Moreover, Banglalink has also acquired a 4G/LTE license in parallel, allowing the company to launch a high-speed data network. The total investment amounts to USD 308.6 million for the spectrum, excluding VAT. An upfront payment of 60% for the spectrum is payable in approximately 30 days with the remaining 40% payable over four years. In addition, the company paid USD 35 million excluding VAT to convert its existing spectrum holding in 900 MHz and 1800 MHz into technology neutral spectrum and USD 1.2 million excluding VAT to acquire the 4G/LTE license. The investment is expected to be funded through locally available cash and local banking facilities.

GTH MANDATORY TENDER OFFER
The GTH Mandatory Tender Offer remains subject to approval by the Egyptian Authorities. VEON has taken all actions required for such approval and the matter is currently held up in connection with disputed GTH taxes. Our desire is to find a path forward with the Egyptian Authorities and we are considering all options.

SUPERVISORY BOARD APPROVED A FINAL 2017 DIVIDEND OF US 17 CENTS PER SHARE
The VEON Supervisory Board approved a final dividend of US 17 cents per share, bringing total 2017 dividend to US 28 cents per share. The record date for the Company's shareholders entitled to receive the final dividend payment has been set for 5 March 2018. It is expected that the final dividend will be paid on 13 March 2018. The Company will make appropriate tax withholdings of up to 15% when the dividend is paid to the Company's share depositary, The Bank of New York Mellon. For ordinary shareholders at Euronext Amsterdam, the final dividend of US 17 cents will be paid in euro. VEON is committed to paying a sustainable and progressive dividend based on the evolution of the Company's equity free cash flow.

FY 2018 TARGETS
The Company has formulated targets for FY 2018. Guidance for total revenue and EBITDA is flat to low single digit organic growth. Organic growth reflects changes in revenue and EBITDA excluding foreign currency movements and other factors, such as businesses under liquidation, disposals, mergers and acquisitions and other exceptional items. Major exceptional items currently known are the impact from the Uzbekistan currency liberalization, the Pakistan tower transaction (Deodar), the Euroset transaction and the one-off adjustment to a vendor agreement. 

The target for equity free cash flow is approximately USD 1 billion. Equity free cash flow is defined as free cash flow from operating activities less cash flow for net capex, excluding capex for licenses. FY 2018 equity free cash flow target is calculated at 2018 target currency rates. For the FY 2018 target currency rates, see attachment E.

GROUP PERFORMANCE

FY2017

• Total reported revenue increased 6.6% year-on-year with organic¹ growth of 1.9%
• Strong mobile data organic¹ revenue growth of 26%
• Reported EBITDA increased 11.0% year-on-year; underlying EBITDA², which is excluding exceptional costs of USD 88 million, decreased organically by 0.4%, resulting in an underlying EBITDA margin of 38.8%, an organic decrease of 0.9 percentage points
• Underlying equity free cash flow³ excluding licenses totalled USD 1,067 million, an increase of USD 255 million or 31% year-on-year

Q4 2017

• Total reported revenue decreased 1.4% to USD 2,320 million
• Organic¹ revenue growth of 1.2% driven by Russia, Pakistan, Ukraine and Uzbekistan, partially offset by continued pressure in Algeria and Bangladesh
• Reported EBITDA decreased 3.8% to USD 753 million
• Underlying EBITDA², excluding exceptional costs of USD 61 million, decreased by 10.5% and organically¹ by 6.9% mainly due to a decrease in EBITDA in Russia, Algeria and Bangladesh
• Underlying EBITDA margin of 35.1%, down organically 3.1 percentage points year-on-year
• Underlying equity free cash flow³ excluding licenses totalled USD 101 million in Q4 2017

FINANCIALS BY COUNTRY

Group revenue for Q4 2017 decreased 1.4% year-on-year to USD 2.3 billion but increased by 1.2% organically, driven by revenue growth in Russia, Pakistan, Ukraine and Uzbekistan, but with continued pressure on revenue in Algeria and Bangladesh. Mobile data revenue showed good organic growth increasing 19.0% for the quarter, with total mobile customers increasing 1.5% to 211 million at the end of Q4 2017, primarily driven by growth in Pakistan, Bangladesh and Ukraine. Reported mobile data revenue increased by 14.8%.

Group revenue for FY 2017 increased 6.6% to USD 9.5 billion, partially driven by the consolidation of Warid and the positive effect from the RUB appreciation against the USD. Group revenue increased 1.9% organically, delivering on the FY 2017 target of low single digit growth, as a result of strong performances in Russia, Pakistan, Ukraine and Uzbekistan, partially offset by decreased performance in Algeria and Bangladesh. Mobile data revenue for the year showed strong organic growth of 26%.

Group EBITDA decreased 3.8% to USD 753 million in Q4 2017, compared to USD 783 million in Q4 2016. Underlying EBITDA totalled USD 814 million, reflecting an organic decline of 6.9% year-on-year of USD 119 million, excluding the impact of currency depreciation. The largest contributors to the year-on-year decrease in organic terms were Algeria, Bangladesh, Russia. These negative impacts from country performance, along with an increase in "Other" and HQ costs, more than offset the positive operational contribution from Pakistan and Ukraine. A more detailed explanation for these trends is provided in the following paragraphs. The reported underlying EBITDA decreased by 10.5%.

