Kyivstar Group Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2026

Key Takeaways

  • Positive Sentiment: Kyivstar raised its 2026 outlook after strong nine-month results: it now expects hryvnia revenue growth of 22%–24% and EBITDA growth of 18%–20%, with dollar revenue growth of 15%–17%.
  • Positive Sentiment: Q3 revenue rose 18% to $349 million and EBITDA increased 10% to $189 million; nine-month free cash flow climbed nearly 57% to $274 million. Management said cash generation supports continued investment, and the company ended September with $436 million in cash and no external market debt.
  • Positive Sentiment: Digital is growing rapidly and profitably: revenue increased nearly 69% to $76 million, with a 41% EBITDA margin, while telecom and infrastructure revenue grew 8% and had a 58% margin. Multiplay customers now represent 40% of the mobile base and have higher ARPU and lower churn, according to management.
  • Negative Sentiment: Management expects a marked Q4 growth slowdown, citing Kyivstar TV’s tougher comparison, seasonal declines in solar generation, weaker Uklon activity, and year-end costs. Higher energy expenses and investment in digital businesses are also weighing on EBITDA margins.
  • Neutral Sentiment: Kyivstar agreed to acquire cloud provider GigaCloud for up to $50 million, including an initial $41 million cash payment. The business reported about $14 million in unaudited 2025 revenue; management sees it strengthening cloud and sovereign AI offerings, while integration synergies are prospective.
AI Generated. May Contain Errors.
Earnings Conference Call
Kyivstar Group Q3 2026
00:00 / 00:00

There are 12 speakers on the call.

Operator

Hello, and welcome to Kyivstar's Third Quarter 2026 Results Presentation. For those of you who have joined the Zoom webinar, if you would like to ask a question, you can use the raise hand button, which can be found on the black bar at the bottom of your screen at any time to join the queue to ask a question, and you will be called upon during the Q&A session. For those of you watching on the webcast, if you would like to submit a written question, please use the ask a question tab at the top right of your screen. These questions can also be sent in at any time during the presentation. As a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Cole Akeson, you may begin.

Speaker 1

Thank you. Good morning and good afternoon. Thank you for joining us to discuss Kyivstar Group's or Kyivstar's Third Quarter and Nine-Month 2026 Results. I am Cole Akeson, Group Director for Kyivstar Investor Relations. Joining me are Executive Chairman Kaan Terzioğlu, President and CEO Oleksandr Komarov, CFO Taner Kızıltoprak, and Anand Ramachandran, Chief Corporate Development Officer for VEON. Oleksandr will begin with strategic and operational highlights, followed by Taner with a review of our financial performance. We will then open the line for questions. 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 already available on our investor relations website. With that, I'll hand over to Oleksandr.

Speaker 2

Thank you, Cole. Hello, everyone. We delivered a strong quarter. Our core telecom business and digital ecosystem continue to reinforce one another. Their growth is turning into more cash, and we are raising our 2026 outlook as a result. Let me start with the quarterly numbers. Revenue grew 18% to $349 million. In hryvnia, revenue grew 27%. EBITDA grew 10% to $189 million. Net profit was $99 million against a loss a year ago when we booked one-time listing charge. Over nine months, free cash flow grew nearly 57% to $274 million. That cash flow is sustainable and pays for our next round of growth. Free cash flow was $83 million for Q3 alone. Before we move on, I would like to suggest three points to keep in mind. First, our telecom core grows on value, not on volume.

Speaker 2

Second, digital keeps scaling, and it scales profitably. Third, customers who use more of Kyivstar spend more with us and stay longer. We will return to these points repeatedly. To start digging into our verticals, both of our engines are growing, and both are profitable. Telecom and infrastructure revenue grew 8% to $273 million. Digital revenue grew nearly 69% to $76 million. Telecom and infrastructure earned a 58% EBITDA margin, and digital reached 41%. Taner will dive into more specifics on some of the numbers later. In telecom, our business grows. Customers get more from it. Mobile ARPU grew 9% to $4. Each customer now uses 20% more data than a year ago, and 71.5% of our mobile customers are now on 4G. In September, we switched off our old 3G network for mass market customers and moved them to 4G.

Speaker 2

That gave our 4G network 25% more spectrum. We pride ourselves on our reliability, and the additional spectrum reinforces our customers' access to full-speed data. Our mobile customer base declined by 3% compared with a year ago. The main reason has not changed. People drop second SIM cards they no longer need. SIMs that fell out of the active user base were seeing minimal spending. Churn was just below 12%, and Ukrainian government data show our market share stable around 47%. We manage the value of the base, not the number of SIM cards. Fixed broadband subscribers grew 11%. Our new Open Access agreement with Ukrtelecom lets us sell home internet over its fiber network, widening the reach of our network from approximately 4.6 million households to 6.7 million.

Speaker 2

Nearly half of our broadband customers also subscribe to Kyivstar TV, showing again how our connectivity and digital services feed each other. Multiplay is where telecom and digital meet. A multiplay customer uses our voice and 4G data and at least one of our digital services. We now have more than 8 million multiplay customers, or 40% of our one-month active mobile base. Their ARPU is 50% higher than that of the average mobile customer. Their monthly churn rate is about 40% of the mobile average, so they stay with us much longer. On the lifetime value method shown on this slide, a multiplay customer generates value about four times more than the average mobile customer. Multiplay customers already produce 56% of our consumer revenue.

