Turkcell Iletisim Hizmetleri A.S. (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.
- As previously announced, starting from
Q115, we now have three reporting segments:
- "Turkcell Turkey" which comprises all
of our telecom related businesses in Turkey (as used in our
previous releases, this term covered only 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. Call centers were previously included
in Turkcell Turkey but are, with effect from the fourth quarter of
2015, now included in “Other subsidiaries”. We have made this
change because we believe that our third party call center revenues
are not telecom related. 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, 2016 refer to the same item as at March 31, 2015. For
further details, please refer to our consolidated financial
statements and notes as at and for March 31, 2016, which can be
accessed via our website in the investor relations section
(www.turkcell.com.tr).
- With effect from Q4 2015, our financial
statements are presented in TRY only, the currency in which we
recognize the majority of our revenues and expenses. We will no
longer present financial statements in USD. This change allows us
align our Turkish and US reporting.
- In the tables used in this press
release totals may not foot due to rounding differences. The same
applies for the calculations in the text.
- Year-on-year and quarter-on-quarter
percentage comparisons appearing in this press release reflect
mathematical calculation.
FIRST QUARTER SUMMARY
- Another all-time-high first quarter
revenue and EBITDA1 performance from Turkcell Turkey and the
Group
- Turkcell Turkey’s revenues and EBITDA
up 10.0% and 10.6%, respectively with an EBITDA margin of 31.3%;
data and services revenues, comprising 42% of Turkcell Turkey
revenues, up 31.1%
- Group revenues and EBITDA up 8.3% and
8.1%, respectively with an EBITDA margin of 31.1%
- Group net income as per IFRS up 298.8%
to TRY563 million. Group proforma net income2 up 15.1% to TRY544
million
- Turkcell International revenues up
2.1%, with positive growth after 7 quarters of decline, on an
EBITDA margin of 27.2%
- 4.5G launch on April 1st with over 70%
population coverage in 81 cities; around 5.0 million3
customers
- First real converged offers in Turkey;
single invoice, single call center and uninterrupted
connection
- Full year guidance4 maintained;
Turkcell Turkey and Group revenue growth targeted at 8% - 10%,
Group EBITDA margin targeted at 31% - 33% and Group operational
capex over sales targeted at ~20%
FINANCIAL HIGHLIGHTS
TRY million Q115
Q415 Q116 y/y % q/q
% Revenue 2,978.2 3,334.5 3,225.4
8.3% (3.3%) Turkcell Turkey 2,662.2 2,997.8 2,927.5 10.0%
(2.3%) EBITDA1 926.8 1,058.2 1,001.5 8.1% (5.4%) Turkcell Turkey
828.2 955.8 916.1 10.6% (4.2%) EBITDA Margin 31.1% 31.7% 31.1% -
(0.6pp) Net Income 141.1 584.2 562.7 298.8% (3.7%) Proforma
Net Income2 472.5 567.1 543.7 15.1%
(4.1%)
(1) EBITDA is a non-GAAP financial measure. See page 13 for the
reconciliation and the explanation of how we calculate Adjusted
EBITDA to net income.(2) We use "proforma net income" as a means of
presenting our net income net of certain non-operating items and
items that we believe are non-recurring. We define "proforma net
income" in this document as net Income excluding FX gain / (loss)
(including tax and minority impact), interest Income on time
deposits of Turkcell Iletisim Hizmetleri, share of profit of equity
accounted investees (Fintur), and one-off items. Please note that
this is a non-GAAP measure and that we may in future presentations
change the scope of items that we deduct from net income to arrive
at "proforma net income."(3) Customers with 4.5G compatible devices
and SIM cards(4)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
2015 filed with U.S. Securities and Exchange Commission, and in
particular, the risk factor section therein.
For further details, please refer to our consolidated financial
statements and notes as at and for March 31, 2016 which can be
accessed via our web site in the investor relations section
(www.turkcell.com.tr).
