Earnings Call Transcript - VEON Q4 2021

Nik Kershaw, Group Director of Investor Relations

Welcome to VEON's Fourth Quarter Results presentation for the period ending December 31, 2021. I'm Nik Kershaw, VEON's Group Director of Investor Relations. I'm pleased to join in the room today by Kaan Terzioglu, our Group CEO; as well as Serkan Okandan, our Group CFO, and Alex Bolis, Head of Corporate Strategy. Today's presentation will begin with an operational overview from Kaan, followed by the financial review from Serkan. Then Kaan will come back. As always, we will ensure that there is ample time for your questions, but we would ask that you save these for the end of the presentation. Before getting started, I would like to remind you that we may make forward-looking statements during today's presentation which involve certain risks and uncertainties. These statements relate in part to the company's anticipated performance and operational guidance, future market developments and trends, operational and network development, and investments and the company's ability to realize its targets and commercial and strategic initiatives, including current and future transactions. Certain factors may cause actual results to differ materially from those in the forward-looking statements, including the risks detailed in the company's annual report on Form 20-F and other recent public filings made by the company with the SEC. The earnings release and the presentation, each of which includes reconciliations of non-IFRS financial measures presented today, can be downloaded from our website. With that, let me hand over to Kaan.

Kaan Terzioglu, Group CEO

Thank you, Nik. Good morning to all and welcome to the presentation of our fourth quarter and full year results for 2021. Before we start reviewing our performance, allow me to say a few words on the recent escalation of conflict between Russia and Ukraine, two out of our nine markets probably disturbed. It is heartbreaking and deeply saddening to see two countries with such profound size at conflict. I would like to say that our thoughts and prayers are with everyone affected by the current situation. This is a very sad time for all, and our top priority is the safety and security of our employees and their families. At the same time, our teams are making efforts to ensure service continuity as communication is even a more essential need than ever in these extreme situations. With this on top of our minds, it is important to point out that our company is currently supported by a cash position of US$2.3 billion and a further US$1.5 billion of undrawn committed bank lines. We will continue to ensure at all times an ample liquidity position to cover all the operational and financial requirements. Let us now review 2021. This has been a strong year for VEON across our key markets and key market performance indicators. Group revenue grew 10.1% year-on-year on a local currency basis, closing above our high single-digit values. EBITDA was up 8.9% in local currency, supported by our focus on value and good cost control, and above our minimum 8% guidance. CapEx intensity closed at 23.4 percentage points within our guidance range and 1.2 percentage points lower than the prior year. In reported currency, revenues were up 6.8%, and EBITDA was up 5.7%, supported by our disciplined inflationary pricing and an effective pricing strategy. In terms of quarterly performance, we delivered three quarters of double-digit revenue growth, closing Q4 at 11.1% local currency growth in top line and 9.5% growth in EBITDA. In reported currency, this performance corresponds to 12.2% for revenues and 10.6% for EBITDA. Importantly, our performance improved throughout the year, positioning us well for the medium term. Moving on to Slide 6. The main driver of these results has been the progress in our digital operator strategy, enabled by our 4G investments and the expansion of digital services in adjacent markets. Over the past 12 months, our 4G users increased by 30%, reaching 97 million customers. We now serve nearly one out of two customers with 4G services, up from just over 40% 4G penetration of our subscriber base a year ago. Over the past two years, we have increased our 4G penetration from 28% of our subscriber base to 48%. This gives us confidence that we are on track towards our 70% 4G penetration as mentioned in the medium term. Our one-month active Double and Multiplay 4G customers reached 61.3 million at the end of 2021, with a growth rate of 32% year-on-year. In 2021, these customers generated nearly 60% of our subscriber revenues. In line with this, our combined data and digital revenues increased from 18.2% in local currency terms. Slide 7; looking at the Q4 performance of each of our