Speaker 2

This quarter, we added two new superpowers to our plans to nudge customers to try more of our services, a discount on Uklon and bundling of YouTube Premium Lite. Let me emphasize how this reflects our corporate culture and our drive to provide value for customers and shareholders. We already have a partnership with Google and offer a superpower on regular YouTube Premium. As Google launches the emerging market-focused YouTube Premium Lite product in Ukraine, we are their partner from day one. Our customers see another way they get better value from Kyivstar, and that it in turn gives them another reason to stay connected to the Kyivstar services they use, from telecom through digital. Now, to break down our digital ecosystem.

Speaker 2

The chart is in hryvnia to remove currency effects and to provide the market with the clearest comparability, but I will speak in our reporting currency, USD, where I can. Digital is now 22% of our revenue, against 15% a year ago. Across our platforms, we counted 29.5 million active users in the quarter, and many of them-

Speaker 1

That was last season in the US PGA from the Zenit football. Excuse me, Michael, you are not muted.

Speaker 2

Moving to Uklon, our mobility platform. Uklon revenue grew more than 35% to $33.5 million. EBITDA reached $10 million. A decline year-on-year in the implied EBITDA margin reflects reinvestments into the business growth, which we expect to create more value later on. Deliveries grew nearly 27%, while rides grew 2% year-on-year. Seasonality in the quarter and the current external environment saw growth slow somewhat in a well-established ride market, but expansion continues elsewhere. Uklon entered nine new cities in Ukraine and in Uzbekistan. Uklon also closed its first acquisition, the e-scooter operator, e-Wings. Our branded Uklon Travel bus now runs from Kyiv to Warsaw, an essential route in a country close to commercial air travel. Other routes are being considered and trialed, complementing the Uklon Travel marketplace for third-party bookings. Step by step, Uklon is becoming one platform for moving around and between cities.

Speaker 2

In digital health, more registered users are opting into premium plans, becoming paying customers. Premium subscribers reached more than 136,000, up from 33,000 a year ago. Revenue grew 37% compared with a year ago to reach $2.5 million in Q3. Our Helsi superpower inside Kyivstar mobile plans is a core channel to premium. Customers who choose it spend more with us across both services. Premium services complement the free services, and we add more as opportunities appear. The customer starts with booking a doctor, the service they know well. Then come lab tests, both required and elective. Now, there are services built on data and AI, such as biomarker tracking and preliminary AI-driven interpretations of lab results. Today, more than 46,000 doctors and specialists work with Helsi. Helsi is part of Ukraine's eHealth system, easy to join and too helpful to leave.

Speaker 2

We work to show our customers how the additional features are worth upgrading plans. At the same time, we are committed to easing access to healthcare during the war, a national and ESG priority. The other pillar of our digital healthcare suite, Tabletki, had another strong quarter. Revenue was $8 million at an EBITDA margin of about 75%. Customers booked $397 million of products through the platform. Each month, Tabletki handles about 15 million bookings in pharmacies across the country. Together with Helsi, we are building one patient journey from the doctor's appointment to the medicine. We are evaluating how to expand that flow, including with delivery from Uklon. We are approaching this carefully so that any changes serve customers well, are profitable, and compliant with regulatory requirements. Kyivstar TV served 3.5 million customers in the quarter, 32% more than a year ago.

Speaker 2

Revenue was $14 million. Revenue growth comes in a large part from the move to gross revenue recognition last September, as discussed in the past disclosures. From the fourth quarter, both periods will be on the same basis. Summer can be a slower period in streaming businesses, but our business saw stable quarter-on-quarter trends. High-demand content is essential to longer-term customer relations. This quarter saw new Ukrainian original series and the first feature film to be distributed under our Kyivstar TV Originals brand, as well as exclusive streaming rights in Ukraine to a variety of international blockbusters, like the newest Spider-Man film. From B2C to B2B. Digital enterprise grows with the demand for data, AI, and cloud. Revenue grew nearly 18%, and big data and AI revenue grew 86%. Identity and credential services declined 10% in dollars as business messaging moves to new technologies.

Speaker 2

Cyfra, our national language model, moved to a new version with 26 billion parameters. These numbers, of course, do not include the latest acquisition. in October, we agreed to acquire GigaCloud, a leading Ukrainian cloud service provider. The initial cash payment was $41 million, and total consideration is up to $50 million. GigaCloud serves more than 1,800 enterprise customers. The acquisition expands our cloud services for Ukrainian business and the public sector, and it widens our existing customer base. Businesses everywhere are moving data and processing into the cloud for cost reasons, backups, risk diversification. Addressing risk from the war is another driver in Ukraine, and this acquisition supports our work in Ukraine cloud, and what is even more important, sovereign AI services. As in many of our previous acquisitions, GigaCloud is expected to operate as a separate business unit within the Kyivstar Group, retaining its brand and talent.

