“Strong Start to the Year and Targets
Raised”
Turkcell Iletisim Hizmetleri (NYSE:TKC)
(BIST:TCELL):
- Please note that all financial data is
consolidated and comprises that of Turkcell Iletisim Hizmetleri
A.S. (the “Company”, or “Turkcell”) and its subsidiaries and
associates (together referred to as the “Group”), unless otherwise
stated.
- We have three reporting segments:
- "Turkcell Turkey" which comprises all
of our telecom related businesses in Turkey (as used in our
previous releases in periods prior to Q115, this term covered only
the mobile businesses). All non-financial data presented in this
press release is unconsolidated and comprises Turkcell Turkey only
figures, unless otherwise stated. The terms "we", "us", and "our"
in this press release refer only to Turkcell Turkey, except in
discussions of financial data, where such terms refer to the Group,
and except where context otherwise requires.
- “Turkcell International” which
comprises all of our telecom related businesses outside of
Turkey.
- “Other subsidiaries” which is mainly
comprised of our information and entertainment services, call
center business revenues, financial services revenues and
inter-business eliminations. Turkcell Ödeme ve Elektronik Para
Hizmetleri A.Ş., our subsidiary responsible for payment services,
was previously reported under Turkcell Turkey but with effect from
the first quarter of 2019 is now included in “Other Subsidiaries”.
We made this change due to the fact that its non-group revenues,
which are not telco related, and consumer finance business related
revenues now comprise the majority of its total revenues. All
figures presented in this document for prior periods have been
restated to reflect this change.
- In this press release, a year-on-year
comparison of our key indicators is provided, and figures in
parentheses following the operational and financial results for
March 31, 2019 refer to the same item as at March 31, 2018. For
further details, please refer to our consolidated financial
statements and notes as at and for March 31, 2019, which can be
accessed via our website in the investor relations section
(www.turkcell.com.tr).
- Selected financial information
presented in this press release for the first and fourth quarters
of 2018 and the first quarter of 2019 is based on IFRS figures in
TRY terms unless otherwise stated.
- In accordance with our strategic
approach and IFRS requirements, Fintur is classified as ‘held for
sale’ and reported as discontinued operations as of October 2016.
Certain operating data that we previously presented with Fintur
included has been restated without Fintur.
- In the tables used in this press
release totals may not foot due to rounding differences. The same
applies to the calculations in the text.
- Year-on-year and quarter-on-quarter
percentage comparisons appearing in this press release reflect
mathematical calculation.
FINANCIAL HIGHLIGHTS
TRY million Q118 Q418
Q119 y/y % q/q % Revenue
4,762 5,626 5,675 19.2% 0.9% EBITDA1
2,022 2,239 2,281 12.8% 1.9% EBITDA Margin (%) 42.5% 39.8% 40.2%
(2.3pp) 0.4pp Net Income 501 864 1,224
144.5% 41.7%
FIRST QUARTER HIGHLIGHTS
- Strong set of financials:
- Group revenues of TRY5,675 million, up
19.2% year-on-year
- Group EBITDA of TRY2,281 million, with
an EBITDA margin of 40.2%
- Positive quarterly trend in EBITDA
margin, up 0.4pp for the Group and up 2.2pp for Turkcell
Turkey
- Group net income of TRY1,224 million on
strong operating performance, disciplined financial risk management
and contribution of Fintur sale
- Solid operational performance:
- Mobile ARPU2 growth of 13.4%
year-on-year, like-for-like ARPU3 growth of 19.6%
- Residential fiber ARPU
growth of 12.3% year-on-year
- Digital services downloads reached 178
million
- Mobile multiplay subscriber ratio4
reached 68.6%, up 9.9pp year-on-year; multiplay with TV
subscribers5 reached 49.5%, up 3.8pp year-on-year
- Data usage of 4.5G users at 7.8GB in
March
- The transfer of our stake in Fintur to
Sonera Holding B.V. was completed. The final transaction value was
EUR352.9 million. TRY772.4 million profit was generated from the
transaction.
- Restructuring of the sales organization
enables us to closely focus on customer needs and respond with more
effective services and solutions.
- We revise our guidance6 for 2019.
Accordingly, we now target revenue growth of 17%-19% up from
16%-18% and an EBITDA margin of 38%-40% compared to 37%-40%
previously. We maintain our target operational capex over sales
ratio7 of 16%-18%.
(1) EBITDA is a non-GAAP financial measure. See page 13 for the
explanation of how we calculate Adjusted EBITDA and its
reconciliation to net income.(2) Excluding M2M(3) The ARPU of
customers who have stayed with Turkcell for at least 14 months(4)
Share of mobile voice line users which excludes subscribers who
have not used their line in the last 3 months. Multiplay refers to
mobile customers who use voice, data and one of core digital
services.(5) Multiplay subscribers with TV: Fiber internet + IPTV
users & fiber internet + IPTV + fixed voice users(6) Please
note that this paragraph contains forward looking statements based
on our current estimates and expectations regarding market
conditions for each of our different businesses. No assurance can
be given that actual results will be consistent with such estimates
and expectations. For a discussion of factors that may affect our
results, see our Annual Report on Form 20-F for 2018 filed with
U.S. Securities and Exchange Commission, and in particular, the
risk factor section therein(7) Excluding license feeFor further
details, please refer to our consolidated financial statements and
notes as at and for March 31, 2019 which can be accessed via our
website in the investor relations section
(www.turkcell.com.tr).
COMMENTS BY MURAT ERKAN, CEO
Economic fragility has prevailed in the emerging markets in the
first quarter of 2019. Regardless, as Turkcell Group, we have
delivered robust results on the back of our solid business model
built on strong pillars. Our consolidated revenues grew yearly by
19.2% to TRY5.7 billion with an EBITDA1 of TRY2.3 billion,
resulting in an EBITDA margin of 40.2%. Including the TRY772
million profit generated from the Fintur transaction, we reported
TRY1.2 billion net income, 1.4 times higher than for the same
period of last year. Accordingly, we revise our full-year guidance2
for 2019 upwards to 17% - 19% for revenue growth and 38% - 40% for
the EBITDA margin. In addition to our solid financial performance,
our leverage ratio has declined to 1.3x with the contribution of
the Fintur transaction, and we expect it to further decline over
the coming periods.