The underlying EBITDA margin was 35.1%, an organic decrease of 3.1 percentage points year-on-year. Exceptional items amounted to USD 61 million in Q4 2017 and mainly included USD 58 million of costs for the Group wide performance transformation program. In Q4 2016, the Group recognized exceptional items totalling USD 127 million, mainly related to the costs for Group wide performance transformation program of USD 61 million and a provision for the Iraqna litigation of USD 66 million.

Reported EBITDA for FY 2017 increased 11% to USD 3,587 million, while underlying EBITDA decreased 0.4% organically to USD 3,675 million. The FY 2017 underlying EBITDA margin was 38.8%, a decrease of 0.9 percentage points year-on-year, missing the FY 2017 target of flat to low single digit accretion, due to margin pressure in Russia, Algeria and Bangladesh. In FY 2016, the Group recognized exceptional items totalling USD 349 million, while in FY 2017 exceptional items totalled USD 88 million.

The FY 2017 underlying equity free cash flow excluding licenses increased 31.4% year-on-year to USD 1,067 million, well above the FY 2017 target of USD 850-950 million.

The reconciliation table for reported EBITDA and underlying EBITDA is set forth in Attachment E.
For the discussion of each country's individual performances below, all trends are expressed in local currency.

In Russia, total revenue in Q4 2017 increased 0.4%, driven by an increase in mobile service revenue and sales of equipment and accessories. Mobile service revenue increased by 2.1%, driven by growth in mobile data, value added services and mobile financial services, offsetting the decrease in voice revenue. Mobile ARPU continued its growth trajectory in 2017, increasing by 2.0% during Q4 2017. Fixed-line service revenue decreased by 11.4%, mainly due to the competitive environment, a decrease in transit traffic, growing penetration of FMC in the customer base and the effect of the strengthened ruble on foreign currency contracts. EBITDA decreased 4.9% in Q4 2017. Underlying EBITDA, which is adjusted for exceptional costs related to the performance transformation program, costs related to rebranding and integration of approximately 200 Euroset stores and the impact of the change in definition for EBITDA, to align with the definition applied by the Group, decreased by 3.0%. The underlying EBITDA margin, which is excluding the exceptional costs mentioned above, was 36.5% in Q4 2017, representing a year-on-year decrease of 1.3 percentage points, mainly as a result of the associated costs related the commercial launch of VEON's personal internet platform (~0.5 p.p. impact) and increased G&A and HR costs.

In July 2016, VEON acquired Warid, strengthening its leading market position in Pakistan, and as a result, Warid's financial results have been consolidated into VEON´s financial statements with effect from 1 July 2016. Consequently, this is the second consecutive quarter in which the 2017 results of Pakistan are fully comparable year-on-year. Total revenue grew 4.2%, supported by continued growth in mobile data revenue which grew 27.8% year-on-year, driven by an increase in data customers through higher bundle engagement and the continued data network expansion. The reported EBITDA margin increased to 45.7% (+10.8 percentage points year-on-year), due to strong revenue growth, opex synergies and benefitting for the positive impact of PKR 1.1 billion from the release of historic SIM tax accruals. The margin reduction quarter-on-quarter is the result of a lower positive impact from the release of historic SIM tax accruals when compared to Q3 2017. Underlying EBITDA margin, which is excluding the negative impact of PKR 1.0 billion for performance transformation and integration costs, was 48.1% in Q4 2017, improving by 7.8 percentage points year-on-year while the margin, excluding the above-mentioned release of historic SIM tax accruals, would have been 45.4%.

In Algeria, total revenue decreased by 9.9% year-on-year with a trend in line with Q3 2017. Price competition, in both voice and data, caused a continued reduction of ARPU and a year-on-year increase in churn. Data revenue growth was 36.0%, due to higher usage and a substantial increase in data customers as a result of the 3G and 4G/LTE network roll-out. This positive data revenue trend is also supported by the simplified data-centric pricing architecture. In Q4 2017, EBITDA decreased by 24.1% while underlying EBITDA, which in Q4 2016 was adjusted for exceptional costs of DZD 0.9 billion related to performance transformation, decreased 18.4% to DZD 11.5 billion primarily due to the decline in revenue. Underlying EBITDA margin was 46.7% and excluding the impact of the changes to indirect taxes with effect from 1 January 2017, the underlying EBITDA margin would have been 49.1%.

In Bangladesh, total revenue in Q4 2017 decreased by 9.5%, mainly attributable to the gap in 3G network coverage compared to the market leader and to network availability issues caused by the extreme weather conditions in the country. In addition, the market remains characterized by intense price competition especially on data, which accelerated following the SIM re-verification process and which more than offset the increase in data revenue of 14.6%. Underlying EBITDA in Q4 2017 decreased by 24.4%, which was mainly caused by the revenue decline together with additional technical expenses to improve network availability. As a result, the underlying EBITDA margin was 35.8%, which represents a year-on-year reduction of 7.1 percentage points.