Speaker 2

Its founders are expected to continue leading the business. No changes to existing customer contracts, service levels, or commercial terms are planned as a result of the transaction. All these parts serve one growth strategy. We are a digital operator with a strong telecom foundation, and digital further accelerating overall growth. In core connectivity, we intend to maintain market leadership. We focus on the high-quality customer base and technological innovation, bringing our customers greater convenience and more of Kyivstar in their daily lives. We grow our pool by expanding value to the customer, 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. Joining Kyivstar TV is the most obvious synergy, but not the only one. In digital, we will scale through organic growth and strategic acquisitions, increase multiplay adoption, and deepen daily engagement.

Speaker 2

Our loyal telecom base is the launchpad for digital products. This slide shows how we have built the ecosystem step by step. Uklon, Helsi, Starlink Direct to Cell, Solar, Tabletki, Shtorm, and now GigaCloud. Each step passes the same test. It was already profitable on its own business case. Only then we consider how the additional reach will compound value for our customers and shareholders across our full suite of services. Take Direct to Cell. More than 8 million of our customers have now used Starlink Direct to Cell to provide them with reception at those rare times when they are out of the coverage. Let me now pass the call to Taner to talk through the financials in more detail.

Speaker 3

Thank you, Oleksandr. Let me walk you through the mechanics of the quarter. Revenue reached UAH 16 billion, up 26.5%. Excluding the acquisition of Tabletki and the Solar power plants, year-over-year revenue growth would be 22%. Digital revenue grew by 82%. Excluding Tabletki, this would be 62.5% in hryvnia. Most of this growth comes from businesses we already owned a year ago, including Uklon. EBITDA grew 19% to UAH 8 billion. Again, excluding our acquisitions, year-over-year EBITDA growth would be 12%. The group EBITDA margin was 54%, against 58% a year ago, mainly because of higher energy costs and the growing share of digital businesses in the mix. Net profit was $99 million. In this context, two items deserve more discussion. First, our listed warrants. We carry them at fair value, and their market price at quarter end drives the change each quarter.

Speaker 3

This quarter, their value fell, and we recorded a non-cash gain of $15 million. Second, an additional $5 million in income tax expense was driven by the Pillar Two OECD framework. Excluding these two items, our net profit would have been $89 million. Our basic earnings per share was $0.43, and diluted earning per share was $0.36 due to the warrants. Our investment, capex, was $66 million, down 26% from a year ago. Over the last 12 months, capex intensity fell to 24% from 29% 12 months prior. We are past the peak of our investment cycle, and we keep spending on network resilience, fiber, and energy security. On cash, net cash flow from operating activities was $160 million. Free cash flow was $83 million for the quarter.

Speaker 3

Turning to the balance sheet, we ended September with $436 million of cash and cash equivalents, up from $364 million at the end of June. Free cash flow in the quarter drove that increase. Bonds and loans stand at $86 million, mainly owed to VEON, our majority shareholder. We have no external market debt. Lease liabilities are $460 million, mainly from our tower agreements with Ukraine Tower Company. Net debt, including leases, was $65 million. Excluding leases, our net liquidity position is $352 million. The balance sheet gives us room to keep investing from our own cash generation. Let me hand the call back to Oleksandr.

Speaker 2

Thank you, Taner. Let me close with our revised 2026 outlook. With nine months behind us, we are raising our outlook. In hryvnia, we now expect revenue growth of 22%-24%, EBITDA growth of 18%-20%. In dollars, we expect revenue growth of 15%-17%. Expected EBITDA growth crosses into the double digits at 10%-12%. Our dollar outlook assumes an average exchange rate of 44.5 hryvnia to the dollar. Guided capex intensity stays at 21%-24% of revenue. On paper, the new ranges imply slower headline growth in the fourth quarter. The previously disclosed gross-up of Kyivstar TV's revenue model will enter the past comparison base. We are also anticipating seasonality in Solar generation and year-end costs. As always, this outlook reflects the best visibility we have today. It remains subject to the significant external uncertainties we face given the war.

Speaker 2

Let me now summarize. Our telecom core grows on customer value, and it generates the cash we use to maintain a robust balance sheet while also funding further expansion. Our digital ecosystem keeps scaling, and it scales profitably. Customers who use more of Kyivstar spend more with us and stay longer. Our network stayed online through the quarter because of our people across Ukraine. I want to thank every one of them. Thank you for your support of Ukraine and Kyivstar. We can now open the line for the questions.

Operator

Thank you. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn to ask a question, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you have been introduced, you may unmute yourself, turn your video on, and ask your question. Written questions can be submitted on the webcast by using the Ask a Question tab at the top right of your screen. As a reminder, we are allowing analysts one question and one related follow-up today. If you wish to ask more questions, please raise your hand again to rejoin the queue. We will pause for a moment to allow the questioners to enter the queue.

Operator

Our first question comes from Jesse Sobelson with BTIG. Please unmute your video, your audio, and ask your question.

