The story surrounding the possible nationalization or confiscation of Kyivstar has taken an unexpected turn. A group of leading American investment funds has expressed interest in acquiring VEON, Kyivstar’s parent company. The details are sensational and could dramatically reshape perceptions of the ongoing situation.
The source of these revelations is a publication dated early October by Capitol Intelligence Group (CI), a Washington-based online media outlet specializing in predictive financial intelligence. Notably, CI has a dedicated focus on Ukraine, presented as part of a project with the telling title Black Business News (BBN). CI’s advisory board includes Brigadier General Ernie Audino, a trusted aide to Congressman Michael Waltz, announced by Donald Trump as a national security advisor, and Ivan Shvaichenko, head of Boosteroid, a Ukraine-registered cloud gaming provider.
On September 17, 2024, CI’s head, Peter K. Semler, encountered Mike Pompeo in the corridors of the Hudson Institute in Washington. Pompeo, a VEON board member and part of Kyivstar’s supervisory board, answered Semler’s questions affirmatively. Semler, using glasses with a built-in camera, recorded Pompeo’s responses.
One key question was how Pompeo viewed the idea of a friendly takeover of VEON by a consortium of major American private equity funds, including Blackstone Group, Kohlberg Kravis Roberts (KKR), and The Carlyle Group. In response to Semler’s question, “Would you be open to such a bid?” Pompeo replied unequivocally and positively: “Yeah, of course.” Pompeo appears on video as someone well-informed about the idea, neither asking for clarification on the interested parties nor seeming surprised by the proposal. His demeanor suggests approval and no intent to conceal his support.
The publication is remarkable because it uncovers numerous details about events surrounding Ukraine’s largest telecommunications company, which has been at the center of a conflict between the government and foreign shareholders for two years. What is particularly striking is that none of the information shared by the American journalists has surfaced in Ukraine’s public discourse.
Meanwhile, the CI article claims that the proposed acquisition of VEON by the mentioned investment funds has the backing of the Ukrainian government, the U.S. Secretary of Commerce, the president of the World Bank, and the European Bank for Reconstruction and Development (EBRD). This raises a question: how could so many key players in Ukraine—including the entire business press, industry regulators, and other authorities, as well as numerous experts—not notice such a massive development? This is, to say the least, astonishing.
Additionally, this development raises numerous questions for Mr. Pompeo and VEON’s management. If the details in CI’s publication are accurate, there is reason to reconsider what is happening with Kyivstar and VEON’s other Ukrainian assets. More importantly, this could finally provide a coherent explanation for the peculiarities and contradictions we have observed over the past two years.
What Happened…
The campaign led by the Office of the President and the Ukrainian government as a whole against the Ukrainian assets of LetterOne (formerly Alfa Group, an investment holding founded by Mikhail Fridman and his partners) has been riddled with contradictions since its inception in the spring of 2023.
First, seizing VEON’s assets is ineffective in addressing the goals stated by the Ukrainian government. These goals, as initially articulated, aim to punish sanctioned individuals, including Fridman. Ukrainian authorities initially asserted that they sought to prevent any possibility of these individuals deriving financial benefits, for instance, through the sale of VEON shares or its Ukrainian assets. Later, the narrative shifted toward confiscating these assets as a punitive measure.
However, LetterOne is not the sole owner of VEON, holding roughly half of the holding company’s equity capital. The remaining shares are traded on stock exchanges and owned by numerous bona fide Western portfolio investors. As a result, sanctioned individuals only hold a fractional stake in each VEON share, including its Ukrainian assets, and separating this fraction for the benefit of the Ukrainian state is fundamentally unfeasible.
The Shevchenkivsky District Court’s decision to seize 47.85% of Kyivstar’s authorized capital is both legally invalid and unlawful, as Fridman and his affiliates own only 47.85% of that portion. This makes the entire strategy a dead end.
Second, alongside the seizure of Kyivstar, authorities launched a similar case against lifecell. One of the shareholders in lifecell’s managing holding company, Turkcell, was also LetterOne. The only difference was that in this case, LetterOne’s stake was smaller—19.8%. However, this detail is irrelevant in the broader context of the campaign against LetterOne and its shareholders. What difference does it make whether the stake is 19.8% or 47.85% if the goal is to punish the same people?
