turkcell investor presentation · 2018q4 and turkcell estimation. ict, hardware & software...
TRANSCRIPT
1
TURKCELL
INVESTOR PRESENTATION
January 2020
STRATEGIC FOCUS AREAS& 3-YEAR PLAN
3
WELL-POSITIONED TO CREATE MORE VALUE
CORE COMPETENCIES
STRATEGIC FOCUS AREAS
Digital Business Solutions Techfin ServicesDigital Services
Strong Bond With Customers
State-of-the-art Infrastructure
Advanced Analytics & Technology
Strong & Agile Team
Telecom Services
4
STRATEGIC FOCUS AREAS
Enlarge subscriber base with dedicated focus on postpaid segment
Grow in fixed broadband through fiber and FWA
Utilize the digital channel for acquisition, device sales and growth
Leverage continued demand
Ensure standalone growth
Expand globally
Boost overall corporate business with multiplay focus
Provide end-to-endIT solutions for corporates
Trusted partner of corporates through their digital transformation
Reach wider customer base with complete portfolio of solutions
Reach out to long tail of 1.6 mn+merchants in Turkey
Launch new consumerfinance solutions
GROW IN TELECOM SERVICES
MONETIZEDIGITAL SERVICES
LEVERAGEDIGITAL BUSINESS SOLUTIONS
LEAD TECHFIN SERVICES
+1 Million Subscribers/year
in Turkey
2.5x Standalone revenue
growth in 3 years
#1 Solution Provider
in 3 years
17 Million Active Paycell users
by 2022
5
TECHFIN: REGULATION BECOMING MORE SUPPORTIVE
MPOS
PSD2
E-money
Micro Lending
Potential regulatory changes in the definition of loan facilitations
Benefit: Potential to give micro loans to consumers
The potential adaptation of PSD2 Payment Services Directive of EU in Turkey
Benefit: Ability to reach banking system, becoming single interface for customers
Using smartphone or tablet to perform the functions of a cash register
Benefit: Increased penetration of longtail merchants
Potential legislative measure to remove the requirement to keep e-money funds in escrow account
Benefit: Potential to attract more users offering return on e-money accounts
6
PAYCELL: SUPER APP FOR ALL TECHFIN SOLUTIONS
Turkish Techfin Ecosystem
DCB Wallet
Bill Payment
Payment Facilitators
Money Transfer
Paycell App Strategy
E-Money
VISION: Being an enabler on financial inclusion with the combination of technology and financial services
7
PAYCELL: GO TO MARKET STRATEGY
Merchants
Go-to Market Strategy
(MPOS & QR)
Go-to Market Strategy
(App)
Customers
6,000Turkcell Stores
37 MnCustomers
4,000Direct Sales Force
TurkcellTechnology
8
DSS: THE DYNAMICS OF NEW STANDALONE STRATEGY
1 Bn
2.5 Bn
2019E 2022E
Paid Subscriptions
Platform Licensing
Discovery Services
Traffic Monetization
Data Monetization
Operator Co-operations
Standalone Revenue (TRY)
9Telco market figures consist of mobile and fixed voice & data figures and exclude hardware sales. Mobile figures are based on Futurebright 2018Q4 Field Research. Fixed figures are based on ICTA Report 2018Q4 and Turkcell Estimation. ICT, Hardware & Software figures are based on IDC Blackbook 2019.
DBS: MARKET & TURKCELL POSITIONING
TELCO BUSINESS / EXISTING BUSINESS
41%
24
DIGITAL & ICT BUSINESS / GROWTH ENGINE
5%
HARDWARE & SOFTWARE BUSINESS / OPPORTUNISTIC APPROACH
• Superior network perception• Net add, increase in ARPU• Opportunity of multiplay, new services• High margin
• Fragmented market• Lack of strong system integrator• Increase in demand for digitilization
• Profitable growth with integrated solutions
TelcoMarket Share
ICTMarket Share
Billion TRY
10
TURKCELL FINANCE: KEY PRIORITIES
Inflationary Pricing
Effective Balance Sheet
Risk Management
Strong Free Cash Flow
Generation
Efficient Capital Allocation
• Key to sustainable growth and profitability
• Assurance for required return on investment
• Above-market ARPU growth
• Liquidity management• Net fx position
• Sustainable revenue growth• Continued operational
profitability• Controlled capex
• Review of investment requirement in conventional services
• Investment in high growth businesses
• Ensure returns above WACC
11
EFFICIENT CAPITAL ALLOCATION
Reduce funding needsin capex heavy traditional business
Invest in new high growth areas
Global Telco Industry Challenges
Flow of funds
Turkcell’sResponses
Digital services (TV, music, etc.)
Techfin services
ICT solutions (datacenter, cloud etc.)