Speaker 4

Hey. Good morning, everyone. Maybe good afternoon to the team based on where you are. Thanks for letting me ask a question or two here. First, on Starlink, I think it is really impressive you scaled Direct to Cell to 8 million cumulative users. You are now reselling terminals to businesses and customers. Last quarter, Starlink service ability was cut in Ukraine due to the war, and there was a lot of debate around whether that affected only military terminals or if commercial networks were hit as well. Could you confirm whether Kyivstar’s DTC service and enterprise terminals were impacted by that service cut and if there are any contractual protections to insulate customers in the future?

Speaker 2

You are right. Our relationship based on the technical and commercial terms, I can confirm that our services provided within the current agreement were not affected. We did not get any complaints from the customers. As far as I realize, the main impact was actually in a very specific business-to-military segment that is being commercialized under the Starshield business rather than Starlink business.

Speaker 1

Different mechanism and different plan, Jesse, if I may.

Speaker 4

Yeah, wonderful. Thanks for the detail there. It is useful to know. That actually sounds like it is good that your business is insulated there. Then on the numbers piece of this, I did want to ask, if you use the annual guidance and then the first nine-month results here, which are, 17% growth this quarter is great, but if you back into 4Q's implied metrics, it really does imply quite a sharp deceleration in top-line growth, maybe to the high single digits down from high teens. In the guidance for EBITDA, I am surprised that even on the low end, we would be considering a potential decline in your profitability. What is the limitation on 4Q EBITDA, and how do we look at the controllable dynamics for the business into next year?

Speaker 4

I am curious if there are some transitory headwinds in the fourth quarter that would appear to be more manageable as we look forward into 2027.

Speaker 2

Yeah. I will ask Taner to give you some details.

Speaker 3

Yes. Let me clarify the Q4 revenue growth and EBITDA growth as well. Let's start with the revenue. We have three impacts. First one is Kyivstar TV's new contractual agreements with our content provider, 1+1, in September 2025, is going to be apple to apple starting from the Q4. There wouldn't be any revenue contribution coming from this contractual agreement renewal. Secondly, Solar seasonality between Q3 and Q4 directly affect our utilization, also generation, our energy production. As a third, we expect a slowdown in Uklon in Ukraine due to the population migration from Kyiv due to the attacks during the last few weeks.

Speaker 3

On top of this revenue side, also this Solar seasonal and Uklon slowdown from the EBITDA side, there is also Uklon's investment in scooters, and also travel, and also Uzbekistan, which is going to be cash generating and also value creation investments for the future. Additional to that, we have also operational expenses with higher inflation levels, like electricity costs. When we add them up, we normally, compared with the previous quarters, we are going to see a slowdown for the Q4.

Speaker 4

Yeah. Great. Well, thanks for the detail there. I appreciate the time, and good luck.

Speaker 3

Thank you, Justin.

Speaker 2

Thank you, Justin.

Operator

Our next question comes from Max Findlay with Rothschild & Co. Please unmute your audio, your video, and go ahead with your question.

Speaker 5

Good morning, all. Firstly, I would like to express my sympathies and support to you all, and all those associated with Kyivstar following the recent strikes in your company. My first question is about how the company has been impacted by the strikes. For us outside of Ukraine, it can be quite difficult to gauge what is going on. So, some color on the impacts on your operations, quantum of repair costs, and if this has perhaps prompted a change in M&A strategy, perhaps to prefer asset-light businesses going forwards, that would be useful to know. Secondly, and you touched upon it in your answer in the previous question, your EBITDA margins, especially for the telecoms business, look to be a bit tighter than expected. Your earnings report mentioned higher energy costs, and you mentioned this in your pre-prepared remarks on the call as well.

Speaker 5

So, some color on what is going on with your OPEX would be great, and if these pressures are expected to continue into Q4 and beyond that. Thank you.

Speaker 2

Okay, let me start. Okay, so with the war impact. Okay, so we are operating throughout the war for the last five years. Okay, so we are facing few major risks related to the war. The first one is energy risk. Okay, and I will give you some figures. So, we have almost 270 batteries, okay, installed across our network. We have 10,500 generators across our network. And even right now, we are facing a kind of regular blackouts across different regions in Ukraine, with a minimum impact on our service level. Okay, so we are going through the war, and we are managing this risk. We also have infrastructure risk, and yes, you are right, we were affected during the September by direct hits.

Speaker 2

But because of our efforts, because of all the measures, mitigations measures that were taken by the board and by the management of the company since the beginning of the war, okay, so we were not affected at all. Okay, so we are running business with a quite significant level of redundancy and resilience within the current conditions. So, the effects of these hits, they are immaterial. Okay, and here we are. The second question is asset-light. I can give you one major example. Our contract with Ukrtelecom, Open Access contract. Okay, so I think this is a prominent example of asset-light operator strategy. In one day, in one contract, we expanded our fixed broadband coverage from 4.6 million households to 6.7 million households with zero investments. Okay? And I hope that we will face more such type of examples across Ukrainian telecom market with our participation in the nearest future.

