Kyivstar Group 2026 Q2 Earnings Call

Thank you. As noted, I am Cole Akerson, Group Director for Kyivstar Investor Relations. Joining me today are Executive Chairman, Kaan Terzioğlu, CEO, Oleksandr Komarov. Thank you, Kaan. Oleksandr Komarov, CFO, Taner Kızıltoprak, and Anand Ramachandran, the Chief Corporate Development Officer for Beyond. Before we begin, please note the date for your calendars. We will be hosting our first Capital Markets Day on November 16 in New York City. Details will follow. Returning to earnings, Oleksandr will begin with strategic and operational highlights, followed by Taner with a review of our financial performance. We will open the line for your questions. Before we begin, please note that today's presentation contains forward-looking statements which involve risks and uncertainties. Further details are available in our SEC filings, including our Form 20-F filed March 16, 2026. Our earnings release and presentation are available on our investor relations website.

I'll hand over to Oleksandr.

Thank you, Cole. Hello, everyone. I'm very pleased to see some of you here in New York in person. We delivered another strong quarter. Our telecom core is resilient. Our digital ecosystem keeps scaling. The two businesses fit each other. We are raising our full year outlook for the second time this year. Let me start with the numbers. Revenue reached $339 million, up more than 19% year-over-year. EBITDA grew nearly 14% to $188 million with healthy margins in both businesses. Equity free cash flow grew more than 32% to $104 million. Cash generation funds our growth. Second, our digital transformation. Digital revenue grew 83% year-over-year. This is one first quarter with Uklon in both comparison periods. The comparison is clean. Digital reached 21.7% of total revenue from just over 14% a year ago.

This is a structural shift, not a side project. Third, our multi-play strategy. 8.1 million multi-play customers, up almost 24% year-over-year. They pay more. They churn less. I will come back to the mechanics. Finally, three strategic developments during this quarter. The first one is Starlink. More than 6 million customers have used Direct to Cell, which now also carries light data for essential applications, even without terrestrial signal. The second one is energy. We acquired six solar power plants in the Lviv region, strengthening our energy independence and hedging our electricity costs. The third one is sovereign AI infrastructure. More about this when we discuss the digital enterprise vertical. As for the scorecard. Telecom and infrastructure revenue grew nearly 9% to $265 million on rising IRPU and data usage.

Within EBITDA, telecom and infrastructure generated $157 million at a 59% margin, and digital generated $31 million at a 42% margin. Both engines are profitable. Net profit declined nearly 6% year-over-year to $77 million or $0.33 per share. The cause of the paper decline is one of non-cash item, a $21 million fair value charge on our listed warrants. Taner will walk you through the mechanics and more later. Let's look at the mobile business, starting with subscribers. Our mobile base declined nearly 3% year-over-year to 21.8 million customers. The main mechanism is double SIM-ers. Many Ukrainians carry secondary low-IRPU SIM cards. When they stop using extra cards, these fell out of the customer base. Demographics and seasonality play a role. Internal and third-party estimates put our market share steady at approximately 47%. We focus on the quality of the base, not the volume.

The quality shows in three numbers. The first one is churn, down almost a full point year-over-year to just over 14% annualized. The second one is IRPU. It grew more than 11% to $3.90. The third one is usage. 4G penetration passed 70%, and monthly data consumption grew more than 18% to almost 15 GB per customer. These drive our double-digit telecom revenue growth in UAH. Fixed broadband grew nearly 11% to 1.3 million customers. Households. Nearly half of them also subscribe to Kyivstar TV. One product pulls the other into the household. The fragmented market leaves room for organic and inorganic growth. Multi-play is a core of our engagement model. Let me explain the mechanics. A multi-play customer uses voice, data, and at least one of our digital applications.

These customers now represent almost 40% of our one-month active base, up more than eight points from a year ago, and a stable quarter-on-quarter at 8.1 million. The economics are simple. A multi-play customer generates $5.80 in monthly ARPU. Compare that with the $3.90 of a mobile-only customer, a difference of nearly 50%. Multi-play customer also churn less. Engagement drives the top line and retention protects it. Now, the digital ecosystem. This chart shows UAH figures to eliminate currency effects from the comparison basis. I will focus my comments on our report in currency, the US dollars. Digital revenue reached $74 million, up 83% year-over-year, and now makes up almost 22% of total revenue. Three points stand behind this performance. The first one is the broad base of our growth that spans all five verticals with Uklon the biggest contributor. The second one is profitability.

Digital EBITDA reached $31 million at 42% margin compared with almost 44% a year ago. This small decline reflects investment in new services as we scale the business. These platforms pay their own way. The third one is structure. Our telecom base gives a customer acquisition at a near zero cost, and multi-play bundles are our distribution channels. Moving to Uklon, our mobility platform. Uklon generated almost $33 million in revenue this quarter, up more than 50% year-over-year. More than $12 million in EBITDA, up more than 35%. Real scale in Ukraine, a growing operation in Uzbekistan. Active customer grew 8% to 5.2 million. Rides grew more than 4% to 43 million. Deliveries grew almost 26% to 1.4 million. Uklon is becoming a one-stop solution for movement around and between cities. There are three moves to note. The first one is a multimodal transport.