IPO/M&A activities
Infrastructure sharing
Sell & leaseback transactions
Heavyinvestment
need
Slowrevenuegrowth
Improve returns over WACC11
TURKCELL GİZLİ
12
2019 OUTLOOK & 3-YEAR GUIDANCE
REVENUE GROWTH (CAGR) 13%-16%
EBITDA MARGIN 39%-42%
OP.CAPEX/SALES* 16%-18%
EBIT MARGIN 18%-21%
*Excluding license
2020-2022
~18%
41%-42%
~18%
2019
20%-21%
Q3 2019 RESULTS
14
6.6 Bn TL 13.6% YoY
43.3% 2-yr growth
Q3 2019: SOLID PERFORMANCE
15.0% YoY
ROBUST REVENUE GROWTH
SOLID ARPU GROWTH GROWING CUSTOMER BASE CONTINUED DELEVERAGING
17.6% YoY
mobile blended
19.8% YoY
residential fiber
1.0x Net Debt/EBITDA
0.8x yoy improvement
526K mobile net add
503K postpaid net add
TURKEY-CORPORATE
2.8 Bn TL43.1% margin
STRONG EBITDA
SOLID NET INCOME
801 Mn TL3.3x YoY27.9% YoY
TURKEY-CONSUMER
15
ConsolidatedTRY Million1 Q3 2019 QoQ % YoY % 9M 2019 YoY %
Revenue 6,587 6.4% 13.6% 18,453 17.8%
EBITDA 2,839 11.2% 18.6% 7,673 17.2%
EBITDA Margin 43.1% 1.9pp 1.8pp 41.6% (0.2pp)
EBIT 1,641 27.5% 15.7% 4,031 13.6%
EBIT Margin 24.9% 4.1pp 0.5pp 21.8% (0.8pp)
Net Income 801 72.1% 231.9% 2,491 115.3%
Op.Capex/Sales2 15.0% (0.4pp) (0.6pp) 15.3% (0.6pp)
1 TRY figures are based on IFRS. 2 Excluding license fees
TURKCELL GROUP FINANCIAL HIGHLIGHTS
• Revenue growth performance in line with guidance
• Strong operational profitability and bottomline
16
84.6% 85.8%
7.3%8.0%
4.3%3.3%
3.7% 2.9%
Q3 18 Q3 19
5,7996,587
745101 (33) (25)
RevenueQ3 18
Δ TurkcellTurkey
Δ TurkcellInternational
ΔTCF* Δ OtherSubsidiaries
RevenueQ3 19
REVENUE & REVENUE BREAKDOWN
* Turkcell Consumer Finance Company, Financell
13.6%
REVENUETRY MILLION
• 0.8 bn TL yearly revenue increase in Q319; Turkcell Turkey is the main growth driver
• Top-line mainly impacted by fx change in international business and slow down in TCF due to regulation
REVENUE BREAKDOWN
Highercontribution of Turkcell Turkey
TURKCELL TURKEY
TURKCELL INTERNATIONAL
TCF
OTHER
15.2%
23.8%
(13.3%)
(11.4%)
YoY Growth
17
57.1
66.168.4
38.740.7
45.5
Q3 18 Q2 19 Q3 19
2.2%2.0%
2.5%
Q3 18 Q2 19 Q3 19
TURKEY SUBSCRIBERS (million) ARPU (TL)
MONTHLY AVERAGE MOBILE CHURN RATE
19.4
15.0
Postpaid Prepaid
QoQ 503K↑ 23K↑ 29K↑ 30K↑
Net add
56%of total mobile
OPERATIONAL HIGHLIGHTS
* The ARPU of mobile customers who have stayed with Turkcell for at least 14 months.