Speaker 2

And the third one, I will start. The main reason of our EBITDA decline is a growing share of our digital business and investments into the digital business development. Okay, by nature, digital business, and it is relatively profitable with 40+% EBITDA marginality. Okay, so, but it is lower than our telecom 57% marginality, okay, reported on a Q3 results. Okay, and growing share and continuous investments into the digital business, okay, is actually imposing a certain pressure. But I am absolutely sure that this is the way how we can create value for the customers and for the shareholders in the future. Only during the Q3, we actually run few major pilots across Uklon as an example. Okay, so we are operating our own bus on a Kyiv-Warsaw route in a country where the air transportation is actually impossible.

Speaker 2

Okay, so we are developing and investing into the micro-mobility, which is a very complementary service to the ride hailing and delivery. Okay, for us, it's a vehicle how we will develop our customer base and how we will develop our services. Okay, we are investing into the marketplace, around modern delivery and mobility. Okay, and all these investments are imposing certain pressure on our marginality. Okay, and I think that this is a very right investments into the future growth and future revenue. And maybe a few comments from Yegor.

Speaker 3

Oleksandr, I would like to add a few more things. First of all, you are right. Due to our digital revenue mix, increasing the digital revenue mix, we directly somehow face with an EBITDA dilution. On top of it, the electric price and the usage increase also impact our EBITDA marginality. And also, like I mentioned in the previous question, the Kyivstar new contractual agreement in last year, September 2025, also has a negative impact on our EBITDA marginality.

Speaker 6

Maybe just to add one thing, because business models needs to be taken into consideration. In the traditional telecom and infrastructure business, you have a higher EBITDA, but of course, you also have a higher capex to revenue investment. In the line of digital services, we might be around 40% EBITDA, but the capex to revenue is maybe 6%-7%. And the cash generation capacity of digital services actually is superior to telecom and infrastructure. So that's why I would like to focus more on the free cash flow generation of our businesses as we move on, rather than the nominal EBITDA levels.

Speaker 5

Brilliant. Thank you. Thank you.

Speaker 2

Thank you, Maxim.

Operator

Your next question comes from Timothy Horan at Oppenheimer & Co. Please unmute your audio and go ahead with your question.

Speaker 7

Thanks, guys. Great quarter. Can we discuss GigaCloud a little bit more detail? Can you give us any kind of financials at all, what kind of revenue it's doing, and maybe how important can this be longer term to digital services? Maybe just rank order. Just looking back on GigaCloud, what's their competitive edge versus the other cloud providers? Related to the last question, what are you doing to protect their infrastructure? I would assume it's kind of a prime target. Any more color around that would be really helpful.

Speaker 2

Okay. We declared that cloud and AI business is one of our priorities. Okay? We were focused to develop these priorities first in-house. Let me remind you that we already have $100 million plus cloud business, okay, embedded in our digital enterprise reporting. Our main strategy is multi-cloud. Multi-cloud is based on a few essential elements. The first one is cooperation and partnership with the hyperscalers, and we are right now one of the, let's say, most significant partners of Microsoft in Ukraine. The second one is in the development of our own cloud services based on our own cloud. We launched our cloud during the summer of 2025, and we start to develop this. With this acquisition, we are strengthening our multi-cloud proposition. It's a profitable business with around $14 million 2025 top line, as far as I Yes, correct. Okay.

Speaker 2

It is a fast-growing business. So, right in ahead, 2026 results are better, even we did not disclose them yet. We want to strengthen our cloud business, and on the base of our current cloud business, which is really multi-cloud, we are one of the leaders in partnership with hyperscalers. We are one of the leaders of the national cloud. We want to build a strong AI business. The most lucrative part of this acquisition for myself is actually team. We acquired profitable business that will immediately generate value for our customers and for our shareholders. But at the same time, we acquired one of the most professional team together with the founders. We together are going to develop the kind of AI national sovereign infrastructure and services based on this infrastructure.

Speaker 2

It is a strategic move to strengthen our presence in one of the core verticals. We will keep this as a standalone vertical. We will consider how to report it appropriately in order to ensure that you have full visibility of our strategy and business development.

Speaker 6

Timothy, this is Kaan. I am particularly happy with the GigaCloud immediately making us number one player in the cloud space in Ukraine. Kyivstar is a flagship of number ones in different verticals. We are number one in entertainment. We are number one in mobile connectivity. We are number one in fixed connectivity. We are number one in healthcare with Helsi and Tabletki. We are number one in Uklon, in ride-hailing and delivery. We understand the big responsibility we have in the country, and this is not just an ecosystem. It is an ecosystem of flagship leading companies.

Speaker 7

Maybe just to follow up there.

Speaker 2

Timothy-

Speaker 7

Yeah, go ahead. Sorry.

Speaker 2

Just one aspect of your question about the security and redundancy. Yes, you are right. One of the key GigaCloud data centers were affected by the war, but taking into account all the mitigations measures that were taken by the team beforehand, partial placement of the equipment outside from Ukraine, and diversification across number of data centers in Ukraine, so business was not affected at all.

Speaker 7

That is very helpful. Do you plan-

Speaker 1

Okay, just really quickly, Tim, just a quick one for the transcript purposes. A reminder that the numbers for GigaCloud are unaudited management accounts.