Demand for mobile data has remained strong this quarter with the
contribution of our digital services. Monthly average data
consumption of customers on our 4.5G network has increased 28%
yearly to 7.4GB. Total downloads of our digital services reached
178 million, while we have continued efforts to increase the time
spent on these services. In the fixed segment, Superbox, our Fixed
Wireless Access (FWA) product providing fiber-like speeds at
locations not covered by our fiber network, has earned customer
appreciation, reaching 56 thousand subscribers. Our capability to
provide the Superbox service for the first time in Turkey through
our wide frequency and strong infrastructure has also proven our
readiness for 5G.
As Turkcell, with our “customer first” motto we continue to
contribute to our people and our country.
We marked our twenty-fifth anniversary in February. Over the
past 25 years, Turkcell has transformed from a conventional telco
into the world’s first digital operator. We have developed digital
services; and what’s more, we export technology. Following the one
signed with Moldcell, we have also signed cooperation agreements
with ALBtelecom of Albania, CG Corp Global of Nepal and Digicel
Group of the Caribbean to allow the use of our digital services.
Our customer-focused approach, which we have always pursued in
achieving this success, will only gain strength in the upcoming
periods as we contribute to their lives with new smart
technologies. In this new era, we aim to strengthen our emotional
ties with our customers and have redesigned our sales organization
accordingly. We now have a structure enabling us to focus on
customer needs more closely, and design more effective services and
solutions.
We have three strategic focus areas.
We believe we can sustain profitable growth with a strategic
focus on three key areas: Our digital services, digital business
solutions and our techfin platform. While continuing to work on
increasing the usage of our locally-developed digital services, we
plan to establish new commercial partnerships for digital exports,
the destinations of which today number 38 countries. We will serve
the digital transformation of both private and public sectors
through Digital Business Solutions, our new subsidiary. The
digitization of financial services, which in our view offers great
potential, as well as other new opportunities in this field form
the third focus area.
We continue our efforts towards a shared
infrastructure.
As we offer our services through a strong mobile and fixed
infrastructure, we continue to work towards accomplishing a shared
infrastructure; one that best serves the interests primarily of our
country, but also of all parties involved. In this context, we
already provide fixed broadband to additional households through
bilateral agreements with Türksat and Vodafone Turkey. Regarding
the next phase, we believe in the necessity of joint investments
into infrastructure to position Turkey’s communication
infrastructure among the best in the world. We particularly
perceive the importance of joint infrastructure in the era of 5G,
which will serve as the platform for Industry 4.0.
We are determined to pioneer Turkey’s technological
advancement.
In April, we hosted the technology summit, which coinciding with
our 25th anniversary, was particularly significant. The latest
advances, particularly of locally manufactured technologies formed
the agenda of the summit in its 10th year. The summit hosted over
70 opinion and business leaders in around 30 sessions where 5G,
artificial intelligence, Industry 4.0, smart technologies,
entrepreneurship, cyber security, robotics and cloud technologies
were the key topics of discussion. Over 10,000 attendees in person
witnessed the introduction of our locally-developed AI-powered
personal assistant “Yaani Assistant”.
We will continue to serve our country and people through our
investments.
Turkcell has accomplished its pioneering role in the
technological transformation of Turkey with its well-established
infrastructure. We have been the fastest growing telco globally on
the back of our services and solutions developed for our customers
over the past three years. We own a strong mobile network operating
over the widest frequency in Turkey. We have laid 43 thousand km of
fiber and built eight data centers, enabling us to provide
high-quality services. For this, we have already invested TRY50
billion in our technological infrastructure over the past 25 years,
and going forward we will continue our investments.
We will announce our 3-year targets in New York.
We have seen a strong start to 2019 and have revised our
full-year targets upwards. Accordingly, we are scheduled to
announce our 3-year targets on October 31, 2019 in New York at the
Turkcell Capital Markets Day.
We thank all our colleagues for the part they have played in our
success, along with our Board of Directors for their unyielding
trust and support. We also express our gratitude to our customers
and business partners, who have remained with us throughout our
success story.
(1) EBITDA is a non-GAAP financial measure. See page 13 for the
explanation of how we calculate Adjusted EBITDA and its
reconciliation to net income.(2) Please note that this paragraph
contains forward looking statements based on our current estimates
and expectations regarding market conditions for each of our
different businesses. No assurance can be given that actual results
will be consistent with such estimates and expectations. For a
discussion of factors that may affect our results, see our Annual
Report on Form 20-F for 2018 filed with U.S. Securities and
Exchange Commission, and in particular, the risk factor section
therein
FINANCIAL AND OPERATIONAL REVIEW
Financial Review of Turkcell Group
Profit & Loss Statement (million TRY) Q118
Q418 Q119 y/y %
q/q % Revenue 4,761.6
5,626.3 5,675.3 19.2%
0.9% Cost of revenue1 (2,134.9) (2,607.3) (2,730.2) 27.9%
4.7%
Cost of revenue1/Revenue (44.8%)
(46.3%) (48.1%) (3.3pp) (1.8pp)
Gross Margin1 55.2% 53.7% 51.9%
(3.3pp) (1.8pp) Administrative expenses (154.3)
(198.2) (190.6) 23.5% (3.8%)
Administrative expenses/Revenue
(3.2%) (3.5%) (3.4%) (0.2pp)
0.1pp Selling and marketing expenses (356.6) (500.8) (403.1)
13.0% (19.5%)
Selling and marketing expenses/Revenue
(7.5%) (8.9%) (7.1%) 0.4pp 1.8pp
Net impairment loses on financial and contract assets (93.8) (81.0)
(70.3) (25.1%) (13.2%)
EBITDA2 2,022.0
2,239.0 2,281.1 12.8% 1.9% EBITDA
Margin 42.5% 39.8% 40.2% (2.3pp)
0.4pp Depreciation and amortization (979.8) (1,287.0)
(1,178.1) 20.2% (8.5%)
EBIT3 1,042.1
952.0 1,103.0 5.8% 15.9% Net finance
income / (costs) (313.5) (18.5) (420.4) 34.1% n.m. Finance income
355.6 (1,225.9) 583.0 63.9% (147.6%) Finance costs4 (669.1) 1,207.4
(1,003.4) 50.0% (183.1%) Other income / (expense) (33.5) 46.5
(51.8) 54.6% (211.4%) Non-controlling interests (24.2) (77.7)
(19.8) (18.2%) (74.5%) Share of profit of equity accounted
investees - 0.3 0.8 n.a. 166.7% Income tax expense (170.2) (38.7)
(159.8) (6.1%) 312.9% Discontinued operations - - 772.4 n.a. n.a.