operations, you can see here the summaries. We reported encouraging results across all our operating companies. We reported solid top-line performance in all the markets with double-digit local currency growth in five countries. EBITDA trends were also positive across all operations. Our group revenue growth was driven by all countries as each country reached a healthy growth momentum in 2021. Most notably, in Russia, our turnaround made good progress. Let me now talk about this on the next slide. In Q4, Beeline Russia recorded total revenue growth of 7.7%, service revenue growth of 6.6%, mobile service revenue growth of 6%, and EBITDA growth of 4.3%. This means four consecutive quarters of total revenue growth and three consecutive quarters of growth in service revenues. What is more encouraging is the upward trajectory within the quarter. In December, Beeline Russia's mobile service revenues were up 7.1% year-on-year. The operational foundation for this growth is our 4G user base which grew to RUB25.5 million at the end of the quarter with a year-over-year growth rate of 13%. 4G users now account for 55% of our total customers in Russia, improving Net Promoter Scores, higher ARPU, and lower churn. Our brand renewal, widening B2B portfolio, growth in digital services, and strong partnerships have contributed to this performance. With these results, we consolidated our position as a strong number three player in the market. Let's continue with Ukraine. Over the past few years, Kyivstar delivered consistent growth quarter after quarter and the final quarter of 2021 was no exception. We reported 12.5% growth in revenues and 8.7% in EBITDA in Q4. For the full year, revenues increased 14.3% and EBITDA is up 13.1%. This financial performance has been supported by the consistent price in 4G penetration across our base. We added 2.8 million 4G subscribers year-on-year and nearly 5 million over the past two years, corresponding to 68% growth since the end of 2019. In 2021, we added 3,440 sites to our network, enabling the growth of 4G customers and executing our strategy of 4G to 5G. Kyivstar has strong profitability, infrastructure leadership, growing convergent services, and has been recognized as the best employer in Ukraine. I would like to again thank all our employees there for their exceptional team strength and dedication in these highly challenging times. On Slide 10, we look at Pakistan. Jazz grew 13.7% in revenue and 14.8% in EBITDA. These results were enabled by a 40% increase in our 4G subscribers. 4G penetration has now reached 48% among our customers. Our digital services are another important contributor to customer loyalty, engagement, and value generation. Our fintech service, JazzCash, continued to grow in 2021, reaching 15.2 million monthly active users, up 25% year-on-year. The ARPU of JazzCash customers who also use JazzCash is higher than the ARPU of an average Jazz user by more than 40%. Our entertainment application, Tamasha, was launched in October 2021, building on Jazz TV and offering TV streaming and video-on-demand services. Tamasha's monthly active users reached 1.2 million at the end of the year, a 72% growth over Jazz TV users by the end of 2020. In Q4, total watch time of Tamasha users was four times the total watch time of Jazz TV users in 2020. As we said during the recent Investor Day in December last year, we believe in digital opportunities. Next slide, Kazakhstan. Following the unrest in January, we were glad to see the quick return to stability in the country. They recently held a Foreign Investors' Council, chaired by President Tokayev, demonstrating the government's commitment to maintaining a reliable, predictable, and fair environment for investors. Our industry can contribute significantly to the sustainable growth of Kazakhstan's digital vision, and Beeline Kazakhstan continued to work in this direction in Q4. Our mobile and fixed network expansion continues at a steady pace, including rural areas. We connected 644 remote communities across Kazakhstan, improving the livelihood of more than 800,000 people. What is particularly important is that the progress on this coverage in cooperation with our competitors sharing our network infrastructure has been connected to more settlements. Together, we can use resources responsibly and efficiently while reducing the combined carbon footprint for our industry. The digital services that we are building on top of this connectivity level support bridging the digital divide in Kazakhstan. With a strong focus on 4G and digital services, our revenues in Q4 were up 21.1%, and 22.6% for the full year. We have now reached 64% penetration of our 4G subscribers in our customer base with a growth rate of 21% year-on-year for 2021. Our digital-only