Speaker 7

Got it. Do you plan on migrating your own cloud services onto their infrastructure, or are there any synergies there? Do you expect pretty good synergies from cross-selling from a revenue perspective?

Speaker 2

You are absolutely right. This is part of our plan. We see quite rich synergies between our current cloud business and GigaCloud, and we are planning, of course, it is not since D1, but we are planning to combine this business in one strong vertical full of synergies between telecom business, our extensive customer base in B2B, and the most attractive and competitive value proposition in cloud infrastructure as a service business plus AI business.

Speaker 7

Thank you.

Speaker 3

As a synergy also, on top of today's enterprise customer base, GigaCloud has also cloud engineering expertise and also R&D capabilities. This is also a contributor cloud business for the future.

Speaker 7

Thank you.

Operator

Our next question comes from Bharath Nagaraj at Cantor Fitzgerald. Please unmute your audio and ask your question.

Speaker 8

Hello. Hi. Thank you for taking my questions. I have a couple, please. With regards to the Uklon revenue growth of 35%, the rides only grew by 1.5%, as you mentioned. How do we reconcile that? Is that mainly take rate expansion, delivery mix, or something else? And can you talk about the current blended take rate? And also, how much quantum of investments are you planning to make in this business going forward? Any indication there would be helpful. Secondly, I just had a quick one on the churn improvement that you've talked about, like to 11.5% approximately in Q3. Is your framing that that's going to be the new baseline going forward, or is this more of a cyclical kind of high? Thank you.

Speaker 2

Okay. Let me start with this kind of combination. You are right. The rides are not growing with the same pace year on year. We are at a certain maturity level in the core ride-hailing business in Ukraine because of our leading market share, okay, because of the current situation, partially because of the current situation. You can imagine that it is a certain pressure imposed by the war on the population mobility, okay? And this pressure is actually driving two results. The first one, a certain saturation in the number of rides because mobility is limited by the war factors, but at the same time, accelerated average check growth. And that's why we are less growing by volume, but we are growing by value, so quite non-organically because of the current circumstances and actual demand for the transportation with the current limitations imposed on the public transportation. Okay?

Speaker 2

This is one of the drivers. Then, we probably do not disclose the level of investments we are going to do, but each investment we are doing on the base of the standalone business case. Of course, it's a very, very different businesses. To expand our ride-hailing business, we know this business. We know the metrics of this business. We are quite confident in our ability to make a right forecast. At the same time, we're entering absolutely new businesses like bus travel in Ukraine. It's a different business. We will build it in an asset-light model, but we will own the whole commercial responsibility and the value chain to provide customers with the transportation, together with the ticketing business.

Speaker 2

What we are trying to do, we are trying to scale up the current Uklon platform of the modern mobility. We have five plus million active customers every month, so we are providing millions of rides. We have a lot of interest in delivery. What we are trying to do is to build a kind of ecosystem of modern mobility on the base of the Uklon business. We had quite successful experience in delivery, but I'm quite sure that it is still significant opportunity for the future growth in this area, and we are trying to expand to the intercity travel, and we are trying to expand into the marketplace business around delivery, for the categories where delivery is essential component of the value chain.

Speaker 8

Makes sense.

Speaker 2

Thank you.

Operator

Thank you. Your next question comes from Vincent Fernando at Zero One Investment Research. Please unmute your audio and ask your question.

Speaker 9

Hi. Looked at the Tabletki handling about 397 million of GMV this quarter, and the revenue generated from that is taking about a 75% EBIT margin. Just curious, from here on, how do you plan to build on that base? How might it connect with Helsi and your wider ecosystem?

Speaker 2

Okay. Let me start from our current, let's say, to some extent, midterm vision. We are building a kind of ecosystem of ecosystems, and one of the essential ecosystem within this list is digital health ecosystem. Okay? You can imagine that because of these two brilliant and popular applications, we can be nearby the patient from the first symptoms until full recovery. And, of course, combination of this customer data, of course, within the current regulatory framework, okay, let us to build a very convenient customer journey. In brief, this is our vision. It is one more essential element that we would like to add to this, and this is element that might be brought by Uklon, is a delivery. We can deliver patient into the hospital. We can deliver medicine. We can deliver doctor, to provide you service at home, okay?

Speaker 2

This is our current vision. At the same time, as you see, we are very much focused to ensure that all businesses on a standalone basis are developing according to their own strategies first, okay? They are profitable, okay? They are well appreciated by the customers with the highest possible NPS, okay? On the base of this kind of stability and profitability, we are building joint services that are improving customer experience, okay, during their health problems.

Speaker 9

I can imagine it's like-

Speaker 2

Also addition-

Speaker 9

maybe-

Speaker 2

Oh, please.

Speaker 9

Yeah, please go ahead.

Speaker 2

Yeah.

Speaker 9

Please go ahead.

Speaker 3

Yeah. In addition to Oleksandr, also Tabletki is an amazingly profitable company. As you mentioned, 75% EBITDA margin with lower capex intensity levels, cash generating company purely. Also, I would like to underline one more thing. During the last, I mean, this under the war circumstances also, the demand of coming to the Tabletki also directly positively impacted, because everybody is directly demand this pharmacy through this, our Tabletki platform.