39K↓
1.5
0.8
33K
Fixed subscribers
19.8%YoY
0.7
IPTV
fiber ADSL
fiber
cable
ADSL
20.1%20.5%like-for-like* growth
17.6%Residential fiber
Mobile blended(excl.M2M)
0.1 pp impact due to mandatory registration requirement
IPTV
2.2
18
-155
215
503
73
-1
23
Q1 19 Q2 19 Q3 19Prepaid
Postpaid
STRONG NET ADD WITH ACCELERATING ARPU GROWTH
12.3%
17.2%19.8%
Q1 19 Q2 19 Q3 19
MOBILE ARPU GROWTH vs INFLATION (%)
FIBER RESIDENTIAL ARPU GROWTH (%)
13.4%
16.6%
17.6%
19.9%18.0%
13.5%
Q1 19 Q2 19 Q3 19
MOBILE NET ADD (K)
Inflection point in Q319
All time high
Mobile ARPU(excl. M2M)
Change in CPI
yoy
3x theprepaidARPU
2515
29
Q1 19 Q2 19 Q3 19
FIBER NET ADD (K)
Continued subscriber growth
19
SUPERBOX: THE BRAND FOR FWA
• FWA: broadband via mobile network
• Best solution for clients without fiber access
• Providing a 5G service on our strong 4.5G network
• Becoming «the brand» for FWA in Turkey
3356
130
217
Q4 18 Q1 19 Q2 19 Q3 19
SUPERBOX SUBSCRIBER TREND (K)
QoQNet add 14K 23K 73K 88K
2x ARPUof fixed
broadband
20
LEADERSHIP IN QUALITY AND EXPERIENCE
+10 +9
+22 +21
Q2 19 Q3 19
Points over next best Points over third best
Source: Future Bright
CUSTOMER EXPERIENCE
TurkcellScore 21
Consumer Net Promoter Score (Points)
SMART CAMPAIGNS IN Q319
11 mn participant/gifts
Youngster Digital Services Campaign
Customized gifts
Turkcell’s «Comfortable» Tariff Model
Hybrid (post&pre) model
~55% new to Turkcell
AI based Social Responsibility Project
0.3 mn participants
21
3.4 3.7 4.2
7.08.2
10.0
5.46.6
8.1
Q3 18 Q2 19 Q3 19
Non 4.5G Users 4.5G Users Total Users
MOBILE DATA USAGE (Av. GB/User) 4.5G SUBSCRIPTION (million)
GROWTH ENGINE: MOBILE DATA
94% are 4.5G
subscribers
20 million with
4.5G compatible SPs
85% are 4.5G
compatible SPs
Data consumption of a 4.5G user tapped 10 GB per user per month on average
75% smartphone
penetration
31.5 31.4 32.2
18.2 19.0 19.6
Q3 18 Q2 19 Q3 19
4.5G subscribers 4.5G compatible smartphone
TURKCELL GİZLİ
22
9M 2018 9M 2019 YoY %
Revenues 694.5 695.8 0.2%
EBITDA 301.2 378.4 25.6%
EBITDA Margin 43.4% 54.4% 11.0pp
Net Income1 307.6 83.1 (73.0%)
CONSUMER FINANCE
TECHFIN: FINANCIAL & OPERATIONAL PERFORMANCE
HANDSET FINANCING
0.4 0.3 0.4
4.83.2 2.7
Q3 18 Q2 19 Q3 19
Financell ConsumerLoans
Turkcell ContractedReceivables
TRY BILLION
5.2
3.6
2 per IFRS 3 in the past one year
TRY MILLION
9M 2018 9M 2019 YoY %
Revenues 144.0 175.1 21.6%
EBITDA 108.4 128.1 18.1%
EBITDA Margin 75.3% 73.1% (2.2pp)
TRY MILLION
PAYMENT SERVICES
Net income in 2019 is impacted by swap m-t-m losses arising from declininginterest rates.
96% penetration of
loan insurance3
3.0% cost of risk2
1.4Bn TL transaction
size in Q319
4.6Mn 3-month
active user of Paycell
3.1
1 including the 57 mn TL and 45 mn TL dividend from Paycell in 9M18 and 9M19, respectively
23
TRY MILLION1 Q3 2019 YoY% 9M 2019 YoY%
Revenue 525 23.8% 1,442 39.3%
EBITDA 236 57.1% 660 80.5%
EBITDA
Margin45.0% 9.5pp 45.8% 10.5pp
HIGHLIGHTS
1 Figures are based on IFRS
TURKCELL INTERNATIONAL
TURKCELL INT’L REVENUE BREAKDOWN
2 Other comprises lifecell Germany, other international operations and intra-company eliminations. Ukraine, Belarus and Turkish Republic of Northern Cyprus figures are based on stand-alone financials.
66%
19%
10%5%
• 12% yoy revenue growth in local currency
• 8.8 GB/month 4G subs data consumption
• 79% smartphone penetration
• 10% yoy revenue growth in local currency
Ukraine
Belarus
TR Northern CyprusOther2
• Like-for-like EBITDA margin improvement is 2.3 pp in Q319 and 3.3 pp in 9M 2019
Q319
24
SOLID BALANCE SHEET
NET DEBT/ EBITDA
1 Q119 figure includes proceeds from the Fintur transaction closed on April 2, 2019.2 Excludes Turkcell Consumer Finance Company’s loan portfolio
TCF loan portfolio
Net Debt2
TRY Mn Q1 2019 Q2 2019 Q3 2019
Total Cash1 11,118 10,687 10,975
Total Assets 46,079 45,608 45,515
Total Debt 22,867 22,062 20,675
Lease Obligations 1,410 1,577 1,544
Total Equity 17,102 17,331 17,431
Net Debt 11,749 11,375 9,700
Net Debt2 8,108 8,160 6,975
SUMMARY
8,108 8,160 6,975
3,641 3,215
2,724
1.3x1.2x
1.0x
0.9x 0.9x
0.7x
Q1 19 Q2 19 Q3 19
Net Debt/EBITDA Net Debt/EBITDA2
25
(255)(224)
216 207155
Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
FX EXPOSURE
11.0Bn TLNominal
32%
10%
50%
8%
51%32%
9%9%
CASH1 DEBT
Before Hedging
2 Including advance payments, hedging and excluding FX swap transactions for TL borrowing. Derivatives (VIOP) and forward transactions are included.