Net Income 500.8 863.9
1,224.5 144.5% 41.7%
(1) Excluding depreciation and amortization expenses.(2) EBITDA
is a non-GAAP financial measure. See page 13 for the explanation of
how we calculate Adjusted EBITDA and its reconciliation to net
income.(3) EBIT is a non-GAAP financial measure and is equal to
EBITDA minus depreciation and amortization expenses.(4) Fair value
loss and interest expense in relation to derivative instruments
reported under finance cost were netted off from respective fair
value gain and interest income in relation to derivative
instruments reported under finance income. Historical periods were
restated to reflect this change.
Revenue of the Group rose 19.2% year-on-year in Q119.
This was driven mainly by growth in Turkcell Turkey revenues on the
back of successful execution of digital services focused strategy
and upsell performance.
Turkcell Turkey revenues, at 85% of Group revenues, increased
18.7% to TRY4,833 million (TRY4,072 million).
- Data and digital services revenues rose
by 18.1% to TRY3,215 million (TRY2,722 million).
- Higher number of data users, increased
data consumption per user, rise in 4.5G smartphone penetration as
well as the rise in penetration of digital services were the main
drivers of growth on the mobile front.
- Larger fiber subscriber base, price
adjustments and upsell efforts, as well as the increased ratio of
multiplay subscribers with TV, were the main drivers of growth on
the fixed front.
- Wholesale revenues rose by 38.9% to
TRY232 million (TRY167 million) due to increased carrier traffic
and the positive impact of currency movements.
Turkcell International revenues, comprising 7% of Group
revenues, grew by 52.0% to TRY425 million (TRY279 million),
resulting mainly from the rise in lifecell and BeST revenues.
Other subsidiaries' revenues, at 7% of Group revenues, and which
includes information and entertainment services, call center
revenues and revenues from financial services were at TRY417
million (TRY410 million).
- Please note that we completed the sale
of our shares in Azerinteltek, our sports betting business in
Azerbaijan, as of January 11, 2019. As we received the transfer of
proceeds on December 27, 2018 and transferred the control of the
subsidiary, we did not report any revenues in Q119 in relation to
Azerinteltek operations.
- Our consumer finance company’s revenues
grew by 14.1% to TRY242 million (TRY212 million). Revenue growth
was impacted by the decline in consumer loan portfolio from TRY4.4
billion as of Q118 to TRY3.6 billion as of Q119 due to the
installment limitation on consumer loans for telecom devices.
- Turkcell Ödeme ve Elektronik Para
Hizmetleri A.Ş., our subsidiary responsible for payment services,
was previously reported under Turkcell Turkey but with effect from
the first quarter of 2019 is now included in “Other Subsidiaries”.
We made this change due to the fact that its non-group revenues,
which are not telco related, and consumer finance business related
revenues now comprise the majority of its total revenues. All
figures presented in this document for prior periods have been
restated to reflect this change.
Cost of revenue (excluding depreciation and amortization)
increased to 48.1% (44.8%) as a percentage of revenues in Q119.
This was mainly due to the rise in cost of goods sold (4.6pp),
despite the decline in other cost items (1.3pp) as a percentage of
revenues.
Administrative expenses were at 3.4% (3.2%) as a
percentage of revenues in Q119.
Selling and marketing expenses declined to 7.1% (7.5%) as
a percentage of revenues in Q119. This was mainly due to the
decline in selling expenses (0.7pp), despite the rise in other cost
items (0.3pp) as a percentage of revenues.
Net impairment loses on financial and contract assets
were at TRY70 million (TRY 94 million) in Q119.
EBITDA1 rose by 12.8% year-on-year in Q119,
leading to an EBITDA margin of 40.2% (42.5%).
- Turkcell Turkey’s EBITDA grew by 9.7%
to TRY1,910 million (TRY1,741 million) resulting in an EBITDA
margin of 39.5% (42.8%). Turkcell Turkey’s EBITDA margin improved
by 2.2pp compared to Q418 (37.3%).
- Turkcell International EBITDA2
increased to TRY194 million (TRY93 million) with an EBITDA margin
of 45.6% (33.2%).
- The EBITDA of other subsidiaries was at
TRY178 million (TRY188 million).
(1) EBITDA is a non-GAAP financial measure. See page 13 for the
explanation of how we calculate adjusted EBITDA and its
reconciliation to net income.
(2) We started to capitalize the frequency usage fees of
lifecell in Q418 in accordance with IFRS16 which led to a positive
impact on Turkcell International EBITDA. The change was implemented
retrospectively; impact regarding previous quarters of 2018 was
booked in Q418.
Depreciation and amortization expenses increased by 20.2%
in Q119.
Net finance expense increased to TRY420 million (TRY313
million) in Q119, mainly due to the higher interest expense of
loans. Please note that the Group started to apply hedge accounting
as of July 1, 2018 for existing participating cross currency swap
and cross currency swap transactions, in accordance with the IFRS 9
hedge accounting requirement. Please see the IFRS report for
details.
See Appendix A for details of net foreign exchange gain and
loss.
Income tax expense declined 6.1% year-on-year in Q119.
Please see Appendix A for details.
Net income of the Group rose to TRY1,224 million (TRY501
million) in Q119, mainly driven by strong operating performance,
disciplined financial risk management and contribution of the
Fintur sale, which had a positive impact of TRY772 million.
Total cash & debt: Consolidated cash as of March 31,
2019 increased to TRY8,888 million from TRY7,419 million as of
December 31, 2018. Excluding the FX swap transactions for TRY
borrowing, 79% of our cash is in US$ and 21% is in EUR.