In Ukraine, total revenue increased by 10.7%, mainly driven by continued strong growth of mobile data revenue, which increased by 64.5% as a result of growing number of data customers, and successful marketing activities driven by the continued 3G network roll-out and data-centric tariffs. Fixed-line service revenue increased by 5.4%, supported by broadband revenue which increased by 9.3% and which was driven primarily by the FMC launch. EBITDA increased by 39.1%, representing an EBITDA margin of 58.0%. Underlying EBITDA grew by 12.2% year-on-year, driven by higher revenue and cost efficiencies. Underlying EBITDA margin increased by 0.7 percentage points year on year to 53.1%.

Uzbekistan continued to report strong revenue growth, as the company´s tariffs were fixed at the foreign exchange rate of UZS 4,210 to the USD after the liberalization of the Uzbek som on 4 September 2017, which is a higher level compared to the prior year. Total revenue increased 21.3%, supported by successful marketing activities, increased revenues from interconnect services, value added services and mobile data revenue growth of 28.6%. Underlying EBITDA, adjusted for a reversal of a provision related to a court case of UZS 39.9 billion in Q4 2016, slightly decreased in local currency compared to the prior year and the underlying EBITDA margin was 45.7% in Q4 2017. The revenue growth was mainly offset by an increase in non-controllable costs, such as customer tax, interconnect costs, content costs, frequency fees and the negative impact from the currency liberalization.

The HQ segment includes the costs of VEON's headquarters in Amsterdam and London, costs for digital, external costs for services and projects (e.g. M&A, legal costs, Enterprise Support System, global procurement). In Q4 2017, the amount increased by USD 22 million year-on-year largely due to increased HR costs related to variable remuneration plans, a significant increase in costs (mainly headcount) related to the digital strategy and external costs for services, more than offsetting a positive impact from a tax reversal for prior periods.

"Other" mainly includes the results of Kazakhstan, Kyrgyzstan, Armenia, Georgia, Tajikistan and intercompany eliminations.

INCOME STATEMENT & CAPITAL EXPENDITURES

Q4 2017 ANALYSIS
EBIT increased by 131% to USD 211 million in Q4 2017, as Q4 2017 was impacted by a lower level of impairments at USD 64 million, mainly related to Armenia and Kyrgyzstan due to revised business plans, compared to USD 177 million recorded in Q4 2016, mainly related to impairments for Georgia, Tajikistan and Kyrgyzstan.

The increase in losses before tax to USD 285 million was driven by an increase in net financial expenses of USD 41 million, higher year-on-year foreign exchange losses and other of USD 141 million and an increase in the loss in joint venture and associates of USD 134 million. The increase in financial expenses in Q4 2017 is the result of the revaluation of the put option liability for Warid in Pakistan of USD 38 million. Net foreign exchange losses and other gains of USD 103 million are driven by foreign exchange losses in HQ related to new non-USD debt, foreign exchange losses in Russia and a loss of USD 49 million related to the currency conversion of USD 200 million repatriated from Uzbekistan, which was recorded as a finance cost. The decrease in the share of loss of joint ventures and associates was driven by VEON's 50% share of loss of the Wind Tre joint venture impacted by accelerated depreciation in respect of network modernization, amounting to USD 68 million, and loss of USD 70 million arising on early redemption of the Wind Tre group's senior and junior secured third-party debt as part of the Italy joint venture´s refinancing of its debt.

Prior to the Wind Tre joint venture closing in November 2016, WIND had been accounted for as a discontinued operation and classified as held for sale under IFRS rules since Q3 2015. As a result, the Q4 2016 results were positively affected by the elimination of depreciation and amortization charges from the results of WIND. The "discontinued operations" accounting treatment was not applied in 2017 following the closing of the Wind Tre joint venture transaction.

Income tax expense decreased to USD 93 million in Q4 2017 mainly due to the utilization of tax assets and the loss caused by the foreign exchange devaluation in Uzbekistan, as well as lower taxable profit in Russia, Algeria and Bangladesh.

In Q4 2017, the company recorded a net loss for the period attributable to VEON´s shareholders of USD 325 million, while the net profit reported in Q4 2016 was attributable to a non-cash gain driven by the completion of the Wind Tre joint venture transaction.

Capex excluding licenses decreased to USD 466 million in Q4 2017 primarily due to improved capex planning with capex more evenly spread over the quarters, compared to end of year loaded capex in FY 2016.

The ratio of capex excluding licenses to revenue was 15.4% in FY 2017, reflecting improved capex efficiencies during 2017.

FINANCIAL POSITION & CASH FLOW

Total assets decreased compared to Q3 2017 mainly driven by a decrease in the cash position, used for debt repayments in Russia, Algeria and GTH, partially offset by debt drawdowns at HQ, including a drawdown under the revolving credit facility in relation to the application for the GTH MTO.