After Hedging
NET FX POSITION2
20.7Bn TL
USD MILLION
Share
1 Excluding FX swap transactions for TL borrowing.
USD EUR TRY Other
72%
17%
11%
26
APPENDIX- Strategic Focus
- Network Dynamics
- Pricing
- Active Portfolio Management
- Financial Risk Management
- International Business
- Regulatory
- Currency Trends
2727
DIFFERENTIATION WITH UNIQUE SKILLS
Top-Notch Features
TranslationGroup Video CallSecret Message
Telco-OTT Power
App2NW2nd NumberFixed Number
Quality of ServiceDedicated BandwithOTT Box
Integrated Experiences
fizyDigital MagsTV+
Timeshift & Cloud RecordingLyricsMusic VideoLive Broadcasting
CrossPlatform
Recommendation
Strategic Focus:Digital Services
2828
GLOBAL EXPANSION
TURKEY
Potential
Subsidiaries
Done Deal
Negotiation
Strategic Focus:Digital Services
TURKCELL GİZLİ
29
1: Refers to downloads as of September 30, 2019. 2: Starting from this quarter onwards, our MAU reporting for this service will exclude users who utilised the zero rating benefit of Dergilik magazines and newspapers via browser. 3: 3-month active users also include IPTV users 4: My Account is renamed as Digital Operator in 4Q 2018.
3-Month Active User
Service KPIs
Download1
DIGITAL SERVICES: UNIQUE PORTFOLIO
YoY
DIGITALPUBLISHING2
12.8Mn
2.7Mn
252Kcopies read
per day
+5.2M
+0.1M
MUSICPLATFORM
24.6Mn
3.3Mn
7.1Mnsongs streamed
per day
+5.7M
+0.1M
MOBILE TV3
14.3Mn
3.7Mn
3.3MnTV sessions
per day
+4.5M
+0.7M
PERSONAL CLOUD
12.5Mn
2.7Mn
38docs uploaded
per person / day
+4.1M
+0.6M
DIGITAL OPERATOR4
45.8Mn
21.5Mn
29% more ARPU
+10.7M
+2.9M
8.5Mn
3.4Mn
1.2Mnsearchper day
SEARCH ENGINE& BROWSER
+2.2M
+0.8M
INSTANT MESSAGING
39.8Mn
9.9Mn
336Mnmessages per day
+11.4M
+0.2MYoY
Strategic Focus:Digital Services
TURKCELL GİZLİ
30
CORPORATE CUSTOMERS’ NEEDS IN TURKEY
16KCOMPANY
COMPANY
COMPANY
528K
2.5Mn
OPTIMIZECOSTS
INCREASEREVENUES
Strategic Focus:Digital Business Solutions
3 MILLION COMPANIES
TURKCELL GİZLİ
31
GLOBAL TECHFIN REVOLUTIONStrategic Focus:Techfin Services
400 Mn**
900 Mn*
>1 Bn*
* Active users**Registered users
286 Mn*310 Mn*383 Mn**
23 Mn*140 Mn*
E-Commerce Tech Savvy Regulatory Environment
KEY DRIVERS IN WEST
Unbanked Population Tech Savvy Regulatory Environment
KEY DRIVERS IN EAST
TURKCELL GİZLİ
32
TURKEY: ATTRACTIVE DYNAMICSStrategic Focus:Techfin Services
77%
Smartphonepenetration
82Mn
Youngest & largest
population in Europe
1.6Mn
Merchant
60%
Cashspending
30Mn
Unbankedpopulation
17th
Largest economyin the World
TURKCELL GİZLİ
33
REGULATION BECOMING MORE SUPPORTIVEStrategic Focus:Techfin Services
MPOS
PSD2
E-money
Micro Lending
Potential regulatory changes in the definition of loan facilitations
Benefit: Potential to give micro loans to consumers
The potential adaptation of PSD2 Payment Services Directive of EU in Turkey
Benefit: Ability to reach banking system, becoming single interface for customers
Using smartphone or tablet to perform the functions of a cash register
Benefit: Increased penetration of longtail merchants
Potential legislative measure to remove the requirement to keep e-money funds in escrow account