second brand, Izi, is gaining traction through gamification and music streaming, proposing unprecedented offerings on the market for local and roaming services. BeeTV is evolving into a multi-platform video-on-demand application supporting a vast choice of entertainment functions. It has reached nearly 400,000 monthly active users, up by 48% year-on-year, with ARPU more than 50% higher than the average subscriber. Bangladesh on the next slide. While accelerating its shift to 4G and data, Banglalink recorded a revenue growth of 8.3% year-on-year in the quarter; its 4G subscriber base was up by 50%, and data revenues grew by 24%. Our entertainment platform, Toffee, now has 6.4 million monthly active users, an increase of 2.6 times year-on-year, while maintaining high engagement levels. 70% of top users are non-Banglalink subscribers, which makes it a clear example of how our all-access digital service strategy is working in Bangladesh. Given the supportive macroeconomy and population dynamics, we strongly believe in the digital growth of this company. As part of our 2022/24 plan, we intend to increase our 4G population coverage from 70% to 95%, moving towards full operational capacity. This will enable the growth of our market share from its current level of about 18% to our fair share of spectrum which is in the range of 12% to mid-20s. Finally, let me turn to our other markets which are summarized here on Slide 13. In Q4, Uzbekistan recorded its second quarter of double-digit growth with a year-on-year growth rate of 10.7%. The turnaround in this country is remarkable. Georgia, which bounced back very strongly from the heavy impact of COVID, reported its third consecutive quarter of double-digit growth, with 11.1% growth in Georgia. Kyrgyzstan grew 8.2% in Q4, joining other operations in their solid revenue growth performance. Our 4G subscriber base in Uzbekistan, Georgia, and Kyrgyzstan continued to increase at high teen rates, with even higher year-on-year growth in Double and Multiplay users. I would like to congratulate all three of our CEOs who are appointed to their positions in 2021 and their leadership teams for the successful turnaround in these countries. As far as Algeria stands, we remind you that the good exercise procedure is progressing according to shareholder agreements. On Slide 14, let me give you further flavor on the progress of our digital operator strategy, which underpins the success stories across the business. As of the end of 2021, Doubleplay and Multiplay 4G subscribers made up 34% of our customer base. In Q4, these subscribers generated 62% of our revenue, which compares to 53% in 2020. This revenue upside is the consequence of greater engagement and value generation capacity of these customers. Our Doubleplay 4G users generated more than three times the ARPU of the Singleplay voice users. And if they also use at least one of our digital services, the ARPU multiple grows about four times. These are also reflected in the slide. Churn rate nearly halts for Doubleplay 4G users versus a Singleplay voice and goes down to one-third; they are a Multiplay. Let's now take a more granular look into some of our digital products. Slide 15 is a snapshot of some of our main digital products and partnerships which are key enablers of our digital operator strategy. We have provided details on many of these services and products elsewhere in the presentation to allow me to expand on high-level trends. This was a request from all of you during the last quarter. The fintech applications in Pakistan, Russia, and Ukraine generated an ARPU uplift of 40% to 60% versus total customer bases in their respective markets. For television and video ads in more digitally mature markets like Russia and Ukraine, the ARPU uplift was around 70%, while Toffee users in Bangladesh and Tamasha users in Pakistan generate around 2.5 times the ARPU of the total base. Finally, our Self-care applications continue to be the gateways to digital engagement. Across the group, the number of monthly active users of our Self-care applications grew 26% year-on-year, reaching 32 million. This is an area that will be our focus in 2022 as the usage of our Self-care applications also drives up ARPU. A wide portfolio of digital applications contributes to the engagement of our customers. As you know, several of these products, including JazzCash and Toffee, are in our special focus as high-value, high-potential assets under the ventures pillar of our strategy. Khairil Abdullah will be joining our leadership team as of tomorrow, with a focus to further build and monetize these outstanding assets and follow-up our call today. Welcome Khairil to the team. I would like now to hand over to Serkan to discuss our financial results in more detail.