Consolidated debt as of March 31, 2019 increased to TRY22,867
million from TRY20,156 million as of December 31, 2018. Please note
that TRY1,410 million of our consolidated debt is comprised of
lease obligations resulting from the implementation of IFRS 16.
- Consolidated debt breakdown excluding
lease obligations resulting from the implementation of IFRS 16:
- Turkcell Turkey’s debt balance was
TRY16,771 million, of which TRY9,727 million (US$1,728 million) was
denominated in US$, TRY6,299 million (EUR997 million) in EUR,
TRY214 million (CNY257 million) in CNY and the remaining TRY531
million in TRY.
- The debt balance of lifecell was
TRY1,071 million all denominated in UAH.
- Our consumer finance company had a debt
balance of TRY3,610 million, of which TRY1,759 million (US$312
million) was denominated in US$, and TRY1,077 million (EUR170
million) in EUR with the remaining TRY774 million in TRY.
- TRY705 million of IFRS 16 lease
obligations is denominated in TRY, TRY39 million (US$7 million) in
US$, TRY178 million (EUR28 million) in EUR and the remaining
balance in other local currencies (please note that the figures in
parentheses refer to US$ or EUR equivalents).
TRY13,342 million of our consolidated debt is set at a floating
rate. Excluding the consumer finance business borrowings, TRY5,048
million of consolidated debt will mature within less than a
year.
Net debt as of March 31, 2019 was at TRY13,979 million.
Including the proceeds of the Fintur deal of EUR352.9 million
(equivalent of TRY2,230 million as of March 31, 2019), which is
booked under due from related parties, net debt was TRY11,749 with
a net debt to EBITDA ratio of 1.3 times. Excluding consumer finance
company consumer loans, our telco only net debt was at TRY8,108
million with a leverage of 0.9 times.
Turkcell Group has a long FX position of US$216 million as at
the end of Q119. (Please note that this figure takes into account
advance payments and hedging but excludes FX swap transactions for
TL borrowing. Derivatives (VIOP) and forward transactions are
included).
Capital expenditures: Capital expenditures, including
non-operational items, amounted to TRY1,352.6 million in Q119. In
Q119, operational capital expenditures (excluding license fees) at
the Group level were at 15.6% of total revenues.
Capital expenditures (million TRY) Q118
Q418 Q119 Operational Capex (526.3)
(1,448.6) (883.6) License and Related Costs (188.0)
(1.7) (0.7) Non-operational Capex (Including IFRS15 & IFRS16)
(1,845.9) (784.3) (468.4)
Total
Capex1 (2,560.1) (2,234.6)
(1,352.6)
(1) Breakdown of capex for Q118 has been restated.
Operational Review of Turkcell Turkey
Summary of Operational Data Q118
Q418 Q119 y/y % q/q
% Number of subscribers (million) 37.3
36.7 36.6 (1.9%)
(0.3%) Mobile Postpaid (million) 18.6 18.8 18.7 0.5% (0.5%)
Mobile M2M (million) 2.4 2.4 2.4 - - Mobile Prepaid (million) 16.0
14.9 15.0 (6.3%) 0.7% Fiber (thousand) 1,248.7 1,385.6 1,411.1
13.0% 1.8% ADSL (thousand) 916.6 905.6 861.7 (6.0%) (4.8%) Superbox
(thousand)1 3.5 33.5 56.4 n.m 68.4% Cable (thousand) - - 9.7 n.a.
n.a. IPTV (thousand) 535.0 613.4 632.0 18.1% 3.0%
Churn
(%)2 Mobile Churn (%)3 1.4% 2.9% 1.9% 0.5pp (1.0pp)
Fixed Churn (%) 1.8% 2.2% 2.0% 0.2pp (0.2pp)
ARPU (Average
Monthly Revenue per User) (TRY) Mobile ARPU, blended 31.5 35.0
35.7 13.3% 2.0% Mobile ARPU, blended (excluding M2M) 33.6 37.4 38.1
13.4% 1.9% Postpaid 45.4 49.5 50.6 11.5% 2.2% Postpaid (excluding
M2M) 51.5 56.4 57.4 11.5% 1.8% Prepaid 15.3 17.4 17.2 12.4% (1.1%)
Fixed Residential ARPU, blended 55.3 56.6 59.8 8.1% 5.7%
Residential Fiber ARPU 55.9 58.2 62.8 12.3% 7.9%
Average mobile
data usage per user (GB/user) 4.4 5.9 5.9
34.1% - Mobile MoU (Avg. Monthly Minutes of usage
per subs) blended 344.8 356.4
393.1 14.0% 10.3%
(1) Superbox subscribers are included in mobile subscribers.(2)
Presentation of churn figures has been changed to demonstrate
average monthly churn figures for the respective quarters.(3) In
Q117, our churn policy was revised to extend from 9 months to 12
months (the period at the end of which we disconnect prepaid
subscribers who have not topped up above TRY10). Additionally,
under our revised policy, prepaid customers who last topped up
before March will be disconnected at the latest by year-end.
Our mobile subscriber base stood at 33.7 million by the end of
Q119. While we registered 73 thousand quarterly prepaid subscriber
net additions, our postpaid subscribers declined by 155 thousand
during the quarter. The share of postpaid subscribers was at 55.4%
(53.8%) of our mobile subscriber base.
Our fixed subscriber base was at 2.3 million by the end of Q119.
Our fiber customer base exceeded 1.4 million on 25 thousand
quarterly and 162 thousand annual net additions. Superbox, our
fixed wireless access product, exceeded 56 thousand subscribers in
Q119. IPTV subscribers reached 632 thousand on 19 thousand
quarterly and 97 thousand annual net additions. Total TV
subscribers, including OTT only users, reached 4.1 million4. As of
April, the Turkcell TV+ mobile application has been downloaded 12.6
million times.
In Q119, our average monthly mobile churn rate was at 1.9% and
our average monthly fixed churn rate was at 2.0%.