Benefit: Potential to attract more users offering return on e-money accounts
TURKCELL GİZLİ
34
SUPER APP FOR ALL TECHFIN SOLUTIONSStrategic Focus:Techfin Services
Turkish Techfin Ecosystem
DCB Wallet
Bill Payment
Payment Facilitators
Money Transfer
Paycell App Strategy
E-Money
VISION: Being an enabler on financial inclusion with the combination of technology and financial services
TURKCELL GİZLİ
35
GO TO MARKET STRATEGYStrategic Focus:Techfin Services
Merchants
Go-to Market Strategy
(MPOS & QR)
Go-to Market Strategy
(App)
Customers
6,000Turkcell Stores
37 MnCustomers
4,000Direct Sales Force
TurkcellTechnology
TURKCELL GİZLİ
36
KEY PERFORMANCE METRICSStrategic Focus:Techfin Services
2019E 2022E
Monthly Active User 4Mn 17Mn
Volume (TRY) 4.4Bn 41Bn
Revenue (TRY) 250Mn 750Mn
3737
234.4 MHz
FREQUENCIES BEFORE AND AFTER 4.5G TENDER
TOTAL FREQUENCYBEFORE TENDER
Turkcell Vodafone Türk Telekom
62.0 57.064.8
172.4
82.8
110.2
AWARDED FREQUENCY IN
TENDER
TOTAL FREQUENCYAFTER TENDER
139.8 MHz
175.0 MHz
€0.3
€0.4
€0.5
• Price / MHz / Population in Turkey: €0.12 per MHz per sub cost
3838
234.4 MHz
FREQUENCY BANDS AFTER 4.5G TENDER
Turkcell Vodafone Türk Telekom
62.0 57.064.8
172.4
82.8
110.2
139.8 MHz
175.0 MHz
Main layer for 4.5G Terminal support, capacity and coverage layer
2600 MHz
2100 MHz
1800 MHz
900 MHz
800 MHz 4.5G main coverage layer
2G/3G coverage and voice layer
Mobile broadband layer for 3G4.5G usage for mid/long term
4.5G capacity boost layer for hot spots
€0.3
€0.4
€0.5
• Price / MHz / Population in Turkey: €0.12 per MHz per sub cost
60.040.0 35.0
70.0
35.0 30.0
59.6
20.070.0
24.8
24.8
20.0
20.0
20.0
20.0
3939
FASTEST & BEST & WIDEST
SPEED
1,200 Mbps
2018
* Source: https://gsacom.com/paper/progress-gigabit-lte-networks-2/
QUALITY
CarrierAggregationall network
The BestExperts
4x44x4 MIMOall network
MIMO: Multi Input Multi Output
SPEED QUALITY
4040
DIFFERENTIATED THROUGH QUALITY
Source: IRIS Telecommunication Engineering Services, January 2019
USER EXPERIENCE
82
7574
0-100
DATA SPEED
49
21
13
17
11 10
Download(Mbps)
Upload(Mbps)
Turkcell Telco1 Telco2
4141
47.1%
Incumbent50.4%
Other players
2.5%
FIXED BROADBAND MARKET
6.6 6.6 6.8 7.27.8
8.79.5 9.6
0.551.2
1.461.67
1.93
2.29
2.80 2.96
0.490.49
0.560.63
0.74
0.83
0.930.98
10.2%11.0%
11.5%12.1%
13.2%
14.7%
16.3% 16.6%
2012 2013 2014 2015 2016 2017 2018 2019 Q3
xDSL Fiber Cable Penetration
Note: Company calculation based on data in ICTA Q3 2019 Report
14.1 mnTotal
Subscribers
3 majorOperators
17.2%Penetration
TURKISH FIXED BROADBAND MARKET FIXED BROADBAND MARKET BY TECHNOLOGY (MN)
FIBER SUBSCRIBER MARKET SHARE
Q3 2019
42
WELL-INVESTED INFRASTRUCTURE: FOCUS ON SHARING
21 28Number of cities
In partnership withTürksat & Vodafone
Turkcell (stand-alone)
Turkcell infrastructure
Overlapping
Türksat infrastructure
First in Europe
10 GbpsFiber to the home
The map displays the cities in Turkey where Turkcell offers fiber and cable internet services through its partnership with Türksat and Vodafone. HFC stands for hybrid fiber-coaxial.
