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Turkcell Iletisim Hizmetleri AS (TKC)

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Turkcell Iletisim Hizmetleri A.S. (TKC)

Q4 2015 Earnings Conference Call

February 18, 2016 01:00 PM ET

Executives

Nihat Narin - Director, IR

Kaan Terzioglu - CEO

Murat Erden - CFO

Burak Sevilengül - Chief Sales Officer

Analysts

Roman Aberazoff - UBS

Ivan Kim - VTB Capital

Presentation

Operator

Good day, and welcome to the Fourth Quarter and Full Year 2015 Results Conference Call. At this time, I would like to turn the call over to Mr. Nihat Narin, Director of Investor Relations and Business Developments. Please go ahead, sir.

Nihat Narin

Thank you, Alex. And ladies and gentlemen thank you for your participation. I would like to say, welcome to our call on behalf of the management team here and we will start today with the presentation by CEO, Kaan Terzioglu, and followed by presentation by CFO, Murat Erden. And then we will go into the Q&A session.

Just before we start the presentation, I would like to remind you of the brief legal notice. In this presentation, we will make statements that are forward-looking about our future targets and expectations. These are based on our current views and assumptions, which may of course change in the future and our actual results may be different.

So, now, I hand over to Mr. Kaan Terzioglu. Sir, please go ahead.

Kaan Terzioglu

Thank you, Nihat. Good afternoon, and good evening, everyone. And welcome to Turkcell's fourth quarter and full year 2015 results call.

We have a full house here today. I am joined by our executive team, including our Chief Financial Officer, Murat Erden; Chief Marketing Officer, Burak Sevilengül; Chief Sales Officer, Murat Erkan; Chief Technology Officer, Ilker Kuruöz; Chief Legal and Regulation Officer, Serhat Demir; Strategy Officer, Ilter Terzioglu; and Chief Business Support Officer, Seyfettin Saglam.

The year 2015 ended up a strong quarter, building up the momentum. We have closed the year with 9.5% growth in Turkcell Turkey and 6% in the Group overall, with 32.4% EBITDA margin and TRY2.1 billion net income. Q4 was extremely strong with the revenue growth of 7.5%, EBITDA margin of 31.7% and the net income of TRY584 million. I have provided some updates you during the year, but before going into the details of the number, I would like to do a quick recap of 2015 in terms of the critical events. As you know we had a major year in terms of transforming our organization into a converged platform.

We have combined two of our operating units, Turkcell as the mobile operator, and Superonline as a fixed operator into one operation, with one management team allowing us to create synergies around network as well as our channels organization, marketing and sales teams.

We have followed the year with a strong performance on our 4.5G spectrum tender, where we have acquired the largest spectrum with 47% of the available spectrum in the market and over that spectrum; we have concluded our tests reaching up to 1.2 gigabit speeds last month.

We have later on improved, as we have promised our globally relevant services portfolio, reflecting this strategy, we have launched a couple of digital services, including BiP, which is our communication platform, downloaded in more than 180 countries, and more than 6 million users. We have also progressed with our disciplined mergers and acquisitions approach, where we acquired 100% of Lifecell in Ukraine and also announced our intention to acquire the remaining stake into Fintur, where we have already holding 41.45% stake.

This year also saw important developments in the way we managed our balance sheet. We have achieved three investment grade ratings from three major international agencies. We have concluded on debt restructuring in Ukraine and Belarus. We have raised funds up to $2.9 billion, established our consumer finance company, which will improve our working capital and as well as we have settled our ongoing disputes with Turk Telekom, clearing the ground for an effective and efficient way of managing our markets.

Let me go back to the financial highlights. 2015 has seen a robust performance both operationally and in terms of financial results, where we have delivered on our guidance. Again, our group revenues grew 6% to TRY12.8 billion, while we have recorded an EBITDA of TRY4.1 billion 10.1% year-over-year growth. Both are record levels for the company. Our actions to optimize the organizational structure and focus on cost management resulted in 1.2 percentage points improvement on EBITDA margin after many years. Our pro forma net income rose by 18.3% year-on-year to TRY2.6 billion. While net income according to IFRS increased to TRY2.1 billion.

Moving on to the next page. I would like to also give you some highlights from our domestic operation in Turkcell Turkey. Turkcell Turkey was our main growth driver. The revenues of Turkcell Turkey, which account for 90% of our group revenues rose 9.5%. The EBITDA ramped up by 13% year-on-year to TRY3.8 billion with a margin of 32.7%. In Q4, EBITDA margin was up by 2.1 percentage points. This comes on the back of efficiency measures and our value focused customer acquisition strategy which has increased more takeover of valuable customers, while decreasing the churn rate. Turkey's pro forma net income rose by 17.9% year-on-year to TRY2.3 billion and net income according to IFRS increased to TRY2.5 billion.

Moving on to the solid growth numbers in terms of the operations, Turkcell Turkey accelerated during the year to double-digits due to our value focused customer acquisition strategy and restoring inflationary pricing. Overall, this led to 9.5% annual growth with a one percentage point rise in EBITDA margin.

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