Mobile ARPU (excluding M2M) rose by 13.4% year-on-year in Q119,
mainly driven by the rise in penetration of digital services,
increased data consumption per user and price adjustments as well
as our upsell efforts. The increased share of multiplay customers,
who use voice, data and digital services combined, to 68.6%5,
contributed to the ARPU rise as well.
Our residential fiber ARPU grew by 12.3% in Q119 year-on-year.
This was driven by upsell efforts and price adjustments, as well as
by the rise in multiplay subscribers with TV6 to 49.5% of total
residential fiber subscribers.
Average mobile data usage per user rose by 34.1% in Q119
year-on-year, on the back of rising number and data consumption of
4.5G users and rising digital services usage. Average mobile data
usage of 4.5G users was at 7.8 GB in March.
4.5G compatible smartphones increased to 18.5 million in Q119 on
0.5 million quarterly additions, comprising 82% of total
smartphones on our network by the end of Q119.
(4) IPTV users and OTT only cumulative active users(5) Share
among mobile voice users excluding subscribers who have not used
their lines in the last 3 months. Multiplay refers to mobile
customers who use voice, data and one of core digital services(6)
Multiplay subscribers with TV: Fiber internet + IPTV users &
fiber internet + IPTV + voice users
TURKCELL INTERNATIONAL
lifecell1 Financial Data Q118
Q418 Q119 y/y%
q/q% Revenue (million UAH) 1,207.9
1,417.0 1,415.5 17.2%
(0.1%) EBITDA (million UAH) 504.9 1,083.5 815.5 61.5%
(24.7%)
EBITDA margin (%) 41.8% 76.5%
57.6% 15.8pp (18.9pp) Net income / (loss)
(million UAH) (178.2) (730.1) (267.2) 49.9% (63.4%)
Capex
(million UAH) 2,588.7 2,694.9
357.8 (86.2%) (86.7%)
Revenue (million TRY) 167.9 273.3 275.8 64.3% 0.9%
EBITDA
(million TRY) 69.8 205.9 159.0
127.8% (22.8%) EBITDA margin (%) 41.6% 75.3% 57.7%
16.1pp (17.6pp)
Net income / (loss) (million TRY)
(24.9) (126.3) (52.1)
109.2% (58.7%)
(1) Since July 10, 2015, we hold a 100% stake in lifecell.
lifecell (Ukraine) revenues rose by 17.2% year-on-year in
Q119 in local currency terms mainly on the back of increased mobile
data revenues with rising penetration of 4.5G users and higher data
consumption. EBITDA in local currency terms increased 61.5%
year-on-year to UAH816 million, which led to an EBITDA margin of
57.6%. Please also note that starting from Q418, lifecell started
to capitalize its radio frequency usage costs in accordance with
IFRS16. The overall impact, including the retrospective adjustments
for previous quarters of 2018, was booked in Q418.
lifecell revenues in TRY terms increased 64.3% year-on-year,
while its EBITDA rose to TRY159 million in Q119.
lifecell Operational Data Q118
Q418 Q119 y/y%
q/q% Number of subscribers (million)2
10.3 9.9 9.4
(8.7%) (5.1%) Active (3 months)3 7.7 7.3 6.9
(10.4%) (5.5%)
MOU (minutes) (12 months) 138.5
148.6 141.4 2.1% (4.8%) ARPU
(Average Monthly Revenue per User), blended (UAH) 37.7
47.2 49.0 30.0% 3.8% Active (3 months)
(UAH) 51.4 63.1 66.7 29.8% 5.7%
(2) We may occasionally offer campaigns and tariff schemes that
have an active subscriber life differing from the one that we
normally use to deactivate subscribers and calculate churn.(3)
Active subscribers are those who in the past three months made a
revenue generating activity.
lifecell’s three-month active subscriber base declined to 6.9
million in Q119, mainly due to the declining multiple SIM card
usage trend in the country. lifecell continued its strong ARPU
performance with 29.8% growth in Q119, mainly on increased mobile
data consumption and upsell efforts. Leveraging the quality of its
4.5G and 3G networks and attractive digital services, lifecell
continued to attract high ARPU generating subscribers, which
supported the solid ARPU performance.
The 4.5G subscriber base of lifecell continued to expand in
Q119. 4.5G users reached 36% of total mobile data users. The
penetration of 4.5G services continued to rise as reflected by the
increased number of 3-month active 4.5G users, which exceeded 1.6
million. Average data consumption per user rose by 117%
year-on-year, mainly driven by the higher data consumption of 4.5G
users. lifecell continued its leadership of the Ukrainian market in
smartphone penetration, which reached 77% as at the end of
Q119.
In accordance with Turkcell’s global digital services strategy,
lifecell continued to increase the penetration of its digital
services within its customer base. Accordingly, the number of
three-month active digital services users exceeded 1 million in
Q119. Furthermore, lifecell continued to enrich its digital
services portfolio launching new offerings during the quarter in
order to meet the digital needs of both retail and corporate
customers.
BeST1 Q118 Q418
Q119 y/y% q/q% Number of
subscribers (million) 1.6 1.6
1.6 - - Active (3 months)
1.2 1.2 1.2 - -
Revenue
(million BYN) 29.2 32.9 31.9 9.2%
(3.0%) EBITDA (million BYN) 5.3 12.7 7.4 39.6% (41.7%)
EBITDA margin (%) 18.2% 38.6% 23.2%
5.0pp (15.4pp) Net loss (million BYN) (10.0) (8.3)
(8.8) (12.0%) 6.0%
Capex (million BYN) 29.5
18.3 10.8 (63.4%)
(41.0%) Revenue (million TRY) 56.6 83.8 79.5 40.5% (5.1%)
EBITDA (million TRY) 10.3 31.3 18.4
78.6% (41.2%) EBITDA margin (%) 18.2% 37.4% 23.1%
4.9pp (14.3pp)
Net loss (million TRY) (19.4)
(21.3) (21.9) 12.9%
2.8%
(1) BeST, in which we hold an 80% stake, has operated in Belarus
since July 2008.
BeST revenues grew by 9.2% year-on-year in Q119 in local
currency terms, mainly driven by growth in mobile data revenues.