Net cash from operating activities increased by USD 34 million year-on-year in Q4 2017, driven by USD 96 million higher cash flow from continued operations as a result of significant improvements in working capital, partially offset by the year-on-year decrease in net cash from discontinued operations as a result of the closing of the Wind Tre joint venture transaction in November 2016, which resulted in Italy no longer being accounted for as a discontinued operation.

Net cash flow used in investing activities increased year-on-year by USD 325 million, mainly due to outflow in deposits of USD 898 million in HQ Amsterdam driven by the GTH Mandatory Tender Offer collateral, partially offset by the decrease in net cash used in investing activities in discontinued operations.

Net cash used in financing activities decreased by USD 98 million year-on-year in Q4 2017, mainly due to debt repayments and capital restructuring activities that led to interest cost savings.

Net debt includes cash balances of USD 987 million pledged as collateral for the Mandatory Tender Offer. Excluding this net debt would have been USD 9,728 million and the net debt/underlying LTM EBITDA ratio would have been 2.6x.

COUNTRY PERFORMANCE

• Russia
• Pakistan
• Algeria
• Bangladesh
• Ukraine
• Uzbekistan
• Italy

RUSSIA

The market conditions remained challenging in Russia, but Beeline continued to grow its mobile revenue during the fourth quarter.

Total revenue in Q4 2017 increased by 0.4% to RUB 70.4 billion, driven by an increase in mobile service revenue and sales of equipment and accessories. Mobile service revenue increased by 2.1% to RUB 57.0 billion, driven by growth in mobile data, value added services and mobile financial services, offsetting the decrease in voice revenue. Mobile ARPU continued its growth trajectory in 2017, increasing by 2.0% during the quarter.

Beeline has increased its focus on the B2B segment, improving its proposition with more customized offers and solutions to both small and large enterprises. As a result, mobile service revenue in the B2B segment showed growth in a stagnating market, growing by 5.8% year-on-year, driven by a growth of 9.5% in Beeline's B2B customer base. Overall, B2B revenue contributed RUB 16.2 billion to revenue.

Mobile data revenue continued to grow, increasing by 8.9% to RUB 15.3 billion, as a result of an increased penetration of integrated bundles and smartphones, together with data traffic growth. Mobile ARPU showed continued improvement, growing by 2.0%, driven by successful upselling activities and continued efforts to simplify tariff plans, while being supported by increased penetration of bundled propositions in the customer base. Beeline's mobile customer base was broadly stable year-on-year with 58.2 million customers.

Fixed-line service revenue decreased by 11.4% to RUB 9.6 billion, mainly due to increased competition, a decrease in transit traffic, growing penetration of FMC in the customer base to more than 877 thousand customers, and the effect of a strengthening ruble on foreign currency contracts.

Reported EBITDA decreased by 4.9% to RUB 25.1 billion, with a reported EBITDA margin of 35.7%. Underlying EBITDA, which is adjusted for exceptional costs related to the performance transformation program in both Q4 2016 (RUB 86 million) and Q4 2017 (RUB 158 million), costs related to rebranding and integration of approximately 200 Euroset stores (RUB 266 million), and the impact of change in definition for EBITDA (RUB 165 million), to align with the definition applied by the Group, decreased by 3.0%. The underlying EBITDA margin was 36.5% in Q4 2017, representing a year-on-year decrease of 1.3 percentage points, mainly as a result of the associated costs of the commercial launch of VEON's personal internet platform (impact of 0.5 p.p.) and increased G&A and HR costs.

Beeline expects continued negative impact on EBITDA of approximately RUB 3.0 billion in FY 2018 due to the integration and rebranding costs for the Euroset stores into Beeline monobrand stores. Additionally, Beeline expects EBITDA margin pressure driven by the changing revenue mix, following the integration and rebranding of the Euroset stores. After the rebranding and integration of the Euroset stores, Beeline expects a positive effect on revenue going forward and, from 2019, on EBITDA driven by device sales acceleration and channel-mix improvement.

Capex excluding licenses decreased by 37.8% year-on-year during the quarter as a result of improved capex planning with capex more evenly spread over the quarters, in comparison to capex in FY 2016, which was weighted towards the the end of the year. The LTM capex excluding licenses to revenue ratio for FY 2017 was 14.1%.

From January 2018, the international interconnect and transit services revenues will be fully centralized in VEON Wholesale Services, a Group division centrally managing arrangements of VEON Group companies with international carriers, currently reported at the HQ level. The FY 2018 expected maximum impact on revenue for Russia is USD 53 million, while the expected maximum impact on EBITDA is USD 7 million.

PAKISTAN 

In July 2016, VEON acquired Warid, strengthening its leading market position in Pakistan and, as a result, Warid's financial results have been consolidated into VEON´s financial statements with effect from 1 July 2016. Consequently, this is the second consecutive quarter in which the 2017 results of Pakistan are fully comparable year-on-year.

Jazz continued to show growth of both revenue and customers despite competitive market conditions. Revenue growth of 4.2% year-on-year was supported by continued growth in mobile data revenue which grew 27.8% year-on-year, driven by an increase in data customers through higher bundle penetration and continued data network expansion.