Yet, in this seemingly identical situation, the Ukrainian government took a fundamentally different approach and lifted the seizure of lifecell’s corporate rights. As a result, the company successfully changed ownership and passed into the hands of the French holding NJJ Capital.
Third, court rulings against Kyivstar were accompanied by procedural violations. For instance, the company’s lawyers were unable to obtain a copy of the decision for an extended period, as required by law. It is unclear whether they ever received it. Such legal maneuvers are often indicative of cases built on shaky foundations.
Fourth, the presence of a heavyweight figure like former U.S. Secretary of State and CIA Director Mike Pompeo on Kyivstar’s supervisory board did not yield any noticeable results. Given the flaws in the official position of the Ukrainian authorities, one might have expected that Pompeo’s involvement alone would suffice to resolve the conflict. Especially since he actively promotes foreign policy initiatives such as the idea of transferring $500 billion in frozen Russian assets to Ukraine. However, none of this has brought VEON closer to achieving the goals for which Pompeo was brought on board.
…And What Has Changed
New players have now entered the scene, bringing forward plans that contradict everything stated previously. A friendly takeover of VEON would mean a complete change in its shareholder structure. All current shareholders, including LetterOne, would have to sell their shares and exit. While Fridman and his partners leaving would remove the justification for the seizure of VEON’s Ukrainian assets, it would also directly oppose the state policy goals cited by those who initiated the asset freeze.
In theory, without clarity on attempts to confiscate one of VEON’s largest assets (ranked second by revenue), the very idea of a takeover makes little sense. However, discussions about the deal are ongoing, and the involved parties are radiating optimism. This suggests that they believe the issue of Kyivstar’s asset freeze can be resolved. At the same time, it’s worth noting that no public signals of such resolution have been observed so far.
Another unavoidable question is how to reconcile the proposed buyout of VEON shares with some stakeholders’ plans to significantly increase their value. Since the summer of 2024, one of VEON’s largest shareholders, the American firm Shah Capital Investment, has openly criticized VEON’s and specifically Kyivstar’s current valuation as being unreasonably low.
In an exclusive interview with Mediasat, Shah Capital Investment CEO Himanshu Shah made no mention of the possibility of a friendly takeover of VEON. Does he not know about it? Does he know but consider it unrealistic? Or does he see it as realistic but choose not to mention it?
This silence is striking. For a friendly takeover to succeed, the company’s shareholders, management, and buyers must agree on a fair price for the shares. Shah argues that VEON is currently trading far below its fair value, suggesting, among other things, that Kyivstar should be listed on NASDAQ. Recently, VEON CEO Kaan Terzioglu has also aligned with this perspective. However, like Shah, Terzioglu has not mentioned the possibility of selling VEON as a whole.
It appears that opinions are divided within VEON. One faction of the board of directors, led by Terzioglu, believes it is necessary to support Shah’s proposals. Meanwhile, selling the holding company has gained the backing of at least Mike Pompeo and John Elkann, who owns 7.2% of VEON shares. It is essential to understand that the interests of potential buyers and current VEON shareholders are directly opposed. This sets the stage for intense negotiations, where the uncertain situation with Kyivstar is likely to be used as leverage.
Having insiders—or even better, partners—in Ukrainian government institutions would provide a significant advantage in negotiations over VEON’s price. However, it could also trigger a prolonged conflict over the question of what constitutes a fair valuation of the company’s shares.
Hypothesis
We now have enough grounds to suggest that Kyivstar is following in the footsteps of lifecell. Once VEON’s valuation is agreed upon by all interested parties, the freeze on 47.85% of Kyivstar’s corporate rights will be lifted. According to this hypothesis, the contradictions mentioned earlier find a straightforward and rather mundane explanation. Specifically, the seizure of VEON’s and Turkcell’s Ukrainian assets is merely a tactic to drive down the price, serving the interests of potential buyers. The beneficiaries of the ongoing situation surrounding Kyivstar are likely to be a few of the largest investment funds, which will gain the opportunity to acquire an attractive and, most importantly, undervalued asset at a discount. These funds are expected to implement proposals like those of Shah Capital, such as listing Kyivstar on NASDAQ.
