VI. Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
We had 33.7 million mobile subscribers in Turkey, including 14.9 million mobile prepaid subscribers, as of
December 31, 2018, compared to 34.1 million mobile subscribers in Turkey, with 15.6 million mobile prepaid subscribers, as of December 31, 2017. During 2018, we recorded a decrease of 0.4 million Turkish mobile
subscribers.
In the fixed segment, we increased our subscriber base from 2.1 million, of which 1.2 million were
fiber customers, for the year ended December 31, 2017, to 2.3 million, of which 1.4 million were fiber customers, for the year ended December 31, 2018.
In Ukraine, we had 9.9 million and 11.1 million registered subscribers as of December 31, 2018 and 2017,
respectively. During 2018, we lost approximately 1.2 million Ukrainian registered subscribers, similarly 3 months active subscribers decreased from 8.0 million to 7.3 million. This was primarily due to decreasing multiple SIM
card usage.
a.
Revenues
Total revenues for the year ended December 31, 2018 increased 20.8% to TRY 21,292.5 million in 2018 from TRY
17,632.1 million in 2017.
Total revenues generated by Turkcell Turkey increased 18.2%, to TRY 18,265.8 million
in 2018 from TRY 15,450.1 million in 2017, mainly due to a 16.4% growth in data and digital services revenues and 10.4% growth in voice & SMS revenues driven by higher number of data users, increased data consumption per user and
higher penetration of digital services as well as our ability to upsell in mobile business coupled with a larger subscriber base in fixed business and higher ratio of multiplay subscribers with TV.
Postpaid subscriber usage is generally higher than prepaid subscriber. In Turkey, during 2018, we maintained our focus on
the postpaid segment, with newly launched campaigns, offers and promotions to switch customers from the prepaid to the postpaid segment. We focus on postpaid subscribers because there is, in general, higher average revenue per postpaid subscriber
and a lower churn rate. In 2018, postpaid ARPU excluding M2M subscribers was TRY 54.9 whereas prepaid average revenue per user was TRY 16.9. These figures indicate that postpaid average revenue per user is approximately 3.2 times the
prepaid average revenue per user. Therefore, the increase in the number of postpaid subscribers has a positive effect on blended average revenue per user.
Total revenues generated by Turkcell International increased by 36.5%, to TRY 1,457.0 million in 2018 from TRY
1,067.1 million in 2017 mainly due to growth in Ukraine and Belarus business in addition to the appreciation of UAH and BYN against TRY during the period. The annual growth rates of lifecell and Belarusian Telecom, in terms of local currency
were 8.1% and 11.7%, respectively.
Other subsidiaries revenues, mainly comprised of our revenues from information
and entertainment services, call center services and financial services, grew by 62.8% to TRY 1,933.8 million in 2018 from TRY 1,187.5 million in 2017. The increase in revenue is mainly attributable to Financell, our consumer finance
business despite the negative impact of the introduction of a regulatory limitation on the number of installments for consumer loans for smartphones in August 2018.
b.
Cost of revenues
Cost of revenues, including depreciation and amortization, increased by 24.6% to TRY 14,146.0 million in 2018 from TRY
11,350.2 million in 2017, due to an increase in depreciation and amortization charges, treasury shares and universal funds paid, network related expenses, wages, salaries and personnel expenses, funding costs for financial services and other
items and the impact of new IFRS standards which includes amortization charge of subscriber acquisition cost according to IFRS15 and capitalization of lease expenses, depreciation and amortization charges of right of use assets according to IFRS16.
TRY depreciation and rising inflation resulted in an increase in the overall cost of revenues.
Depreciation and
amortization charges (including impairment charges) increased by 65.1%, to TRY 4,288.0 million in 2018 from TRY 2,597.0 million in 2017. The effect of current year addition of IFRS standards is TRY 1,173.4. The amortization expense
for our GSM license and other telecommunication operating licenses was TRY 533.3 million in 2018 mainly attributable to our 4.5G license and TRY 537.2 million in 2017.
Treasury shares and universal service funds on our mobile revenues paid to the Turkish Ministry increased 13.2%, to TRY
2,141.0 million in 2018 from TRY 1,891.2 million in 2017 which was mainly due to the increase in mobile revenues.
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