New Street: VEON (Neutral, TP: US$2.60, +24%) Tower disposal a first step towards easing dividend concerns
VEON has announced the sale of its Russian tower portfolio to Service Telecom for US$970mn, at 11.7x EBITDA. We estimate this will bring leverage down from 2.4x to 2.2x net debt/EBITDA at the group level. Although this is not necessarily a meaningful change, the direction of travel is key for the equity story to work. With management comfortable at ~2.5x, this does provide additional comfort around the likelihood of a dividend reinstatement in 2022. In this note we look at why the timing of this sale is important for shareholders and how leverage is trending assuming management do execute on its ambitions for further tower sales in Pakistan, Bangladesh and Ukraine.
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