The customer base increased by 4.0% year-on-year driven by continued customer satisfaction as a result of a price simplicity and efficient distribution channel management. Jazz sees data and voice monetization among its key priorities, underpinned by the ambition to offer the best network in terms of both quality of service and coverage.

Reported EBITDA margin increased to 45.7% (+10.8 percentage points year-on-year), due to strong revenue growth, opex synergies and benefitting for the positive impact of PKR 1.1 billion from the release of historic SIM tax accruals. The margin reduction quarter-on-quarter is the result of a lower impact from the release of historic SIM tax accruals when compared to Q3 2017. Underlying EBITDA margin, which is excluding the negative impact of PKR 1.0 billion for performance transformation and integration costs, was 48.1% in Q4 2017, improving by 7.8 percentage points year-on-year while the margin, excluding the release of historic SIM tax accruals, would have been 45.4%.

Capex excluding licenses decreased to PKR 6.6 billion in Q4 2017 while the LTM capex excluding licenses to revenue ratio was 15.7% in Q4 2017 (12.3% excluding integration capex). At the end of the Q4 2017, 3G was offered in more than 350 cities while 4G/LTE was offered in over 50 cities (defined as cities with at least three base stations).

In Q3 2017, Jazz achieved the target annual run-rate of synergies announced alongside the transaction to merge Mobilink with Warid, and it completed the network integration by the end of 2017.

Finally, on 30 August 2017 VEON announced that Jazz had signed an agreement for the sale of its tower business ("Deodar") to Tanzanite, a tower operating company owned by edotco and Dawood, for PKR 98.7 billion subject to adjustments. Following the classification of Deodar as a disposal group held-for-sale on 30 June 2017, VEON is no longer accounting for depreciation and amortization charges on these assets. Completion of the transaction is subject to the satisfaction or waiver of certain conditions including receipt of customary regulatory approvals. The approval process remains ongoing.

ALGERIA

Djezzy's operational turnaround continued in Q4 2017, despite a challenging regulatory and macro-economic environment which remains characterized by strong competition and inflationary pressures. As previously stated, the new Finance Law (effective from January 2017), resulted in an increase in VAT from 7% to 19% on data services and an increase from 17% to 19% on voice services. Taxes on recharges also increased from 5% to 7% as a result. The higher indirect taxes affected Djezzy's performance in relation to both revenue and EBITDA as taxes could not be passed on to customers.

Revenue decreased by 9.9% year-on-year, in line with Q3 2017 trends. Price competition, in both voice and data, caused a continued reduction in ARPU and a year-on-year increase in churn. Djezzy's Q4 2017 service revenue was DZD 24.1 billion, a 10.7% reduction, while data revenue growth was 36.0%, due to higher usage and a substantial increase in data customers as a result of the 3G and 4G/LTE network roll-out. This positive data revenue trend is also supported by the simplified data-centric pricing architecture.

The customer base in Algeria decreased by 8.0% to 15.0 million, due to competitive pressures in the market. ARPU declined by 4.8%, a lower decrease compared to Q3 2017, primarily caused by the intense price competition.

In Q4 2017, EBITDA decreased by 24.1% year-on-year while underlying EBITDA, which is adjusted for exceptional costs of DZD 0.9 billion related to performance transformation in Q4 2016, decreased by 18.4% to DZD 11.5 billion primarily due to the decline in revenues. Underlying EBITDA margin was 46.7% and excluding the impact of the changes to indirect taxes with effect from 1 January 2017, the underlying EBITDA margin would have been 49.1%.

At the end of Q4 2017, the company's 4G/LTE services covered 28 wilayas and more than 24.6% of the country's population, while the 3G network covers all 48 wilayas. In Q4 2017 capex excluding licenses was DZD 4.0 billion, a 35.7% year-on-year reduction, with a LTM capex excluding licenses to revenue ratio of 14.4%.

The mobile termination rate ("MTR") symmetry in place from 31 October 2017, which has marked a further improvement of the regulatory environment in the country. Djezzy currently has symmetric MTRs with only one of the two major competitors in the market.

BANGLADESH

In Bangladesh, Q4 2017 results continue to be affected by technical costs, required to restore network availability following flooding caused by severe monsoons earlier in the year, and the market continues to see intense competition, particularly focused around customer acquisition. During the quarter, Banglalink continued to focus on acquiring customers in a competitive market and restoring network availability.

The customer base grew by 3.2% year-on-year, and this increase was fuelled by competitive customer acquisition campaigns in the market by all operators.

Revenue in Q4 2017 decreased by 9.5% year-on-year, while Banglalink's service revenue decreased by 10.0% year-on-year to BDT 10.4 billion. The decline in service revenue was mainly attributable to the gap in 3G network coverage compared to the market leader, in addition to network availability issues caused by the extreme weather conditions in the country. The market remains characterized by intense price competition especially in relation to data, which accelerated following the SIM re-verification process. Notwithstanding the competitive environment, data revenue increased by 14.6%, driven by increased smartphone penetration. Data revenue growth was driven by data usage growth of 48.2% along with 13.4% growth in active data users. ARPU decreased year-on-year by 14.7%, as a result of in market pricing pressure.