Serkan Okandan, Group CFO

Thanks, Kaan. Good morning and good afternoon to all participants. In the coming slides, I will elaborate on our financial results for the fourth quarter and full year in more detail. Let me first focus on the key numbers summarized here on Slide 17. 2021 has been a strong year for the group across all the key financial metrics, positioning us well for the coming years. There were some one-off items in the year and these are, as always set out in the earnings release but almost significant in Q4 2021. We concluded the sale of our tower assets in Russia, which added US$225 million to full year net profits, and after accounting for the increase in these liabilities, group net debt decreased by US$131 million. For full year 2021, revenue rose by 10.1% year-over-year in local currency terms and 6.8% on a reported basis, accelerating as we move through it. Full year group EBITDA increased by 8.9% in local currency terms and by 5.7% on a reported basis. I should note that in the fourth quarter, local currency EBITDA was higher by a solid 9.5% versus last year. The group also reported US$801 million in net profit versus a net loss of US$315 million in 2020. Our CapEx was directionally flat year-over-year. What we saw was a 1.2 percentage points decline in the CapEx intensity ratio to 23.4% as revenue continued to increase. Finally, on this slide, equity free cash flow was US$341 million for the year, higher by 38% year-over-year. Moving now to Q4 performance and looking at revenue in more detail on Slide 18. The quarter was strong across all our markets, with particularly higher growth rates in Kazakhstan, Pakistan, Ukraine, Georgia, and Uzbekistan, all delivering double-digit revenue growth. Also noteworthy is the encouraging performance from Russia, where positive momentum has continued. Once again, this performance was supported by strong 4G adoption and customer growth with a further increase in data usage. Moving to Slide 19 which sets out our EBITDA performance in greater detail. We recorded a particularly strong EBITDA performance in the quarter and after normalizing for the gain in Kazakhstan Q4 last year related to the government grant on radio frequencies, our group local currency EBITDA was up by 11% year-over-year. We reported double-digit EBITDA growth in five of our operating countries, and in Russia, we reported EBITDA higher by 4.3% year-over-year. The best quarterly performance we have seen in more than 15 quarters for our operations in Russia. Also particularly noteworthy was a turnaround we had seen in Uzbekistan. After weak performances for a number of years, over the first six months, the business has delivered a superb turnaround, and EBITDA in Q4 was significantly higher by 35.7% year-over-year. Over the medium term, a key element of our EBITDA improvement will be the expected contribution from Project Optimum. On Slide 20, I would like to remind you again about Project Optimum in more detail. To reiterate our ambition here, we aim to achieve a one percentage point improvement in group EBITDA margin each year over the next three years, which represents around US$250 million run rate cost reduction in group by the end of 2024. While we initiated Project Optimum during 2021, the first full year benefits will be in 2022. Our continued success in reducing our corporate overhead also made a positive contribution to group profitability this year. HQ corporate overhead costs further declined by 17% year-over-year. Moving to Slide 21 on CapEx. 4G network group investments further progressed during the quarter. While CapEx in the quarter was lower year-over-year, this was largely impacted by the larger CapEx deployment in the early part of the year. Full year CapEx of US$1.8 billion was largely flat, although we saw CapEx intensity decline to 23.4% within our guided range of 22% to 24% as we reported higher revenues. As we saw in previous quarters, Russia was again the primary focus of this investment, accounting for just over 50% of our CapEx spend in the quarter. Continued investments in our digital capabilities and services remained a key strategic focus throughout the quarter and helped us to grow our digital users significantly. Turning now to group debt on Slide 22. At the group level, while gross debt increased quarter-on-quarter, net debt was largely stable at US$8.1 billion. The key factor to note here was the higher level of cash, which increased to US$2.3 billion at year-end. I would also like to note that net debt, excluding these liabilities, decreased to US$5.4 billion. Our cash and committed undrawn credit facilities totaled US$3.7 billion and highlights the strong liquidity position of the group. Our leverage ratio was 2.4x to 4x and is in line with our internal level of comfort, although higher than the limit of 2.4x given our dividend policy. We concluded RUB90 billion of funding in December which allowed us to keep the average tenor of our funding at 3.3 years. However, the global trend of interest rates resulted in a 100 basis point year-over-year rise in our average cost of debt to 6.9%. Moving to equity free cash flow on Slide 23. The group reported US$421 million equity free cash flow for the year and US$334 million after license payments. This reflects our strong EBITDA performance throughout the year, together with stable CapEx. As we look forward over the next few years, we expect to see continued local EBITDA with stable to declining CapEx levels which should support free cash flow generation in the coming years. This brings us to Slide 24 which summarizes our performance versus guidance. As Kaan has already covered, our 2021 results were better or in line with our guidance on all metrics. Looking now to the year ahead, given the current context around Russia and Ukraine which together account for around 65% of our group revenues, we are not at this stage providing any guidance for the full year 2022. With regards to dividends, our policy remains unchanged. This is at least 50% equity free cash flow or after license payments, while at the same time ensuring group leverage does not exceed 2.4x. As our leverage ratio is 2.4x to 4x at the end of 2021, we continue to focus on strengthening our balance sheet and concentrate on financial resources to further debt reduction in the coming quarters and creating dividend capacity for the future.