Digital services revenue growth also contributed to the revenue
increase. BeST’s EBITDA rose by 39.6% year-over-year to BYN7.4
million, which led to an EBITDA margin of 23.2%.
BeST’s revenues in TRY terms grew by 40.5% year-on-year in Q119,
with an EBITDA margin of 23.1%.
BeST continued to increase the penetration of its 4G services as
reflected by the number of 4G users, which reached 40% of its
3-month active subscriber base, resulting in increased data
consumption and digital services usage. Average monthly data
consumption of subscribers rose by 76% year-over-year to 6.3GB in
Q119. Digital services penetration continued to increase within its
customer base. Accordingly, subscribers who use at least one
digital service comprise 21% of the 3-month active subscriber base.
Meanwhile, BeST launched its new digital offering PLAY, which
includes 7 digital services.
Kuzey Kıbrıs Turkcell2 (million TRY)
Q118 Q418 Q119
y/y% q/q% Number of subscribers
(million) 0.5 0.5 0.6
20.0% 20.0% Revenue 43.5 45.8 47.9
10.1% 4.6%
EBITDA 14.1 11.6 16.7
18.4% 44.0% EBITDA margin (%) 32.4% 25.3% 34.9% 2.5pp
9.6pp
Net income 5.2 8.9 7.6
46.2% (14.6%) Capex 15.2 23.3
10.6 (30.3%) (54.5%)
(2) Kuzey Kıbrıs Turkcell, in which we hold a 100% stake, has
operated in Northern Cyprus since 1999.
Kuzey Kıbrıs Turkcell revenues grew by 10.1% year-on-year
in Q119, mainly driven by mobile data revenue growth. EBITDA
increased by 18.4% resulting in an EBITDA margin of 34.9%.
Fintur: In accordance with our strategic approach and
IFRS requirements, Fintur is classified as ‘held for sale’ and
reported as discontinued operations as of October 2016.
On December 12, 2018, Turkcell signed a binding agreement and on
April 2, 2019 completed the transfer of its shares in Fintur to
Sonera Holding B.V., the majority shareholder of Fintur. The final
value of the transaction was EUR352.9 million. As the conditions
precedent required for the share transfer were completed within
Q119, TRY772 million profit generated from the transaction is
reflected in Q119 financial statements.
Turkcell Group Subscribers
Turkcell Group subscribers amounted to approximately 48.4
million as of March 31, 2019. This figure is calculated by taking
the number of subscribers of Turkcell Turkey and each of our
subsidiaries. It includes the total number of mobile, fiber, ADSL,
cable and IPTV subscribers of Turkcell Turkey, and the mobile
subscribers of lifecell and BeST, as well as those of Kuzey Kıbrıs
Turkcell and lifecell Europe.
Turkcell Group Subscribers Q118
Q418 Q119 y/y%
q/q% Mobile Postpaid (million) 18.6 18.8
18.7 0.5% (0.5%) Mobile Prepaid (million) 16.0
14.9 15.0 (6.3%) 0.7% Fiber (thousand) 1,248.7 1,385.6 1,411.1
13.0% 1.8% ADSL (thousand) 916.6 905.8 861.7 (6.0%) (4.9%) Superbox
(thousand)1 3.5 33.5 56.4 n.m 68.4% Cable (thousand) - - 9.7 n.a.
n.a. IPTV (thousand) 535.0 613.4 632.0 18.1% 3.0%
Turkcell
Turkey subscribers (million)2 37.3 36.7
36.6 (1.9%) (0.3%) lifecell (Ukraine) 10.3 9.9
9.4 (8.7%) (5.1%) BeST (Belarus) 1.6 1.6 1.6 - - Kuzey Kıbrıs
Turkcell 0.5 0.5 0.6 20.0% 20.0% lifecell Europe3 0.3 0.2 0.2
(33.3%) -
Turkcell Group Subscribers (million)
50.1 48.9 48.4
(3.4%) (1.0%)
(1) Superbox subscribers are included in mobile subscribers.(2)
Subscribers to more than one service are counted separately for
each service.(3) The “wholesale traffic purchase” agreement, signed
between Turkcell Europe GmbH operating in Germany and Deutsche
Telekom for five years in 2010, had been modified to reflect the
shift in business model to a “marketing partnership”. The new
agreement between Turkcell and a subsidiary of Deutsche Telekom was
signed on August 27, 2014. The transfer of Turkcell Europe
operations to Deutsche Telekom’s subsidiary was completed on
January 15, 2015. Subscribers are still included in the Turkcell
Group Subscriber figure. Turkcell Europe was rebranded as lifecell
Europe on January 15, 2018.
OVERVIEW OF THE MACROECONOMIC ENVIRONMENT
The foreign exchange rates used in our financial reporting,
along with certain macroeconomic indicators, are set out below.
Q118 Q418 Q119
y/y% q/q% GDP Growth (Turkey)
7.4% (3.0%) n.a.
n.a. n.a. Consumer Price Index (Turkey)
(yoy) 10.2% 20.3% 19.7% 9.5pp
(0.6pp) US$ / TRY rate Closing Rate 3.9489 5.2609
5.6284 42.5% 7.0% Average Rate 3.8077 5.4369 5.3378 40.2% (1.8%)
EUR / TRY rate Closing Rate 4.8673 6.0280 6.3188 29.8% 4.8%
Average Rate 4.6795 6.2121 6.0777 29.9% (2.2%)
US$ / UAH
rate Closing Rate 26.54 27.69 27.25 2.7% (1.6%) Average Rate
27.42 28.18 27.41 - (2.7%)
US$ / BYN rate Closing Rate
1.9501 2.1598 2.1285 9.1% (1.4%) Average Rate 1.9663
2.1307 2.1470 9.2% 0.8%
RECONCILIATION OF NON-GAAP FINANCIAL MEASUREMENTS: We
believe Adjusted EBITDA, among other measures, facilitates
performance comparisons from period to period and management
decision making. It also facilitates performance comparisons from
company to company. Adjusted EBITDA as a performance measure
eliminates potential differences caused by variations in capital
structures (affecting interest expense), tax positions (such as the
impact of changes in effective tax rates on periods or companies)
and the age and book depreciation of tangible assets (affecting
relative depreciation expense). We also present Adjusted EBITDA
because we believe it is frequently used by securities analysts,
investors and other interested parties in evaluating the
performance of other mobile operators in the telecommunications
industry in Europe, many of which present Adjusted EBITDA when
reporting their results.