Banglalink's underlying EBITDA in Q4 2017 decreased by 24.4% to BDT 3.9 billion, which was mainly caused by a decline in revenue and technical expenses to improve network availability. As a result, the underlying EBITDA margin was 35.8% in Q4 2017, which represents a year-on-year reduction of 7.1 percentage points.

In Q4 2017, capex excluding licenses decreased by 26.6% year-on-year to BDT 3.7 billion, with a LTM capex excluding licenses to revenue ratio of 17.7%. Banglalink continues to invest in efficient, high-speed data networks aiming to substantially improve its 3G network coverage and availability. The 3G network covered approximately 70% of the population at the end of Q4 2017.

The Ministry of Post, Telecommunications and Information Technology issued a public consultation on draft Regulatory and Licensing Guidelines for Tower Sharing. The industry has provided comments on these guidelines to the Government of Bangladesh and Guidelines have not been issued following the consultation.

On 24 December 2017, Banglalink entered into a new floating rate term facilities agreement of BDT 29.3 billion (approx. USD 353 million), divided into two tranches. The first tranche amounting to BDT 10.7 billion (approx. USD 129 million) has a three-year tenor and the second tranche amounting to BDT 18.6 billion (approx. USD 224 million) has a five-year tenor. The facilities agreement includes an option to increase the amount of the facilities up to a total amount of BDT 40 billion.

On 13 February 2018, Banglalink was awarded technology neutral spectrum in the 1800 and 2100 MHz bands. As a result of the auction conducted by the Bangladesh Telecommunication Regulatory Commission, Banglalink has been awarded 5.6 MHz paired spectrum in the 1800 MHz band and 5 MHz paired spectrum in the 2100 MHz band. The spectrum is technology neutral and allows Banglalink to double its 3G network capacity. Moreover, Banglalink has also acquired a 4G/LTE license in parallel allowing the company to launch a high-speed data network. The total investment amounts to USD 308.6 million for the spectrum, excluding VAT. An upfront payment of 60% for the spectrum is payable in approximately 30 days with the remaining 40% payable over four years. In addition, the company paid USD 35 million excluding VAT to convert its existing spectrum holding in 900 MHz and 1800 MHz into technology neutral spectrum and USD 1.2 million excluding VAT to acquire the 4G/LTE license. The investment is expected to be funded through locally available cash and local banking facilities.

UKRAINE

Kyivstar continued to deliver robust results in Q4 2017 and, in an increasingly competitive environment, the company remains the clear leader in both customer market share and NPS.

Total revenue increased by 10.7% year-on-year to UAH 4.3 billion in Q4 2017 while mobile service revenue grew by 10.7% to UAH 4.0 billion. This was driven by continued strong growth of mobile data revenue, which increased by 64.5% as a result of growing data usage, and successful marketing activities driven by the continued 3G network roll-out and data-centric tariffs. As a result, data consumption per user more than doubled in Q4 2017 compared to the same quarter in the previous year.

Kyivstar´s mobile customer base increased by 1.7% to 26.5 million in Q4 2017, while mobile ARPU continued to increase by 9.1% year-on-year to UAH 49.

Fixed-line service revenue increased by 5.4% to UAH 285 million, supported by broadband revenue which increased by 9.3% and which was driven primarily by the FMC launch. The fixed broadband customer base is stable year-on-year at 0.8 million and fixed broadband ARPU increased by 8.6% year-on-year to UAH 70.

EBITDA increased by 39.1% to UAH 2.5 billion in Q4 2017, representing an EBITDA margin of 58.0%. Underlying EBITDA, adjusted for regulatory provisions grew by 12.2% year-on-year, driven by higher revenue and cost efficiencies. Underlying EBITDA margin increased by 0.7 percentage points year on year to 53.1%.

Q4 2017 capex excluding licenses was UAH 534 million with an LTM capex excluding licenses to revenue ratio of 15.8% as Kyivstar continued to roll out its 3G network, reaching a population coverage of 74% up from 61% in the same quarter last year.

On 31 January 2018 Kyivstar secured one of three licenses to provide nationwide 4G/LTE services, subject to final regulatory approvals. Kyivstar will pay UAH 0.9 billion (approximately USD 32.2 million) for 2x15MHz in the 2600 MHz band.

UZBEKISTAN

Unitel continued to report strong revenue growth, as the company´s tariffs were fixed at the foreign exchange rate of UZS 4,210 to the USD after the liberalization of the Uzbek som on 4 September 2017, which is a higher level compared to the prior year. Total revenue increased by 21.3% and mobile service revenue increased by 20.8% to UZS 621 billion, supported by successful marketing activities, increased revenues from interconnect services, value added services and mobile data. Mobile data traffic more than doubled and mobile data revenue increased by 28.6% year on year during the fourth quarter, driven by the continued high-speed data network roll-out, increased smartphone penetration and the launch of new bundled offerings. The overall customer base increased by 1.9% to 9.7 million during the fourth quarter.