Kaan Terzioglu, Group CEO

With that, let me hand over to Kaan for some closing remarks, before we turn the floor over to your questions. Thank you, Serkan. Let me now on Slide 26 give you a reminder of what priorities we had in 2021 at the start of the year and the related achievements. I'm pleased to report that every one of these seven points has been executed from 4G network rollout targets to Russia going back to growth and double-digit growth in Ukraine, Pakistan, and Kazakhstan building digital scale through targeted verticals, optimizing capital structure, streamlining our portfolio and focusing on cost efficiencies and creating tower business units and personalizing the value. In terms of the operational foundations of our business, we have every reason to be confident in the capacity of our group and the business potential. We look forward to continuing our strong execution in 2022. Given the current macro ambiguities in two of our largest operations, therefore, we will not be sharing any guidance at this stage. With that, I would like to thank you for your attention and turn the call over to the operator for questions. Hi, Alastair.

Alastair Jones, Analyst

Can you hear me?

Kaan Terzioglu, Group CEO

Yes, I can hear you well.

Alastair Jones, Analyst

I have a general question about capital allocation in the current environment. There are several challenges in a couple of your markets. How do you balance investing in the network while also managing your leverage, especially with currency fluctuations and dollar debt on your balance sheet? I’d like to hear your overall strategy for capital allocation. Also, regarding your Russian operations, your financials for the nine-month period showed no dividends paid to headquarters. Has there been a dividend paid since then over the last quarter? If so, could you provide details on the amount and the cash available at headquarters? Lastly, who are your key equipment suppliers in Russia and Ukraine, and how do you access and pay for that equipment? Any context you could provide on those challenges would be appreciated.

Kaan Terzioglu, Group CEO

Thank you, Alastair. Alastair, as you can imagine, we have a capital allocation methodology based on reflecting the potential of the countries, cost of capital, as well as return on investment, which is systematically applied. Having said that, it's one of the reasons why we did not provide the guidance. It’s obviously change of the dynamics which will require us to adjust the investments that we will be making in our business in line with the progression of the current macroeconomic situations. So I would like to keep in mind that our disciplined policy of making sure that we create cash and continue to control our cash balances will be of high priority over the next couple of months.

Serkan Okandan, Group CFO

I’d like to address a couple of points regarding capital allocation and its effect on leverage. As shown in the presentation, about 50% of our leverage is in U.S. dollars and approximately 40% is in Rubles. If there is any depreciation of local currencies, such as the Ruble, our leverage will benefit because our debt in Rubles will be valued lower than in U.S. dollars. This is a positive outcome. Moving on to your second question about the group’s cash position, we currently have around $2.3 billion in cash, with $1.6 billion at headquarters and nearly all of it in hard currency, primarily U.S. dollars, held in European or U.S. banks. This makes it fully accessible at headquarters. Additionally, we have a bond maturing tomorrow, amounting to $417 million plus accrued interest, totaling about $430 million. To preserve our cash reserves for future loans, we plan to utilize our committed revolving credit facility to repay the bond, which will leave us with $1.6 billion in cash available at headquarters for future needs. Regarding supplies and payment terms, we have specific agreements with major vendors that vary by country. We are actively negotiating with our key vendors to secure more favorable payment terms. As mentioned, this process is vendor-specific and country-specific. We aim to build long-term strategic partnerships with these vendors to extend our payment terms.

