Turkcell Iletisim Hizmetleri AS (TKC)

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Turkcell Iletisim Hizmetleri AS (TKC)

Q3 2012 Earnings Call

October 19, 2012 10:30 AM ET


Koray Özturkler – Chief Corporate Affairs Officer

Süreyya Ciliv – CEO

Murat Erden – CFO


Alex Wright – UBS

Hervé Drouet – HSBC

San Dhillon – Barclays

Alexandra Serova – Renaissance Capital



Ladies and gentleman, thank you for standing by. Welcome to the Third Quarter 2012 Results Announcement Conference Call on the 19th of October 2012. Throughout today’s recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

I’ll now hand the conference over to Koray Özturkler. Please go ahead, sir.

Koray Özturkler

Thank you, Ken. I’d like to welcome everyone here on behalf of the Turkcell management team. We’ll quickly start the presentation.

Before the presentation, as far as the procedure, I’d just like to give you the quick notice that this presentation may contain some statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially due to factors discussed in this presentation.

Please also note that all financial data are consolidated, whereas non-financial data are unconsolidated, unless otherwise specified. Now, we can begin with the presentation of Mr. Ciliv.

Süreyya Ciliv

Good afternoon and welcome to Turkcell’s third quarter of 2012 results call. In the quarter, we have generated the highest quarterly revenue, record revenue in our history. Turkcell Group revenues rose by 9% year-on-year and 7% quarter-on-quarter to TRY2.8 billion. While improving our top line, we sustained a profitable business model. In nominal terms, our EBITDA rose year-on-year to TRY912 million with an EBITDA margin around 33.1%.

This strong operational performance and higher interest income raised our net income to TRY571 million, including the TRY72 million impairment due to A-Tel, the details of which will be discussed in our financial review section.

At Turkcell Group, we performed better in the third quarter. And based on our year-to-date performance of 11% revenue growth and 8% EBITDA growth, we now expect revenue in the range of TRY10.3 billion to TRY10.4 billion, and EBITDA in the range of TRY3.1 billion to TRY3.2 billion for 2012. Meanwhile, our guidance for the CapEx over sales ratio is unchanged at 16%.

Moving on to page five. In the third quarter of 2012, our company continued to perform strongly across all major business lines. Turkcell Turkey’s voice revenues grew 4% year-on-year, mainly driven by the rising share of higher revenue generating postpaid subscribers, increased incoming traffic, and price increases.

Since the launch of 3G, we have recorded substantial contribution from mobile broadband and service revenues. In the third quarter, mobile broadband and service revenues rose by 12% year-on-year. We believe in the huge potential of this segment and we should accelerate our performance in order to fully realize this potential.

We welcome the increasing contribution of our subsidiaries to the top line, which rose 28% year-on-year, mostly driven by Turkcell Superonline and Astelit in Ukraine. In line with the sequential rise in our revenues, we also achieved a sequential improvement in our EBITDA margin, delivering 33.1% margin in the third quarter. Overall, the nine months performance of each business line confirms our strategic vision, which we will continue to execute on.

Moving to page six. Now I would like to elaborate on the market dynamics. In the quarter, the market focus remained on postpaid as well as increasing smartphone penetration. Turkcell Turkey’s RPM, revenue per minute, improved quarter-on-quarter, partly due to price increases to keep up with high costs and inflation.

In the third quarter, our subscriber base increased by 442,000 net additions, with a 1.3 percentage point decline in the churn rate. Increasing customer focus, offering differentiated superior customer experience and value pricing have been and will continue to be our strategy. Increased RPM, increased revenue per minute, maintaining our customer base and declining churn show that our strategy is working. We plan to continue to execute on this strategy.

Moving to slide seven. Our subscriber base reached 35.2 million. During the quarter we further improved our postpaid base to 12.9 million with 340,000 new subscribers. As a result, the share of postpaid reached 37% of our total subscriber base and 64% of revenues. In addition, our efforts to decrease involuntary churn lead to 102,000 rise in our prepaid base. We welcome the 4.3% rise in blended ARPU mostly driven by a growing postpaid base in our subscriber mix along with higher mobile broadband contribution. We also recorded a healthy growth of 16% rise in MoU.

Page eight. To provide the best customer experience, we prioritize investment in our network and new technologies. Relying on our superior network capabilities, we further differentiated ourselves during the quarter through innovative cross-industry solutions such as cloud computing machine-to-machine and mobile finance. Most recently in partnership with MasterCard, we launched Turkcell Wallet, (inaudible) which offers innovative solutions on a single commerce and payment platform. Smart voice availability is also essential to maximize user experience.

In pursuit of higher smartphone penetration through offering affordable prices, we have been promoting our Turkcell Maxi series with two new models and launched a new campaign called Smartphone Festival. In conclusion, our technology vision experienced collaboration and innovation to create significant value for our customers in turn keeping us ahead of the competition.

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