VEON sells Algeria's Djezzy to FNI

VEON, the emerging-markets operator that counts Russia as its biggest market, is shrinking its footprint further with the announcement that it intends to exit Algeria in North Africa.

The group, which operates telecom networks across an incongruous array of geographical markets, had already disposed of its operating subsidiary in Armenia as part of efforts to simplify its structure and enhance its focus on markets with attractive long-term growth opportunities.

It now plans to sell its 45.57% stake in its Algerian subsidiary, Omnium Telecom Algérie SpA, to Fonds National d’Investissement (FNI), the Algerian National Investment Fund. Omnium owns the Algerian mobile network operator, Djezzy.

The sale of Algeria comes as little surprise as VEON has previously indicated that it could sell off more of its operating companies (opcos) that are similar in size to the Armenian business. In a statement, the group said this latest step "will further streamline VEON’s operations, allowing for an improved focus on our core markets."

Sergi Herrero, the former co-CEO of VEON who stepped down from his role on June 30, told Light Reading in May 2020 that the group regularly assesses its portfolio, and intended to focus on core markets that can "move the needle" for VEON's share price.

Indeed, both Algeria and Bangladesh are listed as "frontier markets'' in VEON’s results presentation for the first quarter (Q1) of 2021. Pakistan, Ukraine, Kazakhstan and Uzbekistan are described as "growth engines", while Russia is "our cornerstone."

In Q1 2021, the Algerian business registered a 13.6% drop in operating revenue to US$160 million, although the rate of decline was only 5.1% in local currency. Adjusted EBITDA fell by 16% to $91 million.

VEON blamed the decline on "aggressive price competition and overall economic slowdown", which resulted in "lower voice, interconnect and other services revenue." Roaming revenue also fell owing to travel restrictions under lockdown measures imposed to limit the spread of COVID-19.

Digital focus

To be sure, VEON has been instigating a number of measures in recent months and years to reposition itself for growth.

As well as cutting loose Armenia and now Algeria, it has also slashed its workforce at its Amsterdam headquarters and reversed an earlier, one-size-fits-all strategy, under which it attempted to build a single app for customers worldwide and centralize technology decisions. These days, its opcos are autonomous.

That change in strategy was further reinforced when former chief technology officer (CTO) Yogesh Malik left as part of the group's approach to delegate decisions about new digital and technology strategies to its individual opcos. CTOs have now been appointed at each opco.

VEON has been placing emphasis on digital businesses for some time, and is continuing to ramp up operations in these areas.

The remit of Herrero, who joined VEON from Facebook, had been to focus on services beyond traditional connectivity offerings and his departure also suggested that the opcos would be more responsible for their respective digital businesses.

However, VEON is still apparently implementing some strategies at group level. For example, in Russia it recently acquired a majority stake in OTM, a technology platform for the automation and planning of online advertising purchases in Russia.

Although VEON said the investment in OTM will significantly strengthen Russian opco Beeline’s position in the AdTech market, it also noted it would allow the expansion of OTM's operations into other markets served by VEON’s mobile operators.

Meanwhile Beeline in Kazakhstan has launched what it described as the country’s first digital payment card integrated with its mobile financial services offering.

The card is marketed under the "Simply" brand and takes the form of a mobile financial service application linked to a customer's phone number, an electronic wallet and a premium digital Visa Platinum card. The card is also integrated with digital wallets Apple Pay, Samsung Pay and Garmin Pay.

In May, Pakistan-based digital financial services provider, JazzCash, launched a Business App that aims to make digital payments more efficient and seamless for business owners, company managers and home businesses.

VEON recently gained 100% ownership of its Pakistan business after buying the 15% minority stake in PMCL, the operating company of mobile operator Jazz, from the Dhabi Group for $273 million.

Top image source: Unsplash

— Anne Morris, contributing editor, special to to Connecting Africa