Speaker 9

Understand. Then I just want to dig a bit into the Multiplay. I saw Multiplay is now 40.3% of your base. Now, it's gone up 8.6% in a year. Where do you think this can go in another year? Which digital services are you right now seeing that are the ones that are triggering people to become a Multiplay customer? Are there certain digital services right now, maybe it's Tabletki, et cetera, that are right now kind of getting a lot of interest and creating that conversion?

Speaker 2

I think that one of our key objectives is to develop concept of the Multiplay. What I mean, because right now, we see a combination of a well-thought, strategy-driven Multiplay development and the kind of combination of non-organic movements, okay? Coming back to the ecosystem of ecosystems, okay, I can give you one of the key vehicles how we are going to develop Multiplay. In our value proposition, telco value proposition, every customer, apart from a standard bundle of minutes, SMSs, and gigabytes, can customize his own value proposition through the ecosystem of the superpowers. Superpowers is actually the main link from the telco customer base, from the telco platform that is reached by customer, by necessity of the service, by frequency of engagement, okay? We can then reach this telco value proposition with the digital service proposition.

Speaker 2

If you will ask me right now what is number one vehicle, it's Kyivstar TV, okay? Tabletki is growing from 33,000 paid subscribers to 136,000 in one year. I don't see, to be very honest, I don't see limit. I think this will very much depend on our ability to develop Helsi value proposition within the subscription, okay, and to combine it in the right way with the telco value proposition. Right now, we do not compete with our telco competitors. We compete on absolutely different level. This is the vehicle. This is the core element of our strategy, how we will try to deepen relationship, to accelerate relationship, to widen relationship with our customer base, and in organic way, convert more and more customers into the well-thought multiplay customer base.

Speaker 9

Okay. Just a real quick last quick.

Speaker 6

Maybe, Vincent, one.

Speaker 9

Yeah, please go ahead.

Speaker 6

Maybe, Vincent, one additional thing I would like to mention, because clearly digital services is where the impact is today. But if I look to the next three years, the superpower packages will be around AI, and the value proposition will be on top of the digital services, but a completely new value proposition, practically offering our customers a better version of themselves. We can actually, with the right local sovereign AI agentic tools, make a teacher a better teacher, a small business owner more profitable, a farmer more productive. That value proposition will be generating, I think, a completely new level of growth and will be redefining our business.

Speaker 1

Helsi already has some of those items. It's a good intro to it, and you can see that in the premium customer growth.

Speaker 9

My quick little ending question is just Sorry, go ahead.

Speaker 2

Kyivstar TV is an excellent example. In few years, from the fifth player on the market to a market leader. This is how it works. Okay? This is a way how we were able to create a tangible business, okay? So through this ecosystem of the superpowers.

Speaker 9

Great. My question is just,

Speaker 2

Okay

Speaker 9

we saw Multiplay again go to 40.3% of your base, up 8.6 percentage points in a year. Are you targeting to get the same rate of conversion to Multiplay in the next year, or is maybe there was some catalyst earlier that created a one-off, or do you think you're trying to keep that same rate of penetration growth? Thank you.

Speaker 2

We are targeting growth, Vincent.

Speaker 9

Great.

Speaker 2

Okay? We are targeting growth because this is one of the main vehicles of our top-line growth.

Speaker 9

Okay. Thank you.

Operator

Thank you. Our next question comes from James Ong at New Street Research. Please unmute your audio and go ahead with your question.

Speaker 10

Hi. Given the plans to bring

Speaker 2

Hi

Speaker 10

Hi. Given the plans to bring Jungo TV content to Ukraine, how does this actually change what Kyivstar can offer customers beyond its existing Kyivstar TV service, and what role do you see it playing in the future in your multiplay strategy in Ukraine? Yeah, that's it.

Speaker 2

Of course, we are considering such opportunity. Let me start from the beginning. Sport is essential component of the successful OTT TV platform. Live events, sport events is actually anchoring customer base, attracting new customer base. Of course, we will consider all the opportunities that are driven by the deal, orchestrated by the owner.

Speaker 6

Yeah. Jungo TV and All Women's Sports Network has a couple of very unique characteristics. It gives us access to low-cost and extremely sustainable way of content provisioning, including things like All Women's Sports Network, which is a high frequency, and from basketball to volleyball to tennis to golf, all sorts of women's sports content coming into our markets. It has healthcare content, and it has mixed martial arts content. Jungo TV has also been a very strong distributor of U.S.-based content for frontier markets at, again, very favorable cost terms. So we will not only be able to use this in Ukraine, but we will also be able to serve the diaspora of Ukraine outside of Ukraine with the right content.

Speaker 6

Of course, with the new AI tools, we are able to dub any kind of content in local Ukrainian language, which will also increase our relevance to the market.

Speaker 10

Thank you.

Operator

Thank you. As a reminder, we are allowing analysts one question and one related follow-up today. If you wish to ask more questions, please raise your hand again to rejoin the queue. Our next question comes from Matthew Harrigan at StoneX. Please unmute your audio, turn on your video, and ask your question.

