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21. Bull, Bear & Beyond – VEON: executive interview with CEO Kaan Terzioğlu
6 Plays1 year ago
"In this interview, VEON Group’s CEO, Kaan Terzioğlu, highlights the strategy, challenges and opportunities for VEON as it continues to penetrate its core markets in the Ukraine, Bangladesh and Pakistan. Kaan emphasises that VEON’s target is to expand into digital services, with offerings in adjacent sectors such as fintech, education, healthcare and entertainment, underpinned by VEON’s commitment to offer 4G connectivity to all customers.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
About Edison:
Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
Original interview published on 21/11/2024 and reposted as a podcast"
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Transcript
Introduction to Karn Terziolu and Vion
00:00:08
Speaker
Hello, today I'm joined by Karn Terziolu of Vion. Vion is a NASDAQ-listed telecommunications and digital services business operating across a number of different markets.
00:00:19
Speaker
Karn, many thanks for joining
Vion's Digital Transformation
00:00:21
Speaker
me today. um Can you start by introducing Vion and in particular the company's been on quite a transformation over the last couple of years. Can you talk us through that?
00:00:30
Speaker
Thank you very much and thanks for asking this question because it's really a passion for me to talk about the opportunities that we have as a company and how blessed we are for having a company with a purpose.
00:00:41
Speaker
ah We are a frontier markets digital operator and to be specific about what it means that we are not a traditional company that serves the customers 32 minutes a day by providing them voice and data services.
00:00:54
Speaker
and by selling them number of minutes, number of gigabytes, number of SMSs, we actually focus on real needs of the customers in these frontier markets which are significantly underserved. And we provide them meaningful digital services from financial services, entertainment, education, healthcare, in addition to communication services.
Strategy in Underserved Markets
00:01:16
Speaker
And we have a strategy which says, you know, digital operator, 1,440.
00:01:22
Speaker
This number is ah is the number of minutes in a day. We have to be providing our customers a digital service which is relevant for their lives in every single minute. And that expands our relevance to our customers. And that's why when I look to the countries that we operate in, from Pakistan to Bangladesh to Uzbekistan, Kazakhstan to Ukraine,
00:01:43
Speaker
very difficult economies in in reality, but also an incredible opportunity because these people are underserved. They do not get the services that they deserve. If you look today, you know, we are probably over the next three years, we're going to add another 100 million 4G users. Still, in most of the markets, one out of two people don't have a smartphone.
00:02:06
Speaker
They don't have 4G coverage, not to mention 5G. They don't have bank accounts because you know the banks serve only the government and maybe a handful of enterprises in these countries. Entertainment services, they don't have credit cards to pay for it.
Growth and Expansion Plans
00:02:20
Speaker
And I believe our role as a digital operator, whether be it through BanglaLink in Bangladesh or Jazz in Pakistan or Beeline in Kazakhstan and Uzbekistan or Kyivstar in Ukraine, is to provide the services our customers need.
00:02:36
Speaker
in the best way possible to cover all these markets, not only the telecoms, but adjacent markets from entertainment to financial services, to education, to healthcare, and to enterprise services. And that's our growth story, because I believe on one side we have an organic growth potential,
00:02:55
Speaker
You know, 100 million more 4G users, 25 million babies to be born over the next three years, more smartphones to be owned by people. So there is a natural driver of organic growth in our markets. It's not a saturated market that many other telecom companies complain about. It's actually a growing market by itself.
00:03:15
Speaker
But my passion is to take that growth which is an opportunity of doubling the business by itself to the adjacent markets and double it again. And make sure that we are number one and number two in entertainment business.
00:03:28
Speaker
We are number one or number two in financial services, in education and healthcare. care And today, if you look in these markets, we have 160 million SIM card owners of our operators.
Karn's Career Journey
00:03:39
Speaker
So a traditional telecom company will tell you we have 160 million subscribers. But we have, in addition to that, 120 million users of our digital services. We have almost 40 million people utilizing our entertainment services, our super apps, and another 30 million utilizing our financial services.
00:03:58
Speaker
And our ability to be actually in a position to acquire customers very easily at low costs and distribute all these digital services to masses is unique.