Our Adjusted EBITDA definition includes Revenue, Cost of Revenue
excluding depreciation and amortization, Selling and Marketing
expenses and Administrative expenses, but excludes translation
gain/(loss), finance income, finance expense, share of profit of
equity accounted investees, gain on sale of investments, minority
interest and other income/(expense).
Nevertheless, Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it in isolation from, or as a
substitute for analysis of, our results of operations, as reported
under IFRS. The following table provides a reconciliation of
Adjusted EBITDA, as calculated using financial data prepared in
accordance with IFRS as issued by the IASB, to net profit, which we
believe is the most directly comparable financial measure
calculated and presented in accordance with IFRS as issued by the
IASB.
Turkcell Group (million TRY) Q118
Q418 Q119 y/y%
q/q% Adjusted EBITDA 2,022.0
2,239.0 2,281.1 12.8%
1.9% Depreciation and amortization (979.8) (1,287.0)
(1,178.1) 20.2% (8.5%) Finance income 355.6 (1,225.9) 583.0 63.9%
(147.6%) Finance costs (669.1) 1,207.4 (1,003.4) 50.0% (183.1%)
Other income / (expense) (33.5) 46.5 (51.8) 54.6% (211.4%) Share of
profit of equity accounted investees - 0.3 0.8 n.a. 166.7%
Consolidated profit from continued operations before income tax
& minority interest 695.2 980.4 631.6
(9.1%) (35.6%) Income tax expense (170.2) (38.7)
(159.8) (6.1%) 312.9%
Consolidated profit from continued
operations before minority interest 525.0 941.7
471.8 (10.1%) (49.9%) Discontinued operations
- - 772.4 n.a. n.a.
Consolidated profit before minority
interest 525.0 941.7
1,244.3 137.0% 32.1%
NOTICE: This release includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934 and the Safe
Harbor provisions of the US Private Securities Litigation Reform
Act of 1995. This includes, in particular, our targets for revenue,
EBITDA and capex for 2019. More generally, all statements other
than statements of historical facts included in this press release,
including, without limitation, certain statements regarding the
launch of new businesses, our operations, financial position and
business strategy may constitute forward-looking statements. In
addition, forward-looking statements generally can be identified by
the use of forward-looking terminology such as, among others,
"will," "expect," "intend," "estimate," "believe", "continue" and
“guidance”.
Although Turkcell believes that the expectations reflected in
such forward-looking statements are reasonable at this time, it can
give no assurance that such expectations will prove to be correct.
All subsequent written and oral forward-looking statements
attributable to us are expressly qualified in their entirety by
reference to these cautionary statements. For a discussion of
certain factors that may affect the outcome of such forward looking
statements, see our Annual Report on Form 20-F for 2018 filed with
the U.S. Securities and Exchange Commission, and in particular the
risk factor section therein. We undertake no duty to update or
revise any forward looking statements, whether as a result of new
information, future events or otherwise.
The Company makes no representation as to the accuracy or
completeness of the information contained in this press release,
which remains subject to verification, completion and change. No
responsibility or liability is or will be accepted by the Company
or any of its subsidiaries, board members, officers, employees or
agents as to or in relation to the accuracy or completeness of the
information contained in this press release or any other written or
oral information made available to any interested party or its
advisers.
ABOUT TURKCELL: Turkcell is a digital operator
headquartered in Turkey, serving its customers with its unique
portfolio of digital services along with voice, messaging, data and
IPTV services on its mobile and fixed networks. Turkcell Group
companies operate in 5 countries – Turkey, Ukraine, Belarus,
Northern Cyprus, Germany. Turkcell launched LTE services in its
home country on April 1st, 2016, employing LTE-Advanced and 3
carrier aggregation technologies in 81 cities. Turkcell offers up
to 10 Gbps fiber internet speed with its FTTH services. Turkcell
Group reported TRY5.7 billion revenue in Q119 with total assets of
TRY46.1 billion as of March 31, 2019. It has been listed on the
NYSE and the BIST since July 2000, and is the only NYSE-listed
company in Turkey. Read more at www.turkcell.com.tr
This press release can also be viewed using the Turkcell
Investor Relation app, which can be downloaded
here for iOS,
and here for Android mobile
devices.
Appendix A – Tables
Table: Net foreign exchange gain and loss details
Million TRY Q118 Q418
Q119 y/y% q/q% Turkcell Turkey
(367.5) 1,030.1 (558.5) 52.0%
(154.2%) Turkcell International (9.4) 5.7 (25.8) 174.5% (552.6%)
Other Subsidiaries (117.1) 434.3 (128.1) 9.4% (129.5%)
Net FX
loss before hedging (494.0) 1,470.1
(712.5) 44.2% (148.5%) Fair value gain on
derivative financial instruments1 213.7 (1,551.9) 452.3 111.7%
(129.1%)
Net FX gain / (loss) after hedging
(280.3) (81.8) (260.2)
(7.2%) 218.1%
(1) Definition of fair value gain on derivative financial
instruments has been extended to include the impact of interest
income and expense in relation to derivative instruments and fair
value of FX swaps, option contracts engaged in during the period to
manage operational cash flow balance.
Table: Income tax expense details
Million TRY Q118 Q418
Q119 y/y% q/q% Current Tax
expense (180.2) (114.9) (153.8) (14.7%)
33.9% Deferred Tax income / (expense) 10.0 76.2 (6.0)
(160.0%) (107.9%)
Income Tax expense (170.2)
(38.7) (159.8) (6.1%)
312.9% TURKCELL ILETISIM HIZMETLERI
A.S.