Speaker 11

Can you hear me?

Speaker 2

Yes.

Speaker 6

We can, Matt.

Speaker 11

I am interested, you signed an MOU in June with the Ukrainian government for development of a data center, and I do not think it is a monster. I think it is tens of millions of U.S. dollars. I would be curious to get your thoughts on data center developments. One thing that really astounds me is, there are things like quantization where you can lighten some of the floating point burden and distillation, collapsing into smaller models. I do not hear very much about software and even quantum computing. I mean, you cannot have a frontier model on quantum computing right now, but that is certainly something people are going to be looking at over a period of time. Clearly, unfortunately, I guess the data center probably would obviously would not be there until after the war concludes, but that is another vulnerability point.

Speaker 11

Just kind of your general thoughts on data centers and even outside of just kind of a broad macro question, outside of Kyivstar, I mean, why don't we see more emphasis on improving efficiency versus just getting gorilla-sized power in West Texas and spending trillions of dollars?

Speaker 2

Okay. We have our vision, okay? This vision is to be leading AI player in Ukraine from the customer services perspective and from the infrastructure perspective. I see three key elements of this development. Large language model that we are developing in cooperation with the Ministry of Digital Transformation is one of the elements. It is on track, okay? We are right now switching from a kind of testing 4 billion model to 26 billion model, okay? We got access to the first Ukrainian datasets, okay? It is in process, okay? We consider that this will be an essential element and bridge between the infrastructure and customer service. The second important element is our experience in infrastructure. Organically, Kyivstar is one of the biggest infrastructure player in Ukraine. Okay.

Speaker 2

We have these competencies, experience, okay, and we are ready to apply competencies, experience, our data centers, okay, in order to develop AI infrastructure, sovereign AI infrastructure. First, it should be sovereign. Second, it should be as close as possible to the Ukrainian end users. The third very important element that we just concluded is to strengthen our market position in a modern cloud business with GigaCloud acquisition. All these three elements are actually looking into the same direction to build, as a result of this transformation, the strongest AI infrastructure and service provider in Ukraine. Okay? Also, our strategy, I do understand that, so our strategy can be perceived from different perspectives. Our strategy is built on a kind of optimistic realism. We do understand that we are in a war situation. We accept this.

Speaker 2

There are actually two simple choices, either to stay in a hibernating mode or to develop. We decided for ourself that we will develop. Okay? I disagree that during these years it might be a bad idea to build a certain AI infrastructure in Ukraine. First, it can be protected. Second, the risk can be mitigated through the partial investments outside from Ukraine. Okay? I think that we should start right now and not to wait until end of the war, because it is still very important factor of sovereignty, okay, that should be somehow incorporated into the Ukrainian decisions.

Speaker 6

And maybe, if I may add one thing, when we talk about these AI factories, everybody talks about advantages due to GPUs, energies, safety. There is one sustainable advantage, and that is access to the customers. That is where we are strong, and I believe the source of the inference traffic will be primarily from our customer base, and that is actually what matters, and that is where we will be gaining our competitive advantage in this play.

Speaker 11

Now, you have obviously fantastic data lakes, but just as an adjunct to that question, and clearly you do need data center capability in Ukraine, I am not disputing that. But what is your perspective, though, on just getting work done, with software and even quantum computing at some point? Because it just feels like everybody is just throwing literally hundreds of billions or even trillions of dollars on these data centers, and it is a huge energy burn. Just taking a broad perspective, even outside Kyivstar, do you think there is a lot of latitude to just get more efficient and be less energy intensive over a period of time?

Speaker 2

Everybody outside from Ukraine. Okay? So nobody in Ukraine. Okay? So, and our vision is to be leading player in Ukraine. Okay? So this is a right time to start. Okay? So this is my perspective. We see demand. We see that this demand is partially covered by the hyperscalers, okay? But I am absolutely sure that with the growing importance of the sovereignty, okay, so this will be somehow substituted by the local players like Kyivstar.

Speaker 6

Absolutely. Matthew, we should also separate headlines from trend lines. Back in 2001, I don't think anyone would have imagined how digital our lives would be in 2026, yet we had the dot-com bubble with a hype scenario. I think we cannot imagine how AI-oriented our lives will be in five years from today. When a technology like this hits a market, the adoption is 1%, 3%, 8%, 30% over time. We are not today even at 1%. Having said that, there will be failures, and there will be own versions of dot-coms where liquidity crisis will hit a couple of big investments in this area. That is why I always say what matters is the customer, and customer access will drive this adoption. And we are basically building our models on that prudent basis.

Speaker 11

Yeah, hopefully AI helps the energy efficiency over a period of time. Thanks.

Speaker 2

Thank you.

Operator

Thank you. That was our final question for today as we have reached the end of time for this Q&A today. I will now hand back to Cole Akeson for closing remarks.

Speaker 1

We will keep it short and sweet. Thank you so much to everyone for joining us today. We appreciate your support for Kyivstar, and we are looking forward to speaking with you next time. We will also be seeing some of you at VEON's Capital Markets Day on November 16th. If there are any other additional questions, please let us know, and we will be happy to discuss.

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