00:04:10
Speaker
Thank you. And you've clearly got an awful lot of passion for the business. Can you tell us about yourself and and in particular how did you end up arriving at Vyond and owning a good number of shares in the business?
Shift to Digital Services
00:04:21
Speaker
Look, I started my career as an auditor in Arthur Andersen. And I did the auditing for a year and a half, and then I moved to consulting side of the house, and I became a management consultant. So for 10 years in Andersen, I actually either audited telecom companies or consulted to telecom companies. Later on, I moved to Cisco, a major telecom company which is specialized in telecommunications equipment sales. I sold a lot of equipment to telecom companies. Later on, I was on the boards of publicly listed companies, driving actually the services that we acquired from telecom companies. And I did acquire lots of services from telecom companies. Finally, one day, I found myself as the first job I had in a telecom company as the CEO of Turkcell back in 2015 in Turkey.
00:05:08
Speaker
And I never forget, it was almost maybe the 10th day of my job. I received my first WhatsApp call. My phone rang in a different tone and I was terrified because I felt like you know something was about to hit me because it was our service and somebody else was providing that service and I was on the receiving end of it.
00:05:32
Speaker
And then you know kind of I thought about my career and I felt like I have observed this industry over maybe 25 years at that time, now 35.
Revenue Growth from Digital Services
00:05:41
Speaker
And I noticed that telecom companies were like in a bus stop waiting for the bus, but the buses came and passed by and they never even bought a ticket.
00:05:51
Speaker
A trillion dollar industry was created over e-commerce, e-business and digital economy. Very few of that value actually tickled down to the telecom companies.
00:06:04
Speaker
Facebook's, Google's, all sorts of e-commerce sites, Amazons, Apples, they benefited greatly providing incredible value to their shareholders. But if you look to our industry, a capex heavy industry, practically focusing, when they talk about technology, they talk about bending the fiber, you know, splitting the cables or tilting the antennas.
00:06:26
Speaker
It's not about that. If you want to grow the business, if you want to relevant to the customer, you have to move from that 32-minute narrow relationship of having a phone call or as sending an SMS to digital services. And that's why at that tenth day in my job as a CEO of a telecom company, I made a big decision to say that we are going to be in digital service business. And we are going to be a services company ah who focuses on consumer services and enterprise services, which happens to be having a telecom license.
00:06:55
Speaker
And ah that belief that belief of mine that being relevant to the customer will enhance your revenue potential turned out to be true. This last quarter was the first quarter where we disclosed our revenues coming directly from digital services. So not including the accelerator impact of digital services to telco revenues, but really revenues directly coming from digital services. either interest income we do, our loans we give, or advertising technology income, or subscription service income, and they reached 11% of our top line.
00:07:30
Speaker
And they were growing at that time at 78% year on year in US dollar terms. And that shows actually the potential. When you provide the services they deserve, frontier market customers, they stay with you and they enjoy your services.
Local Empowerment and AI Integration
00:07:47
Speaker
Thank you. And can you elaborate a little bit on how you execute this growth? In particular, how are you able to do it with an asset-like model without significant capex and also on an an international basis?
00:07:58
Speaker
Sure. First of all, I believe in empowerment of local teams. ah A telecom company is one of the biggest enterprises in the countries that they serve. So practically trying to manage these companies, trying to making decisions in headquarters in those days from Amsterdam or today from Dubai for a tariff plan in ah in you know Uzbekistan is illogical. And I think those efforts have been done in the past and the centralization and the ah kind of false pretext of synergies exist
00:08:31
Speaker
We don't do that. We believe in empowerment, we believe in decentralization. And as a company, we are unique because on one side we have a unified strategy of a digital operator which is relevant to its customers 1,440 minutes a day. But we have a totally decentralized execution which does not seek small you know calculations around synergies which empowers people and which follows the philosophy of data of Pakistan stays in Pakistan. Engineers who are Pakistani works with that data to create Pakistani digital services. We create jobs in the country, we pay taxes in the country. And with this philosophy, we have been executing country by country.