Kaan Terzioglu, Group CEO

And I would state a second point. Our current capital structure is a major enabler for us. Being a group allows us to allocate capital effectively and raise debt rates and access to markets, and these are most valuable, especially in outside demonstrations.

Alastair Jones, Analyst

Thanks very much.

Kaan Terzioglu, Group CEO

Hi, Cesar.

Cesar Tiron, Analyst

Yes. Hi, everyone. Thanks for the call and the opportunity to ask questions. I have a couple, sorry about that. The first one, I just wanted to understand if the SWIFT issue prevents you from today making payments or sourcing equipment in Ukraine or Russia? That's one. Second, I just wanted to get back to the Algeria put option. Do you have any update on the timing? And can you please guide us to what magnitude of cash inflow do you expect? Third question would be on the Russian debt. What percentage of it is floating rate? And if there's a significant percentage in floating rate, how fast does it adjust to the kind of short-term rates because they've been increased to 20% in Russia? And then the last question, in which country is most of your cash held?

Kaan Terzioglu, Group CEO

Thank you, Cesar. Serkan, go ahead.

Serkan Okandan, Group CFO

Okay, Cesar, you have quite a few questions. If I overlook anything, please let me know. The first question concerned SWIFT and its possible effects on our payments and equipment sourcing. As of just before this meeting, I can confirm that SWIFT is still operational. We maintain multiple bank accounts across various banks in Ruble, Euro, U.S. dollars, and other currencies, allowing us to manage cash flow across borders. However, in Ukraine, the Central Bank has imposed strict controls, preventing cash outflows in U.S. dollars or Euros. That's the only restriction we currently face. We continue to engage with our partner banks in different countries to explore ways to adapt to any changes in SWIFT regulations, but everything is functioning normally for now. I'll skip the situation in Algeria, as Kaan will address that. Regarding our debt in Russia, we have both bank loans and bonds in Ruble. All our Ruble bonds have fixed rates, so we're in a good position there. Our bank loans include both floating and fixed interest rates. The majority of our bank debt is currently floating, but when we factor in the bonds, the bulk of our total debt consists of fixed-rate obligations. Additionally, as noted, the Central Bank of Russia raised interest rates to 20% today, but we expect these increased rates to impact us after April, specifically starting in Q2, depending on our agreements with the banks. I’ll pause here without going into further details.

Kaan Terzioglu, Group CEO

Thank you, Serkan. And Cesar, with regard to your Algeria question, all procedures connected to the exercise of our put option in Algeria are being performed by both parties in accordance with our shareholders agreement. As a matter of fact, as we speak, the process is further progressing. And with slight delays, everything is on the right track, and I will be actually visiting Algeria over the next couple of weeks. We'll go back to the process and make sure that it is on track as well. I won't be able to give more color at this stage considering the range of the questions.

Serkan Okandan, Group CFO

Cesar, Nik just reminded me that you also asked where our cash is. HQ cash is in Europe.

Kaan Terzioglu, Group CEO

And I know many of you have lots of questions around sanctions, so let me go through carefully upfront with what I can say in this specific area. We are continuously monitoring the sanctions regulations which are being issued by various jurisdictions in order to make sure we are complying with them. And I would like to also highlight that at the shareholder level, VEON is a public company with no controlling shareholders. So we do not expect any flow of sanctions coming from any of these issues as well. But this is a fluid situation. So we will be continuously monitoring and, of course, we're keeping, if necessary, the public informed about the regulations.

Cesar Tiron, Analyst

Thank you so much.

Operator, Operator

The next question is from Nicholas.

Unidentified Analyst, Analyst

Hi, good afternoon. Thank you for your time today and thank you for taking questions. Just one quick question on your ability to get cash out of Russia with the sanctions that are being imposed on Russia, because obviously, almost 50% of our revenues are coming from Russia.

Kaan Terzioglu, Group CEO

So Nicholas, we have already been in an investment cycle in Russia. Therefore, upstreaming cash from Russia has not been a priority for us. It is particularly not, but Serkan, please...