IFRS SELECTED FINANCIALS (TRY
Million)
Quarter
Ended Quarter Ended Year Ended
Quarter Ended Mar 31, Dec 31, Dec
31, Mar 31, 2018
2018 2018
2019 Consolidated Statement of
Operations Data Turkcell Turkey 4,072.0 4,747.5 18,092.6
4,833.3 Turkcell International 279.4 421.9 1,457.0 424.8 Other
410.2 457.0 1,742.9 417.3 Total revenues 4,761.6 5,626.4 21,292.5
5,675.4 Direct cost of revenues (3,114.8) (3,894.5)
(14,146.0) (3,908.3) Gross profit 1,646.8 1,731.9 7,146.5
1,767.1 Administrative expenses (154.3) (198.2) (673.4) (190.6)
Selling & marketing expenses (356.6) (500.8) (1,626.7) (403.2)
Other Operating Income / (Expense) (33.4) 46.5 (140.1) (51.8) Net
impairment loses on financial and contract assets (93.8)
(80.9) (346.4) (70.3) Operating profit before
financing costs 1,008.7 998.5 4,359.9 1,051.2 Finance costs (669.1)
1,207.4 (3,619.1) (1,003.4) Finance income 355.6 (1,225.9) 1,932.1
583.0 Share of profit of equity accounted investees - 0.3
(0.1) 0.8 Income before tax and non-controlling
interest 695.2 980.3 2,672.8 631.6 Income tax expense (170.2)
(38.8) (495.5) (159.8) Income from continuing
operations before non-controlling interest 525.0 941.5 2,177.3
471.8 Discontinued operations - - - 772.4 Non-controlling interests
(24.2) (77.8) (156.3) (19.8) Net income 500.8
863.7 2,021.0 1,224.4 Net income per
share 0.23 0.40 0.93 0.21
Other Financial Data
Gross margin 34.6% 30.8% 33.6% 31.1% EBITDA(*) 2,022.0 2,239.0
8,788.0 2,281.1 Total Capex 2,560.1 2,234.6 7,644.1 1,352.6
Operational Capex 526.3 1,448.6 3,943.1 883.6 Licence and related
costs 188.0 1.7 414.1 0.7 Non-operational Capex 1,845.9 784.3
3,286.9 468.4
Consolidated Balance Sheet Data (at
period end) Cash and cash equivalents 4,589.7 7,419.2 7,419.2
8,888.3 Total assets 37,073.1 42,765.3 42,765.3 46,078.6 Long term
debt 9,414.2 13,119.6 13,119.6 15,407.7 Total debt 15,130.5
20,155.5 20,155.5 22,866.9 Total liabilities 22,825.5 26,711.7
26,711.7 28,976.3 Total shareholders’ equity / Net Assets 14,247.6
16,053.6 16,053.6 17,102.3 (*) Please refer to the notes on
reconciliation of Non-GAAP Financial measures on page 13 For
further details, please refer to our consolidated financial
statements and notes as at 31 March 2019 on our web site
TURKCELL ILETISIM HIZMETLERI A.S.
TURKISH ACCOUNTING STANDARDS SELECTED
FINANCIALS (TRY Million)
Quarter
Ended Quarter Ended Year Ended
Quarter Ended Mar 31, Dec 31, Dec
31, Mar 31, 2018
2018 2018
2019 Consolidated Statement of
Operations Data Turkcell Turkey 4,072.0 4,747.5 18,092.6
4,833.3 Turkcell International 279.4 421.9 1,457.0 424.8 Other
410.2 457.0 1,742.9 417.3 Total revenues
4,761.6 5,626.4 21,292.5 5,675.4 Direct cost of revenues (3,114.8)
(3,894.5) (14,146.0) (3,908.3) Gross profit
1,646.8 1,731.9 7,146.5 1,767.1 Administrative expenses (154.3)
(198.2) (673.4) (190.6) Selling & marketing expenses (356.6)
(500.8) (1,626.7) (403.2) Other Operating Income / (Expense) 100.5
(500.8) 1,392.4 248.7 Operating profit before
financing and investing costs 1,236.4 532.1 6,238.8 1,422.0 Net
impairment loses on financial and contract assets (93.8) (80.9)
(346.4) (70.3) Income from investing activities 8.7 212.9 238.8
12.7 Expense from investing activities (14.2) 58.1 (118.9) (50.1)
Share of profit of equity accounted investees - 0.3
(0.1) 0.8 Income before financing costs 1,137.1 722.5
6,012.2 1,315.1 Finance income 288.9 (1,533.0) 1,280.3 461.5
Finance expense (730.8) 1,790.8 (4,619.7)
(1,145.0) Income from continuing operations before tax and
non-controlling interest 695.2 980.3 2,672.8 631.6 Income tax
expense from continuing operations (170.2) (38.8)
(495.5) (159.8) Income from continuing operations before
non-controlling interest 525.0 941.5 2,177.3 471.8 Discontinued
operations - - - 772.4 Income before
non-controlling interest 525.0 941.5 2,177.3 1,244.2
Non-controlling interest (24.2) (77.8) (156.3)
(19.8) Net income 500.8 863.7 2,021.0 1,224.4 Net income per
share 0.23 0.40 0.93 0.21
Other Financial Data
Gross margin 34.6% 30.8% 33.6% 31.1% EBITDA 2,022.0 2,239.0 8,788.0
2,281.1 Total Capex 2,560.1 2,234.6 7,644.1 1,352.6 Operational
Capex 526.3 1,448.6 3,943.1 883.6 Licence and related costs 188.0
1.7 414.1 0.7 Non-operational Capex 1,845.9 784.3 3,286.9 468.4
Consolidated Balance Sheet Data (at period
end) Cash and cash equivalents 4,589.7 7,419.2 7,419.2 8,888.3
Total assets 37,073.1 42,765.3 42,765.3 46,078.6 Long term debt
9,414.2 13,119.6 13,119.6 15,407.7 Total debt 15,130.5 20,155.5
20,155.5 22,866.9 Total liabilities 22,825.5 26,711.7 26,711.7
28,976.3 Total shareholders’ equity / Net Assets 14,247.6 16,053.6
16,053.6 17,102.3
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190430005822/en/
TurkcellInvestor RelationsKorhan Bilek, Tel: + 90 212 313
1888investor.relations@turkcell.com.tr
Corporate Communications:Tel: + 90 212 313
2321Turkcell-Kurumsal-Iletisim@turkcell.com.tr
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