Veon becomes an internet platform and works to rebuild the company’s credibility

By:
Alan Burkitt-Gray
Published on:

VimpelCom’s name change to Veon was part of a series of transformations CEO Jean-Yves Charlier has been undertaking in what was once a troubled company. He tells Alan Burkitt-Gray that Veon is now paying dividents to shareholders

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The word “transformation” is on Jean-Yves Charlier’s lips almost as soon as we start the interview, in a flash new office suite a five-minute walk from London’s so-called Silicon Roundabout.  “This morning’s results confirm that our transformation is well on track,” says the man who has been CEO since April 2015 of what we used to call VimpelCom. It’s now Veon (though the company prefers VEON), and that is just one of the changes he’s brought about since he joined. 

A third is a move, still under way, from a collection of mobile telecoms companies into what Charlier calls a personal internet platform. His vision is to turn the group into an online service, mostly – but not necessarily – delivered via its own networks, companies such as Beeline in Russia and Jazz in Pakistan. 

The next transformation is in corporate reputation. Just after Charlier joined, the group had to set aside $900 million because of corruption investigations in Uzbekistan. At the end of that year it had to pay fines to US and Dutch authorities. As a result Telenor said it would sell its 33% holding.  The Norwegian company is now in the final stages of that process.  

So corporate governance is high on Charlier’s list of priorities for Veon. “It’s a focus on making the group world class,” he says, listing “controls and compliance and new systems and platforms and back office” along with ensuring there is a “world-class supervisory board”. In July the shareholders expanded the supervisory board from nine to 11 with two new directors: Ursula Burns, who took over the chair from Alexey Reznikovich, and Guy Laurence. Russian-born Reznikovich, now a citizen of Malta, runs the telecoms arm of LetterOne, the Luxembourg-based vehicle of energy investor Mikhail Fridman. Both Fridman and Reznikovich are on the Veon supervisory board. 

Burns joined Xerox in 1980 as a new graduate in mechanical engineering and left in 2017 as chairman of the board, having also been CEO for seven years. She was the first African American woman to lead a Fortune 500 company. Laurence spent 12 years in the Vodafone group, ending as CEO of Vodafone UK, before becoming chairman and CEO of Rogers in Canada for three years. 

“We wanted to regain credibility with investors,” says Charlier. Veon shares are listed on Nasdaq in New York and Euronext in Amsterdam. That meant rebuilding financial performance and corporate governance “and a return to the dividend policy”. Which takes us back to those results: “It was a solid set of results. We moved from negative growth to positive growth in two years. Now we have double-digit growth and we are paying 11 cents a share in dividends, based on our new dividend policy.”

The executive in charge of those finances was Andrew Davies, who spent seven years in Vodafone, in the UK, Japan, Turkey and India, before becoming CFO of Verizon Wireless for three years.  When Vodafone owned 45% of Verizon Wireless, the UK group always provided the CFO. It was often an uneasy relationship. Verizon wanted 100% control of its wireless unit; Vodafone liked the dividends and wanted a good deal in terms of tax. In September 2013 Vodafone finally agreed to sell its stake to Verizon for $130 billion. Within weeks, Davies was in Amsterdam looking at the finances of VimpelCom. 

Given Telenor’s long and difficult relationship with VimpelCom, Davies’s experience in London and New York was useful preparation. He announced his retirement in September 2017.

Meanwhile Charlier shows me round Veon’s London offices, where many of the company’s software people will work – at desks, in pods, in small meeting rooms. Some details are picked out in the glowing golden yellow that is used for the company’s V logo, but there’s a table-tennis area bordered by a turquoise-striped wall. “All our offices are being modernised in the same style,” says Charlier, who’s been CEO of Colt and SFR in the past. Why the corporate name change? “We thought that it was very important that we provide the group with a corporate brand. VimpelCom wasn’t a consumer brand.”

The company had picked Veon as the name for the internet platform. “Given the new strategy it was a good opportunity to rebrand the group. The name was researched with consumers around the world and has gone well with our own employees. We see a group with a clean sheet.”