Underlying EBITDA, which is adjusted for a reversal of a provision related to a court case of UZS 39.9 billion in Q4 2016, slightly decreased compared to the prior year and the underlying EBITDA margin was 45.7% in Q4 2017. The revenue growth was mainly offset by an increase in non-controllable costs, such as customer tax, interconnect costs, content costs, frequency fees and the negative impact from the currency liberalization. Customer costs increased as a result of an 83.3% growth in customer tax to UZS 2,750 per customer per month during Q4 2017. The customer tax increased further to UZS 4,000 per customer starting from January 2018. Adjusting for this negative effect, underlying EBITDA growth would have been 12.9% and underlying EBITDA margin for Q4 2017 would have been 5.9 percentage points higher at 51.6%.

Capex excluding licenses totalled UZS 120.1 billion and the capex excluding licenses to revenue ratio was 13.0% in 2017. The company continued to invest in its high-speed data networks, improving the 4G/LTE coverage in Tashkent and increasing the number of nationwide 3G sites by 60% year-on-year. Further improvements to the high-speed data networks will continue to be a priority for Unitel in 2018.

The Republican Radiofrequencies Council in Uzbekistan delayed the implementation of the decision to redistribute radio frequencies in Uzbekistan to April 2018. This will result in a reallocation of Unitel's radio frequencies to other cellular communications providers in the market. The Company prepared the network for this conversion and is analyzing the effect of this measure, which might lead to increased investments in network capacity.

In December 2017, PJSC VimpelCom successfully repatriated a net amount of approximately USD 200 million from Unitel, its wholly owned subsidiary. The remaining cash and deposits balances as per year end 2017 in Uzbekistan are USD 147 million in Uzbek som.

ITALY JOINT VENTURE¹

Wind Tre's total revenue in Q4 2017 decreased by 11.1% to EUR 1.6 billion, driven by a 8.1% decline in mobile service revenue and lower mobile CPE (consumer premises equipment) revenue. The mobile service revenue decline was primarily due to continuing aggressive competition in the market, which resulted in a customer base decline of 5.8% to 29.5 million, together with impact from the new EU roaming regulation. The mobile CPE revenue decline was primarily due to lower volume of gross additions and a more selective mobile customer scoring, aimed at reducing bad debt, in line with the company' shift of focus from volume to value.

Mobile data revenue continued to show solid growth year-on-year with a 16.8% increase, driven by stable data customer base, data ARPU growth of 7.9% and data usage which grew by 50% to approximately 4.1 GB per customer per month. In Q4 2017, mobile ARPU slightly declined to EUR 11.2, a 1.8% year-on-year erosion, all attributable to voice component.Fixed-line service revenue slightly declined by 2.5% year on year, as the increases in direct and broadband customers of 2.0% and 2.3% respectively driven by the increased demand for ultra-broadband connections, were more than offset by the unfavourable comparison with Q4 2016, when some commercial initiatives were undertaken. In Q4 2017, the fixed-line direct customer base and the broadband customer base reached 2.5 million and 2.4 million respectively. Fixed and broadband ARPU slightly declined as a consequence of the abovementioned unfavourable YoY comparison.

Underlying EBITDA declined by 3.1% year-on-year in Q4 2017 to EUR 592 million, mainly due to service revenue erosion, partially offset by opex synergies of EUR 69 million, which led to an increase in the underlying EBITDA margin of 3.2 percentage points to 38.1%.

Capex in the quarter totalled EUR 515 million and was primarily focused on expanding capacity and coverage of the 4G/LTE network, as well as modernizing and merging the former WIND and Tre networks. To be noted that in the cities, Trieste and Agrigento, where the network modernization has been performed, network performances recorded are at the top.

The net leverage ratio (net debt/underlying EBITDA) was 4.4x at the end Q4 2017, primarily due to the payment of call premia and one-off costs related to the refinancing of the entire capital structure of Wind Tre. This refinancing not only improved the maturity profile of the company but is expected to substantially reduce future interest costs by an annual amount of approximately EUR 270 million.

During the year 2017, Wind Tre generated opex synergies of approximately EUR 167 million, on track with the targets disclosed at the time of the announcement of the Wind Tre joint venture.

CONFERENCE CALL INFORMATION

On 22 February 2018, VEON will also host a live presentation by senior management in London at 14.00 CET (13.00 GMT), which will simultaneously be made available through video webcast on its website and through the following dial-in numbers. The call and slide presentation may be accessed at http://www.veon.com

2.00pm CET investor and analyst conference call
US call-in number: +1 (646) 828 8143
Confirmation Code: 8795299

International call-in number: +44 (0) 330 336 9411
Confirmation Code: 8795299

The conference call replay and the slide presentation webcast will be available until 1 March 2018.
The slide presentation will also be available for download on VEON's website.