00:09:15
Speaker
That's why when you look to our portfolio, you're going to see lots of brands. We have a different entertainment brand in Bangladesh, and we have a different entertainment brand in Pakistan. But that local aspect, the proud that people have, that having developed the service in their country, working with their own people's data, it's unbeatable. Now, starting with last year, we added another layer to our strategy of Do 1440, and that is augmented intelligence 1440, AI 1440. The reason for that, I truly believe that the age of digital services will be complemented with augmented intelligence services. And our countries, when you look to languages that are spoken,
00:09:59
Speaker
Urdu, Punjabi, Bengali, Kazak, Özbek, Ukrainian, these are not the natural languages that you would find in scientific libraries. So we need to take extra effort to make these languages basically become AI agents.
00:10:15
Speaker
with specific purposes. And that's an area that I thought that we can grow our business in ah in an unprecedented way. Because imagine if you are not just buying number of gigabytes from an operator, but you are buying a service which augments your competencies, skills, experience to be a doctor, a teacher, a farmer, an auto mechanic, a small business owner, or a mother or father. I think this value proposition is unbeatable.
Future Growth and AI-Driven Services
00:10:43
Speaker
We are practically offering them a better version of themselves.
00:10:47
Speaker
Now, maybe you're paying $25 to OpenAI or Microsoft for co-pilot. You know our ARPU today is $2.6. I would love to see that to $3.6, $4.6, $7.6. Maybe for more specialized competencies and skills, $19.99. But I believe that that opportunity exists. And today, all of our technology companies, we, by the way, in addition to our services companies and telecom company in every country, we have a technology company which actually employs software engineers. and AI specialists, and they actually focus on that specific mission.
00:11:23
Speaker
Fascinating. and And you talked about the next three years, but in terms of your vision for the business, and what would you like Vion to be in three years, five years? So first of all, I really see ourselves being ah active in frontier markets. I would love to see our footprint to grow.
00:11:41
Speaker
And I would love to see you know the 160 million SIM users plus 120 million digital service users to grow into half a billion in total. And I want to see in every country that we operate in, we provide both mobile and fixed connectivity services. And on top of that, we are either number one or number two in financial services.
00:12:01
Speaker
Number one or number two in entertainment, number one and number two in education and healthcare. And of course, don't expect us to build schools or hospitals, but the way we will empower teachers and doctors and nurses is going to create a platform where we can actually be the biggest player. And let me give you an example. Even today, in Ukraine, we have the largest healthcare platform.
00:12:26
Speaker
We have 28 million out of 40 million Ukrainians around the world registered on this platform. We do 2.6
Healthcare Platform and NASDAQ Focus
00:12:34
Speaker
million online appointments every single month. And we provide a healthcare care subscription service for our customers so that they can put their x-rays or blood tests and an AI agent can interpret it for them. And they can store it for many years for themselves, for their kids. I think That's the view and I envision three years out being the biggest players in these adjacent markets, serving half a billion people, not only with connectivity but digital services, and more importantly, creating great value for its shareholders.
00:13:08
Speaker
And what about from a capital markets perspective? You've recently announced that you're delisting from Euronext, consolidating the listing on Nasdaq. What should we expect and what are your priorities from an investor relations capital markets perspective? Sure. First of all, I value our listing in NASDAQ a lot. I know how important it is for our international shareholders. So we will ah be really focusing on the NASDAQ listing for our international shareholders. But we are also realizing the fact that our brands like Jazz or BanglaLink, these are blue chip brands for Pakistan and Bangladesh.
00:13:42
Speaker
And I think there is an opportunity for us to also tap into domestic retail investors and pension funds. So don't be surprised if you see some of our local assets being listed locally or in regional markets. This could be our operators or this could be our financial services companies or entertainment companies. And I truly believe that we should give the opportunity for investors to participate in the growth opportunities that frontier markets offers, as well as specific countries that can offer to the domestic markets. This will be very important because I think it will allow us to crystallize the value in the eyes of the investors. Because as you can imagine, in London, New York, you start talking to investors from Bangladesh, Pakistan, the moment you say Ukraine, the eye starts to roll, right?
00:14:28
Speaker
They're not familiar with these markets, but they are familiar with the management. They are familiar with the track record of the business. And I think if they can also see that parts of the business, you know, value is crystallized. I think this is a perfect match in heaven.
00:14:43
Speaker
Khan, fascinating discussion, fascinating business. Many thanks for joining me today. Thank you very much. My pleasure.