3.6 mn 3.6 mn fiber + 3.0 mn cable (HFC)Homepass
43
5G IS AN EVOLUTION
MassiveMachine Type
Communication
Ultra ReliableLow-LatencyCommunication
EnhancedMobileBroadband
4444
5%
10%
15%
20%
25%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Turkcell Group EEMEA
Source: Bloomberg Industry Data and company announcements*Excluding licence fees
Turkcell Group Average: 17.7%*
EEMEA Average: 17.6%Between 2008 and 2018
CAPEX/SALES TREND
4545
NEW DEFINITION OF THE CUSTOMER
Internet ~59%
Pay TV ~30%
~24 MnHouseholds
Determining household via network and social network analysis
Capturing potential via house profiling by using big data
Raising wallet share with cross contracting, household offers and new products
s Share
53%
Source: Turkey Household: Turkcell expectation based on TurkStat 2018 announcement Internet & Pay TV: ICTA Q219 Turkcell’s Share: Future Bright Convergence & Household Penetration Research Q119
4646
UTILIZE BIG DATA TO MAXIMIZE CONSUMER SURPLUS
AnalyzeCustomer Behaviour
Social networkApplication usage
Location baseNetwork metrics
BIG DATA
Adaptive learningRule-based
management
ARTIFICIAL INTELLIGENCE
+8%+20%Lower benefit
Lower price
Higher benefitHigher price
Multiple layered offersfor value maximization
Special offer for customers with churn risk
RIGHT OFFER TO THE RIGHT CUSTOMER AT THE RIGHT TIME
4747
NEW PRICING APPROACH
1HYBRIDOFFERS
Mix of postpaid & prepaid offers
Flexible postpaid management
No bill shock
2YEARLY
PACKAGES
Data benefit which can be used flexibly
during 12 months
3SEMI
CONTRACTS
Contract based on benefit
Flexible price
4PURE
DIGITAL OFFER
Game changer tariff
Low cost play
Digital channels only
4848
POTENTIAL ACTIONS
• Established in 2015, fully owned by Turkcell
• Standalone payment and e-money company
• Payment institution and e-money licenses from BRSA
• Mobile payment solutions in several verticals
• Share know-how
• Invest jointly
• Diversify risk
STRATEGIC PARTNER
INORGANIC GROWTH
• Acquire local techfin companies to
expand vertical solutions
• Look for synergies
PAYCELL: TURKEY’S LEADING TECHFIN COMPANY
4949
548
900
1,276
2,070
2015 2016 2017 2018
1,719
2,429
3,210
4,076
2015 2016 2017 2018
NET REVENUE TREND EBITDA TREND
TRY Mn TRY Mn
• 45 thousand km rollout, 21 cities
• 1.5 Mn fiber customers
• Data speed up to 10Gbps
• Infrastructure sharing (Turksat & Vodafone)
• 3.5 Mn fiber homepass
INITIAL PUBLIC OFFERING
• More transparent articulation of equity story
• Diversify risk
• Invest jointly
• Share know-how
STRATEGIC PRE-IPO PARTNER
INORGANIC GROWTH
• Acquire local or regional fiber assets, smart-home and security companies
• Look for synergies
INFRASTRUCTURE SHARING
• Asset light model
POTENTIAL ACTIONS
TURKCELL SUPERONLINE: TURKEY’S FASTEST FIBER
5050
68
112139
223
2015 2016 2017 2018
168
212
257
338
2015 2016 2017 2018
Note: Tower portfolio includes owned and managed towers and towers for which contract management services are provided.
NET REVENUE TREND EBITDA TREND
TRY Mn TRY Mn
• First and only TowerCo of Turkey
• Tower portfolio of 10,878 (owned + right of use)
• Regional player operating in 4 countries
• Long term, visible revenue stream & strong profitability
• More transparent articulation of equity story
POTENTIAL ACTIONS
INFRASTRUCTURE SHARING
INITIAL PUBLIC OFFERING
• Asset light model
Tenancy ratio
1.7x
GLOBAL TOWER: TURKEY’S FIRST & ONLY TOWERCO
5151
87
207
346
803
2015 2016 2017 2018
• 111k m2 datacenter space
• 33.5k m2 white space
• 8 locations
• Ankara datacenter: 44k m2 datacenter space, 12k m2 white space
• Gebze datacenter: 33k m2 datacenter space, 10k m2 white space
• İzmir datacenter: 15k m2 datacenter space, 2.4k m2 white space
CUMULATIVE DATACENTER INVESTMENTS
TRY Mn
• Asset light model
FUTURE FUNDING
SELL AND LEASE BACK
FREE CASH FLOW GENERATION
DATACENTERS: LARGEST WHITE SPACE CAPACITY IN TURKEY
5252
100105
113119 118 119
126 124129
134
149144 147
157
175
100 101 103 105110 113 114
118 122127
136145 146
150 154
Q1
16
Q2
16
Q3
16
Q4
16
Q1
17
Q2
17
Q3
17
Q4
17
Q1
18
Q2
18
Q3
18
Q4
18
Q1
19
Q2
19
Q3
19
TCELL ARPU (exl. M2M) CPI
Q1
16
Q2
16
Q3
16
Q4
16
Q1
17
Q2
17
Q3
17
Q4
17
Q1
18
Q2
18
Q3
18
Q4
18
Q1
19
Q2
19
TCELL Operator 1 Operator 2
TURKCELL ARPU VS. CPI TREND MOBILE ARPU COMPARISONQ116=100Company and TUIK announcements
Q116=100Based on ICTA market report
Key for sustaininggrowth & margins
Secure ROI of projects & investments
Reflecting coststo the prices
ARPU growth above competition
INFLATIONARY PRICING
52
5353
Short FX
position
Limited Short FX
position
Positive/NeutralFX
position
294590
250 299
1,913
326
Q419 2020 2021 2022 2023+
FX Local Currency
620 590
250 299
1,913
• US$1.9 Bn equivalent of cash holdings covers maturities until 2023
• Strong free cash flow generation
• Committed lines of US$100 million
• Almost all cash in hard currency
• 50% of FX denominated debt is hedged
• Hedging for whole maturity (principal & interest)
LIQUIDITY MANAGEMENT NET FX POSITIONPrincipal & Interest Payments1
(1) Data of Turkcell Group, excluding consumer finance business.