Investor and analyst call replay
US Replay Number: +1 719 457 0820
Confirmation Code: 8795299

UK Replay Number: 0800 101 1153
Confirmation Code: 8795299

DISCLAIMER

This press release contains "forward-looking statements", as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by words such as "may," "might," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "seek," "believe," "estimate," "predict," "potential," "continue," "contemplate," "possible" and other similar words. Forward-looking statements include statements relating to, among other things, VEON's plans to implement its strategic priorities, including with respect to its transformation plan, among others; anticipated performance and guidance for 2018, including VEON's ability to generate sufficient cash flow; future market developments and trends; operational and network development and network investment, including expectations regarding the roll-out and benefits of 3G/4G/LTE networks, as applicable; the effect of the acquisition of additional spectrum on customer experience; and VEON's ability to realize its targets and strategic initiatives in its various countries of operation. The forward-looking statements included in this release are based on management's best assessment of VEON's strategic and financial position and of future market conditions, trends and other potential developments. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of demand for and market acceptance of VEON's products and services; continued volatility in the economies in VEON's markets; unforeseen developments from competition; governmental regulation of the telecommunications industries; general political uncertainties in VEON's markets; government investigations or other regulatory actions and/or litigation with third parties; failure to realize the expected benefits of the Italy Joint Venture or the Warid transaction as expected or at all due to, among other things, the parties' inability to successfully implement integration strategies or otherwise realize the anticipated synergies; risks associated with data protection or cyber security, other risks beyond the parties' control or a failure to meet expectations regarding various strategic priorities, the effect of foreign currency fluctuations, increased competition in the markets in which VEON operates and the effect of consumer taxes on the purchasing activities of consumers of VEON´s services. Certain other factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risk factors described in VEON's Annual Report on Form 20-F for the year ended December 31, 2016 filed with the U.S. Securities and Exchange Commission (the "SEC") and other public filings made by VEON with the SEC. Other unknown or unpredictable factors also could harm our future results. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Under no circumstances should the inclusion of such forward-looking statements in this release be regarded as a representation or warranty by us or any other person with respect to the achievement of results set out in such statements or that the underlying assumptions used will in fact be the case. Therefore, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date hereof. We cannot assure you that any projected results or events will be achieved. Except to the extent required by law, we disclaim any obligation to update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made, or to reflect the occurrence of unanticipated events. Non-IFRS measures are reconciled to comparable IFRS measures in VEON Ltd.'s earnings release published on its website on the date hereof. Furthermore, elements of this release contain or may contain, "inside information" as defined under the Market Abuse Regulation (EU) No. 596/2014.
As of 7 November 2016, VEON Ltd. owns a 50% share of the Italy Joint Venture (with CK Hutchison owning the other 50%) and we account for this JV using the equity method as we do not have control. All information related to the Italy Joint Venture is the sole responsibility of the Italy Joint Venture's management, and no information contained herein, including, but not limited to, the Italy Joint Venture's financial and industry data, has been prepared by or on behalf of, or approved by, our management. As a result of this, we do not provide any reconciliations for non-IFRS measures for the Wind Tre Joint Venture. For further information on the Italy Joint Venture and its accounting treatment, see "Item 5— Operating and Financial Review and Prospects—Key Developments and Trends—Italy Joint Venture" "Explanatory Note—Accounting Treatment of our Historical WIND Business and the new Italy Joint Venture" and Note 6 to our audited consolidated financial statements included in our Annual Report on Form 20-F for the year ended 31 December 2016.
All non-IFRS measures disclosed further in this release (including, without limitation, EBITDA, EBITDA margin, underlying EBITDA, underlying EBITDA margin, EBIT, EBT, net debt, equity free cash flow, organic growth, capital expenditures excluding licenses and LTM (last twelve months) capex excluding licenses/revenue) are reconciled to comparable IFRS measures in VEON Ltd.'s earnings release published on its website on the date hereof. In addition, we present certain information on a forward-looking basis (including, without limitation, the expected impact on revenue, EBITDA and equity free cash flow from the currency liberalization in Uzbekistan, the sale of the tower business in Pakistan (the "Deodar" transaction), the consolidation of the Euroset stores after completing the transaction ending the Euroset joint venture). We are not able to, without unreasonable efforts, provide a full reconciliation to IFRS due to potentially high variability, complexity and low visibility as to the items that would be excluded from the comparable IFRS measure in the relevant future period, including, but not limited to, depreciation and amortization, impairment loss, loss on disposal of non-current assets, financial income and expenses, foreign currency exchange losses and gains, income tax expense and performance transformation costs, cash and cash equivalents, long - term and short-term deposits, interest accrued related to financial liabilities, other unamortized adjustments to financial liabilities, derivatives, and other financial liabilities.

ABOUT VEON

VEON is a NASDAQ and Euronext Amsterdam-listed global provider of connectivity and internet services, with the ambition to lead the personal internet revolution for over 240 million customers it currently serves, and many others in the years to come.

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CONTENT OF THE ATTACHMENTS

For more information on financial and operating data for specific countries, please refer to the supplementary file Factbook4Q2017.xls on VEON's website at http://veon.com/Investor-relations/Reports--results/Results/.

ATTACHMENT A: VEON LTD FINANCIAL SCHEDULES

VEON LTD UNAUDITED CONSOLIDATED STATEMENT OF INCOME