Serkan Okandan, Group CFO

Yes, in our plans for this year, there is no projected plan to cash upstreaming from Russia. We only have some intercompany loans between HQ and Russia. Apart from that, there is no dividend upstreaming assumed in our planned conversions.

Operator, Operator

The next question is from Tammy Lloyd.

Unidentified Analyst, Analyst

Hi, there. Thanks for the call. I also have a couple if that's okay. You recently announced that you've taken out loans with Russian banks which are now sanctioned. Can you talk a little bit about what might happen with these loans and your ability to keep borrowing in Russia? The second thing is, can you just remind us, following on from the Russian cash flow about cash flow from the other operations for the full year? And what your expectations are to be able to get cash out of your other operations? And just alluding to the comment earlier that you don't expect the shareholder to be an issue. Is that because LetterOne owns less than 50% of VEON and the rest is owned with an independent board?

Kaan Terzioglu, Group CEO

Let me start with the last question, and then I will give it over to Serkan. As we have rightly summarized, we don't have a controlling shareholder; we have an independent board in place. So that's basically…

Serkan Okandan, Group CFO

If you allow me, I want to give you a little bit detail so that can shed also some light about Cesar's question on how floating interest rates will impact our overall cost of debt. So currently, we have, as I said, bonds in Ruble. So they are not impacted by the sanctions, so they will be still in place. We have loans from three Russian banks amounting to RUB120 billion, depending on what rate you use; it's around US$1.5 billion before today's depreciation in the currency. So these banks are Sberbank, VTB, and Alfa-Bank. The way that we read the sanctions is that as of today, we can borrow cash from two out of three banks that I just named. For the VTB Bank, our loans from VTB Bank, amounting RUB30 billion, we have refinancing in February this year, after the year end. And most probably, that amount should be repaid to VTB within the deadline put as per these sanctions, which will be probably before the end of March. So that's RUB120 billion. So after repaying VTB by the end of March according to the sanctions regulation, our exposure or our borrowing from two Russian banks will be RUB90 billion, and most of it will be floating. However, I want to link this to Cesar's question. Assuming that we will repay VTB RUB30 billion by the end of March, our cost of debt, which is currently 6.9% overall group cost of debt, after this 20% revised interest rate in Russia, this cost of debt will only increase to 7.5%. So the immediate impact on our cost of debt will be 60 basis points roughly, which will start to impact us beginning in April this year because there will be a gradual transition to the new interest rates. That would be my answer for the first question. Regarding the second; as I mentioned, Russia is within itself cash flow sufficient. We are not expecting any cash upstreaming from Russia as in dividends. Apart from Russia, we don't see any issue in upstreaming cash in, for example, Kazakhstan, Pakistan, and other countries that we are operating. So the only question mark is Ukraine, and we need to wait and see what's going to happen in Ukraine. But as I said at the beginning, we have US$1.6 billion cash at HQ; and we want to keep this as our cash reserve for the future.

Kaan Terzioglu, Group CEO

And maybe just to add, we were not planning to upstream cash from Russia, and we will not be doing so.

Operator, Operator

Is that everything?

Unidentified Analyst, Analyst

Yes. Thank you.

Kaan Terzioglu, Group CEO

Thank you very much.

Operator, Operator

Thanks. The next question is from Ivan Kim.

Ivan Kim, Analyst

Hello. Thank you for the opportunity. Can I follow up on the timeline regarding cash upstream from Russia? Is this just for this year, or is it part of a longer-term plan, with concerns extending into 2023 as well? My second question is about the Pakistan spectrum. I want to confirm that you will be adopting a scheme where you pay 50% upfront and then defer the remaining 50% in installments over five years. Lastly, regarding dividends, based on the way you outlined it in the press release, do I understand correctly that you would not have paid a dividend regardless of the war and current circumstances due to your leverage being above 2.4x?

Kaan Terzioglu, Group CEO

Let me start with Pakistan. Unlike the last license renewal, this time, actually, the license renewal process is very predictable. And as expected, we'll be paying 50% cash by the end of July, and the rest will be over years. This is in line with our plans and predictions. There won't be any surprises this time.