We agreed to acquire E-wings, which adds electric scooters in 11 Ukrainian cities. With the travel service for intercity buses, Uklon covers more of the journey. Remember, Ukraine remains a no-fly zone, so buses and trains carry the country. The second one is autonomy. Uklon ran Ukraine's first live testing of autonomous vehicle technology. Uklon leader, Sergey, and I tested it personally, which you can watch on our YouTube channel. This technology is still at an early stage, but our testing places us first in this space at home. The third one is commerce. Our Uklon Store pilot starts with the same-day flower delivery in Kyiv, applying Uklon's expertise in space adjacent to mobility. On the healthcare, Helsi is Ukraine's leading health tech platform. Helsi served 5 million customers this quarter, and revenue grew almost 36% year-over-year to $2.4 million. The engine behind this growth is premium subscription.

From 57,000 subscribers at the end of last year to more than 109,000 today. Family medical care plans and health insights, automatic interpretation of test results, biomarker tracking drive the conversion, and our Helsi SuperPower bundle inside Kyivstar mobile plan is a core channel to distribute. The foundation keeps widening. More than 43,000 doctors and specialists, around 1,800 healthcare institutions, and 2.4 million patient appointments booked in the quarter. Helsi is deeply embedded in the state e-health system, convenient to join and hard to leave. It also eases access to healthcare during the war, which we are considering as a national priority. Tabletki, the leading online marketplace for pharmaceuticals and other healthcare products. Its first full quarter with us after consolidation in February. The quarter was strong. Revenue reached $7.8 million, and EBITDA reached $6.2 million, an implied margin close to 80%. The margin follows from the model.

Customer booked $376 million of gross merchandise value. We recognize as revenue only our commission and service fees. Low capital, very high conversion. The scale is national. 6.3 million customers, 15 million average monthly bookings, and more than 14,500 partner pharmacies across the whole Ukraine. Helsi and Tabletki have natural synergies. We are building toward a more connected patient journey. From doctor's appointment to prescription to a medicine order. We are evaluating whether delivery could join that flow. We are taking a deliberate approach so that any changes serve customers well, create shareholders value, and comply with regulatory requirements. Moving to entertainment, Kyivstar TV remains the largest media streaming service in Ukraine. The customer base grew almost 48% year-over-year to 3.6 million, and revenue reached nearly $14 million. To be clear, the growth rate mainly reflects the move to gross revenue recognition last September.

Underlying drivers are real: a bigger customer base, a high-demand exclusive content. Last quarter, I told you we would broadcast world boxing champion Oleksandr Usyk's latest high-profile boxing match. We delivered with exclusive rights to the Usyk-Rico fight in Ukraine, alongside premieres such as "Kill House" and a deep library of international and Ukrainian content. Exclusive local content acquires customer. The ecosystems keeps them inside. From B2C to B2B, digital enterprise serves companies and institutions from small businesses to the largest. Revenue grew almost 16% year-over-year to $16.9 million. Active contracts grew more than 29% to 2,400. Two product lines drive the growth: big data and AI services and cloud. Advisor, our self-service advertising platform, passed 4,100 registered clients. Now, Sovereign AI. Two milestones this quarter. The first one is Syaivo, our Ukrainian large language model in Kyivstar Tech portfolio.

The latest model 4B, a kind of pilot model, entered beta testing and has achieved high marks in local competitive testing. The second one is infrastructure. In June, at the Ukraine Recovery Conference, we signed a memorandum with Ukraine's Ministry of Economy to explore expanded cooperation in sovereign AI infrastructure. Any investment would be faced within our existing CapEx framework: disciplined capital, national capability. All these parts serve one growth strategy. We are a digital and communication service provider with a strong backbone in our telco business. In core connectivity, we intend to maintain market leadership. We focus on a high-quality customer base and technological innovation. This quarter launch of Direct to Cell light data is a good example. We grow IRPU by expanding value to the customers, not just through price. In fixed broadband, we aim to expand market share through organic growth and targeted acquisitions.

Broadband brings entire households into our ecosystem. In digital, we scale through organic growth and strategic acquisitions, increase multi-play adoption, and deepen daily engagement with our customers. Our loyal telecom base is a launchpad for digital products. The next slide shows how we build the ecosystem step by step since late 2024. spectrum, Uklon, Helsi, Starlink Direct to Cell, solar, Tabletki, Shtorm. Each move fits the same design. The newest one is energy. In May, we completed the acquisition of six solar power plants in the Lviv region, 105 MW total power for roughly $81 million. With our first plant, Sunvin 11, our capacity now stands at 118 MW. Expected output equals roughly 30% of the electricity our telecom operations consume in a year. The logic is clear. Energy independence that hedges a major operational cost and reduces our exposure to potential green instability during the war.