Dec15 Dec16 Dec18 Dec19
US$ Mn
EFFECTIVE BALANCE SHEET RISK MANAGEMENT
5454
MAJOR FUNDING & HEDGING DETAILS
5555
LIFECELL UKRAINE LIFE :) BELARUS KKTCell TRNC LIFECELL VENTURES NL
• Growth driven by data
• Expand digital services
• Net profit by 2021
• Growth driven by data
• Expand digital services
• Grow in fixed broadband
• New revenue streams(Corporate & SystemIntegration)
• Expand DSS footprint
• Make new strategic alliances
• Revenue generation
STRATEGIC FOCUS AREAS OF TURKCELL INTERNATIONAL
5656
lifecell PERFORMANCE
HIGHLIGHTS
UKRAINE MOBILE MARKET FACTS*
55.0mTotal
subscribers
3Operators
131% Mobile
Penetration
Ownership 100% Turkcell
Ownership 100% VEON
Ownership 100% MTS
*Source: Global Wireless Matrix Q2 2019** MTS announced the sale of its Ukrainian operations to Bakcell (Azerbaijan) on Nov 25, 2019.
UAH MILLION Q3 2019 YoY% FY18 YoY%
Revenue 1,529 11.8% 5,269 8.0%
EBITDA 811 32.9% 2,762 108.2%
EBITDA Margin 53.0% 8.4pp 52.4% 25.2pp
**
OPERATIONS IN UKRAINE
• Operational performance (3 months active):
• 6.9 million subscribers in Q3 2019
• UAH 74.7 ARPU (up 24.7% yoy)
• 79% SP penetration (market leader)
• Launched Mobile ID (digital signature)
• First to launch 4G services in Ukraine on 2600 MHz
• 4.5G services on the 1800 MHz frequency since Jul 1st, 2018
5757
49.7%
37.3%
13.0%
KYIVSTAR
VDF
lifecell 9%
12%17%
16%12%
14% 17%20%
24%
18%
14%9%
18%19%
28%
Q318 Q418 Q119 Q219 Q319
FINANCIALS
44.6%
76.6%
57.6%
53.9% 53.0%54.9% 52.7% 52.8%51.7% 54.6%57.5% 55.8% 62.9%
65.0% 64.8%
Q318 Q418 Q119 Q219 Q319
Mobile Revenue
Subscriber*
(*) 3 month active subscribers
Mobile Revenue Growth (in UAH)(YoY)
lifecell VDF Kyivstar
EBITDA Margin (%)
Source: Company announcements (Q3 2019)
MARKET SHARE
UKRAINE: MOBILE MARKET PERFORMANCE
48.3%
38.2%
13.5%
KYIVSTAR
VDF
lifecell
5858
*Source: Company calculation based on Q3 2019 results
OPERATIONS IN BELARUS
BeST PERFORMANCE
HIGHLIGHTS
BELARUS MOBILE MARKET FACTS*
11.9mTotal
subscribers
3Operators
124% Mobile
Penetration
Ownership 80% Turkcell20% Belarusian State
Ownership51% Belarusian State49% MTS
Ownership100% Telekom Austria
Q3 2019 YoY% FY18 YoY%
Revenue 35.3 9.6% 124.9 11.7%
EBITDA 9.6 74.5% 27.9 548.8%
EBITDA Margin 27.2% 10.1pp 22.3% 18.5pp
BYN MILLION
• 1.1 million subscribers in Q3 2019 (3 months active)
• Provides 4G LTE services in 6 regions and ~190 cities
• Average monthly data consumption grew by 58% yoy to 6.9GB
• Subscribers who use at least one digital service reached 26% of 3-mo active subs base
5959
FINANCIALS
BELARUS: MOBILE MARKET PERFORMANCE
8% 8%
9% 10% 10%8% 7%
7% 6% 5%
17%19% 20%
18% 19%
Q318 Q418 Q119 Q219 Q319
48.2%
45.6%
6.2%
MTS
A1
life:)
Source: Company announcements (Q3 2019).