Serkan Okandan, Group CFO

For your first question, I think it is too early to comment on the '23 cash upstreaming. So I cannot answer to that one, with precise guidance. For the dividend, regarding the year 2021, your understanding is correct. We are not going to pay a dividend for '21, of course, subject to board and AGM approval.

Ivan Kim, Analyst

Can I ask another question? Regarding towers, do you still plan on any tower sales in Pakistan or Bangladesh considering the current macroeconomic situation and higher global interest rates?

Kaan Terzioglu, Group CEO

So we believe our asset value crystallization intent is still valid. We are working actually on Bangladesh, Pakistan, and Kazakhstan in terms of taking these assets into the market. We will probably be slower with our intent in Ukraine, but our project of crystallizing the value and monetizing assets and delayering our telecom operations is still valid.

Ivan Kim, Analyst

Thank you very much.

Operator, Operator

Next question comes from Stella Cridge.

Stella Cridge, Analyst

Hi, there. Afternoon, everyone and many thanks for the presentation. And I had two follow-up questions on the financing side, if you don't mind. So firstly, could you just perhaps give us a bit more specific information on how much you've been able to upstream from Pakistan over the past year and whether you've been able to get anything from Bangladesh? And just in terms of the Pakistan macro situation, would you expect to be able to upstream in 2022? The second question was, I noticed your earlier comment about planning to draw on the RCF to pay the bond that's due tomorrow. And can I just confirm, do you need to get any approvals today to draw on the RCF, or are you pretty confident that that's 100% available to you to make that payment tomorrow?

Serkan Okandan, Group CFO

We are not currently upstreaming dividends from Bangladesh as we are in the investment phase. In Pakistan, our operations are distributing dividends based on 100% of the net profit available. We haven't encountered any issues with extracting cash from Pakistan in recent years, and we do not anticipate any problems moving forward. As for the dividend amount, once we finalize the figures in Pakistan, it will likely be 100% of the net profit available for shareholders. Regarding the RCF drop-down, we have initiated the request and there have been no issues so far. I can confirm that we are utilizing the RCF and do not foresee any difficulties.

Stella Cridge, Analyst

And if it's possible to ask one follow-up. I appreciate your earlier comment about there being no controlling shareholder in VEON. But I guess I could say there's perhaps still some concerns in the market about the combined shareholding across both entities. We've obviously seen some comments from the EU over the weekend about potential sanctions on two partners at LetterOne. And would you be able to give us any more color on the breakdown of shareholdings at the LetterOne level so that the market could assess the risk for VEON?

Kaan Terzioglu, Group CEO

I think really, as the situation evolves, we need to be a little bit patient in terms of making any speculations around this topic. So I will ask your permission to wait for a while so that we see everything, and we will be back to you.

Stella Cridge, Analyst

Thank you very much.

Operator, Operator

The last question is from Antonia Donici.

Unidentified Analyst, Analyst

Hi, I hope you can hear me. I have two questions. You mentioned that your cash holdings are in Europe. Could you share which countries and which banks those accounts are with? Also, which banks are involved in the RCF that you are using to pay the bond tomorrow?

Serkan Okandan, Group CFO

Unfortunately, I cannot answer either question but meanwhile I can try to answer a little bit in overall. First of all, we have multiple banks, around six to ten banks, all are in European countries. All I can say, in EU countries, and some of them are in the U.K. So without naming the banks. Regarding RCF funds, again, we have around ten RCF banks. They are from the U.S., EU, U.K., and Asia. We don't again name, but we have ten banks across the globe.

Unidentified Analyst, Analyst

But just in terms of the banks in Europe that you have the account, are any of them, some of the Russian banks and local subsidiaries that are potentially under sanctions?

Serkan Okandan, Group CFO

For the cash we are keeping, there are no Russian banks.

Unidentified Analyst, Analyst

Okay. Okay, great. Thank you.

Kaan Terzioglu, Group CEO

I want to thank you all for your attention again, and I look forward to talking with you in the next quarter. Thank you very much, and we will close the call here today.

Serkan Okandan, Group CFO

Bye, everyone.