Kyivstar Completes Preliminary Assessment of the Financial Impact of the Cyberattack
- None.
- The cybersecurity incident resulted in a temporary disruption of network and services, which could impact the company's revenue in 2024.
Insights
The cybersecurity incident experienced by VEON's subsidiary Kyivstar is a critical event that underscores the importance of robust digital defenses in the telecommunications sector. From a cybersecurity perspective, the attack's ability to disrupt essential services like voice and data connectivity, international roaming and SMS services indicates a significant breach of network security protocols. The collaboration with law enforcement and government agencies in Ukraine to restore services showcases the necessity of public-private partnerships in mitigating cyber threats.
For stakeholders, the short-term implications include evaluating the effectiveness of Kyivstar's response and the resilience of their systems. Long-term, this incident could lead to increased investments in cybersecurity infrastructure, potentially affecting operating costs and capital expenditure. The reported lack of material financial impact for the year ended 2023 may reflect effective incident management, but the anticipated revenue loss in 2024 highlights the lingering effects of cyber incidents on customer trust and financial performance.
From a financial standpoint, VEON's disclosure of the anticipated revenue impact for 2024 due to customer loyalty offers is significant. The estimated loss of approximately 95 million USD represents a substantial amount for the company. Investors should monitor the company's future financial statements to assess the true financial impact of the cyberattack, including potential hidden costs such as increased insurance premiums, investments in cybersecurity and the long-term effect on customer retention.
Furthermore, the incident illustrates the importance of cybersecurity on a company's revenue and reputation. While the direct costs for 2023 seem to be contained, the strategic decision to provide free services as a remediation effort will have a noticeable effect on the 2024 revenue stream. This decision, while necessary for customer retention, does raise questions about the balance between customer satisfaction and financial prudence.
The cyberattack on Kyivstar and its subsequent impact on customer loyalty programs provide an opportunity to analyze consumer behavior in crisis situations. The company's approach to offer one month of free services could set a precedent in the telecom industry regarding customer compensation following service disruptions. It's important to observe how this strategy will affect customer loyalty and market share, especially in a competitive environment.
Additionally, the incident could influence industry standards for cybersecurity and crisis management. Competitors and peers will likely scrutinize VEON's handling of the situation to benchmark their own policies. The long-term market implications could include a shift in consumer expectations for service reliability and compensation, potentially leading to increased operational costs for telecom companies as they strive to enhance their cybersecurity measures and crisis response strategies.
Amsterdam and Kyiv, 18 January 2024 – VEON Ltd. (NASDAQ: VEON, Euronext Amsterdam: VEON), a global digital operator that provides converged connectivity and online services (“the Company”), announces its preliminary assessment of the financial impact of the cybersecurity incident that affected the network and services of its Ukrainian subsidiary Kyivstar in December 2023.
The incident, which was caused by a widespread external cyberattack, resulted in a temporary disruption of Kyivstar's network and services, interrupting the provision of voice and data connectivity on mobile and fixed networks, international roaming, and SMS services, amongst others, for Kyivstar customers in Ukraine and abroad. Working relentlessly, and in collaboration with the Ukrainian law enforcement agencies, the Security Service of Ukraine and government agencies, Kyivstar restored services in multiple stages starting with voice and data connectivity. After stabilizing the network, Kyivstar immediately launched offers to thank its customers for their loyalty, including one month of free services on certain types of contracts.
VEON and Kyivstar also engaged in a financial impact assessment, the preliminary results of which have become available.
Largely because of the limited period during which the critical services were down, VEON expects no material financial impact on its consolidated results for the year ended 31 December 2023 due to these service disruptions, or due to costs associated with additional IT capabilities required for restoring services, replacing lost equipment, or compensating external consultants and partners in 2023.
However, the Company does anticipate that there will be an impact on its consolidated revenue results for the year ending 31 December 2024 associated with the revenue loss arising from the customer loyalty measures taken by Kyivstar in order to compensate for the inconvenience caused during the disruptions. The revenue impact of these offers is currently estimated to be approximately 3.6 billion UAH (approximately 95 million USD).
Kyivstar plans to continue its remediation and compensation efforts in the coming months. The costs or loss of revenue of any other such remediation measures is uncertain and cannot be reasonably estimated at this time.
VEON and Kyivstar would once again like to thank their customers for the support and loyalty demonstrated during and in the aftermath of the cyberattack; and to their industry partners and Ukrainian authorities for their support in the recovery of the services.
Important Notice
Elements of this press release contain or may contain “inside information” as defined under the Market Abuse Regulation (EU) No. 596/2014.
About VEON
VEON is a digital operator that provides converged connectivity and digital services to nearly 160 million customers. Operating across six countries that are home to more than
For more information visit: https://www.veon.com.
Disclaimer
This release contains “forward-looking statements,” as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward-looking statements are not historical facts, and include statements relating to, among other things, the financial impact on VEON’s consolidated 2024 financial results, VEON’s efforts to address the consequences of the cyberattack, including its remediation measures. Forward-looking statements are inherently subject to risks and uncertainties, many of which VEON cannot predict with accuracy and some of which VEON might not even anticipate. The forward-looking statements contained in this release speak only as of the date of this release. VEON does not undertake to publicly update, except as required by U.S. federal securities laws, any forward-looking statement to reflect events or circumstances after such dates or to reflect the occurrence of unanticipated events.
Contact Information:
VEON
Hande Asik
Group Director of Communication
pr@veon.com
TUVA Partners
Julian Tanner
Julian.tanner@tuvapartners.com
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