What about the names of Djezzy in Algeria, Beeline in Russia, Georgia, Kazakhstan and elsewhere, Kyivstar in Ukraine, and so on? “No,” says Charlier. “But I would never say never in business. Beeline is one of the top 10 Russian brands,” he adds. Djezzy has a similar status in Algeria. However, the Pakistani operation only became Jazz at the start of 2017, a year after Veon’s Mobilink merged with rival Warid. So he’s not inflexible. 

Charlier describes the internet platform as something that “offers everything in an Uber-like way with a few clicks”. Customers can top up, get to customer service and change plan. They can send messages “even when out of credit. We need to offer messages: we can’t leave it to the OTTs. These are prepaid customers, and the value proposition is it’s truly free even when they’re out of credit.” 

The platform has “a lot of content and promotion”, following deals with MasterCard, Burger King and the Russian fashion chain La moda. “We’ve signed 100 partnerships in 100 days. We have a global partnership with Red Bull.” 

Veon the platform is already in five countries: “Russia, Italy, Ukraine, Pakistan and Georgia. But we’ll be in all countries in 2017. In the medium to long term we want to create a marketplace so consumers can buy on the internet platform – including entertainment and financial services,” says Charlier. 

“We’re fundamentally rethinking our data architecture to use data mining platforms. We’re working with taxi internet companies about using location-based data to match demand and supply. So if it sees you in a restaurant on a Friday evening at 9:30, it will ask if you would like us to book a taxi for later.”P27 quotes

Frontier markets 

But isn’t it all too late, given the domination of the mobile internet by companies such as Facebook, Apple, Google and Uber? “It’s far from too late where we operate, in frontier markets,” he retorts. Fewer than half of the people covered by Veon’s networks have access to the internet. “Less than 10% of people in Bangladesh have smartphones.” 

They will use the platform to monitor their credit several times a day, he says, and Veon will offer services that compete with Facebook, WhatsApp and so on. “They will be on our platform often.” It is mainly being developed internally, in London, Amsterdam and Moscow, he says. “It’s very different from what telcos did in the past. We’re doing it in-house like an internet company.” The platform will operate globally in the same way for all Veon’s businesses. 

At the same time it is overhauling its global IT systems. “We’re building a data-mining platform and overhauling the BSS [business support systems] stack. We have a worldwide contract with Ericsson to build the platform. Andrew [Davies] is leading the back-office systems work.”

Replacing legacy systems 

Each of Veon’s local businesses had its own legacy system, says Davies, who’s been through a similar process in previous roles. “This is the eighth time I’ve seen it,” he smiles. The aim is a globalised back-office system distributed across three shared-service centres, covering procurement, human resources, IT and finance.  “All essentially will be carbon copies.” 

Russia will be run from Yaroslavl, 250km north of Moscow; the Eurasian operations will be run from Lviv in western Ukraine; and headquarters functions and emerging markets will be run from Islamabad in Pakistan.

“It’s a long project. These things aren’t easy, given our fragmented legacy,” says Davies. “Previously in my career I’ve done best-practice visits to IBM and Oracle and they have done this themselves.” There is “no intention to outsource” any of the IT. The head-office functions “will be moved to Islamabad by the end of the year”, he adds. 

Italy’s not covered. On 31 December 2016 VimpelCom, as it still was, merged its Wind business with CK Hutchison’s Tre – Three in Italian. Wind Tre “is a separate process of integration”, says Davies. “Hutchison was already working on its own shared service centre with SAP. Wind Tre is largely run out of that.”

Both brands will be retained, adds Charlier. “We’re keeping both, Wind as the family brand, Tre the digital business brand.” 

Meanwhile Veon has been running through a whirl of other deals. Beeline in Russia jointly owned the Euroset chain of stores with rival operator MegaFon. 

“The Russian market is characterised by very high churn. Every two years we renew the customer base – and part of the reason is the distribution structure. It’s very important to expand our brand footprint.”

Veon will take over half the 4,000 stores and convert them to Beeline-branded shops. MegaFon with get the rest. “We think that’s important in terms of differentiation.”

The latest transformation, after the interview with Charlier, was the sale of Jazz’s tower operations to a company controlled by Axiata of Malaysia – a deal that will bring in $940 million. 

“We’ve carried out a radical overhaul, and that includes the balance sheet,” Charlier tells GTB. “The group was highly leveraged and we’ve brought interest costs down by $100 million. Business is now very, very solid – and now this is a dividend-paying stock.”