In this scenario, Mike Pompeo emerges as an effective lobbyist capable of facilitating complex and politically sensitive transactions. At the end of the video that sparked this story, Nippon Steel is mentioned. At first glance, this might seem out of place and unrelated, but closer examination reveals otherwise. In December last year, Japanese company Nippon Steel initiated a $15 billion deal to acquire US Steel, one of the world’s largest steel producers and the second-largest in the United States.
The deal faced public opposition from labor unions, Democrats, and Republicans alike, including both President Biden and former President Trump. Mike Pompeo took on the role of lobbying for this $15 billion deal, causing significant frustration within Trump’s circle. Trump himself vowed to block the deal if it was not completed before his potential inauguration. Currently, Nippon Steel is working to finalize the acquisition before the next president takes office.
Pompeo’s lobbying activities in the U.S. can be assessed through cases like this one. His position on the supervisory board of a Ukrainian company is also viewed as a potential source of conflict of interest. For instance, his involvement has been criticized in the context of Trump’s “peace plan” for Ukraine, for which Pompeo was a co-author.
The Ukrainian Perspective
What does VEON’s sale to new owners mean for Ukraine and its citizens? At first glance, a change in the shareholder structure would have no direct impact on Kyivstar’s subscribers or the operator itself. The corporate governance system isolates the shareholders of the managing company, VEON, from the management and customers of its controlled assets. Eliminating the threat of confiscation also seems like an unequivocal positive. However, such isolation functions effectively only in an institutionally mature environment, which is clearly not the case here. Furthermore, the issue of confiscation may not be entirely straightforward.
The main risk of a friendly takeover lies in the fundamental conflict between the interests of VEON’s potential buyers and its current shareholders. The results of an independent valuation of the shares’ fair value, which current shareholders may claim, will largely depend on the official stance of the Ukrainian government regarding VEON’s Ukrainian assets. This official position, in turn, will likely be determined manually, in a nontransparent manner, by individuals whose identities remain unknown.
If things do not go smoothly, Kyivstar may once again find itself at the center of a prolonged dispute involving shareholders, their affiliated managers, and government entities. This could significantly complicate corporate governance, including the execution of investment plans. Recall that Kaan Terzioglu mentioned the possibility of investing up to $1 billion in Ukraine over five years.
VEON’s plans could be revisited even under the most favorable scenarios, simply because new owners may have their own views on the feasibility of investments. This, in turn, could prompt the authorities to formalize VEON’s announced investments—such as by tying them to 5G spectrum licensing requirements. Governments often enjoy dictating terms with other people’s money, and in such cases, tend not to be frugal. As a result, not only Kyivstar but also other operators could face the need to meet unrealistic demands imposed by the authorities.
Finally, new investors from the United States, particularly those close to the Republican Party, might raise the “China question.” Currently, Huawei and ZTE equipment accounts for 100% of Kyivstar’s network infrastructure, which could theoretically be a point of contention for the Trump administration.
The crusade against Huawei began during Trump’s presidency, and the primary advocate for the “Clean Network” initiative was none other than Secretary of State Mike Pompeo. On the other hand, even a partial replacement of Chinese equipment would require additional investments. Over the past three years, there have been many examples of how flexibly Americans approach their own requirements, values, and declarations, particularly when compliance entails excessive costs.
A change in ownership—or even VEON’s acquisition by one of the existing structures—does not pose significant problems. Truthfully, “Vympel-Communications” (VimpelCom Ltd., renamed VEON Inc. in 2009) has never been particularly successful outside the Russian market. Over its 32 years, VympelCom has been marked by numerous epic failures and scandals, astonishing observers with its ability to erode shareholder capital for no apparent reason. Paradoxically, the prolonged conflict between Telenor and Alfa Group became the foundation of Kyivstar’s success, as it prevented shareholders from interfering in the company’s business.
Shedding LetterOne and other remnants of the past era should greatly simplify life for all stakeholders. Let’s hope for the best, while remaining mindful of the risks ahead.