Subscriber*
Revenue
(*) 3 month active subscribers
47.0%
40.9%
12.1%
MTS
A1
life:)
life :) EBITDA Margin Trend*
Mobile Revenue Growth (in BYN)(YoY)
17.1%
38.6%
23.2%
32.9%27.2%
Q318 Q418 Q119 Q219 Q319
life:) A1 MTSMARKET SHARE
6060
0%
5%
10%
15%
20%
25%
30%
35%Special Communication Tax (SCT) 7.5% 7.5%
VAT 18% 18%
Treasury Share1 15% 1%
TRX fees 5%(of net sales)
-
Contribution Share to Telecom Authority
0.35% 0.35%
New subscription SCT2
(at first enrollment)TRY 65.00 -
Wireless license fees (per acquisition)
TRY 27.86 -
Wireless usage fees (annual)
TRY 27.86 -
TAX MOBILE FIXED
1Under the license agreement Turkcell pays a treasury share equal to 15% of its gross revenue from Turkish GSM operations2 Excluding M2M SIMs3 GSMA/Turkey Report, 2019. Data as of 2017.
TAXATION IN TURKEY
TAXES AND FEE PAYMENTS REPRESENTED APPROXIMATELY 29% OF TURKEY TELECOM MARKET REVENUE3
6161
13.6
9.1
6.6
3.1 3.1 3.12.5 2.5 2.5 2.5 2.5 2.5
2.5
17.2 15.714.4
11.1 11.1
8.16.5
4.94.8 4.2 4.4 4.5
5.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MTR-Turkcell Europe-MTR
MTR: Mobile Termination RateSource: BEREC July 2019 report, Cullen International
EVOLUTION OF MTR TRY kuruş per min.
MTR RATESTRYkr.
OLD Since 2013 Asymmetry OLD Since 2013 Asymmetry
Turkcell 3.13 2.50 - 1.70 0.43 -
Vodafone TR 3.23 2.58 3% 1.73 0.43 -
TTKOM 3.70 2.96 18% 1.87 0.47 9%
Mobile Voice Rates SMS Rates
Turkcell MTR is halfof the European
MTR level
MOBILE/SMS TERMINATION RATES IN TURKEY
6262
CURRENCY TRENDS
3.02 3.324.11
5.606.34
3.183.71
4.52
6.03 6.18
2015 2016 2017 2018 Q319
Average Period-End
2.73 3.013.63
4.76
5.70
2.913.52 3.77
5.265.66
2015 2016 2017 2018 Q319
1.591.98 1.93 2.03 2.06
1.86 1.96 1.972.16 2.07
2015 2016 2017 2018 Q319
21.7925.56 26.64 27.32
25.15
24.0027.19 28.07 27.69
24.08
2015 2016 2017 2018 Q319
USD / TRY EUR / TRY
USD / BYN USD / UAH
63
For further information please e-mail
[email protected] call Turkcell Investor Relations at
(+90 212 313 1888)
Turkcell IR Website
THANK YOU
64
NOTICE
This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21Eof the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Thisincludes, in particular, our targets for revenue, EBITDA, EBIT and capex in 2019 or for the medium term 2020 to 2022. More generally, allstatements other than statements of historical facts included in this presentation, including, without limitation, certain statementsregarding the launch of new businesses, our operations, financial position and business strategy may constitute forward-lookingstatements. In addition, forward-looking statements generally can be identified by the written or oral use of forward-lookingterminology 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 noassurance that such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to usare expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affectthe outcome of such forward looking statements, see our Annual Report on Form 20-F for 2018 filed with the U.S. Securities andExchange Commission, and in particular the risk factor section therein. We undertake no duty to update or revise any forward lookingstatements, 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 presentation, whichremains subject to verification, completion and change. No responsibility or liability is or will be accepted by the Company or any of itssubsidiaries, board members, officers, employees or agents as to or in relation to the accuracy or completeness of the informationcontained in this presentation or any other written or oral information made available to any interested party or its advisers.
Please note that all financial data are consolidated whereas non-financial data are unconsolidated unless otherwise specified. In thecharts or tables used in this presentation totals may not foot due to rounding differences. The figures used in this presentation arerounded while percentage changes are calculated based on the figures disclosed in the press release.