COMMENTS BY KAAN TERZIOGLU, CEO
Turkcell had a solid start to 2016, focused on data and
digital services, following a customer centric approach with
differentiation through 4.5G
We made a strong start to 2016, in line with our plans. We
registered all-time-high first quarter revenue and EBITDA, both at
the Turkcell Turkey and Turkcell Group level. Turkcell Turkey,
comprising 91% of Group revenues, continued its double-digit growth
at 10.0% year-on-year, recording an EBITDA margin of 31.3%. Group
revenues rose 8.3% to TRY3.2 billion, while EBITDA increased 8.1%
to TRY1.0 billion, achieving a 31.1% EBITDA margin. Proforma Group
net income1 rose by 15.1% to TRY544 million, while net income as
per IFRS increased 298.8% to TRY563 million.
In the first quarter of 2016, our key agenda item was the launch
of 4.5G services on April 1st, which will underpin Turkey’s digital
transformation. The Turkcell team has established a strong 4.5G
network and made mobile broadband with 4.5G speed available in 81
cities with a population coverage of over 70%, within a short
period of time. And since the launch, Turkcell customers have
registered high demand for 4.5G. As of today 4.5G customers have
reached 5.0 million2, while 4.5G data traffic on our network
reached 22%.
We have started to implement our action plans across the dealer
network, at our call center and on digital channels to meet all our
customers' needs through a single point of service with offers that
bolster Turkcell’s positioning as a converged communications and
technology services company. We are working to provide our
customers a unique convergence experience on the back of our
strength in mobile and fixed services. In this regard, having
declared a list of ten principles, we are using every means to
ensure customer satisfaction.
Turkcell Turkey: Continued growth in Postpaid, Fiber and
TV
In the first quarter of 2016, the total number of subscribers in
the five countries where we have direct operations reached 50.8
million, of which 35.2 million3 were in Turkey. Turkcell continued
to gain postpaid, fiber and TV subscribers in the quarter. Postpaid
customers rose by 1.2 million year on year, reaching 50% of our
subscriber base. Fiber subscribers rose by 159 thousand
year-on-year to 935 thousand, while total fixed subscribers
amounted to 1.6 million. Turkcell TV+, which continues its rapid
growth with 514 thousand yearly increase, reached 679 thousand
total subscribers.
In accordance with our convergence strategy, the mobile triple
play ratio, which includes voice, data and service users reached
17%4 while multiplay with TV service users increased to 30% of
fiber residential customers.
Mobile ARPU rose by 8.8% to TRY24.7 and fixed residential ARPU
rose 6.8% to TRY50.3 in the first quarter of 2016 due to a larger
postpaid subscriber base, and increased data and services
revenues.
Turkcell Consumer Financing solution to our customers’
technology needs
In March, our consumer financing company commenced operations
across Turkey to facilitate the financing of our customers'
technology needs, and to improve the Group balance sheet, which is
among our strategic priorities. Within a short period of time,
Turkcell Consumer Financing Company has provided more than 400
thousand loans of approximately TRY500 million worth and supported
the penetration of smart devices. Indeed, smartphone penetration on
our network rose by 13 percentage points to 55% year-on-year. With
the increase in the number of smartphones, our data and service
revenues grew 31% to TRY1.2 billion year-on-year, and accounted for
42% of Turkcell Turkey revenues.
Additionally, through our mobile payment platform, named
Paycell, we provide our customers various alternative means of
payment, including via Turkcell invoice. Over the past 12 months,
this platform has seen 16 million transactions amounting to TRY440
million. Paycell, redefined with advanced technological
capabilities, will serve both Turkcell and non-Turkcell
customers.
We are opening services to all-access, providing globally
competitive services
Our innovative services continued to expand rapidly during this
quarter as well. We opened BiP, Turkcell TV+, Smart Storage, Goals
on Your Mobile and our renamed music service fizy, to
all-access.
Our new generation communication platform BiP has been
downloaded 7.5 million times to date, and in 192 countries. BiP is
one of the world's most innovative applications with 39% of its
users being from other operators.
Smart Storage, the most widely used personal cloud service in
Turkey, has been downloaded 2.6 million times, while downloads on
Turkey's most popular music platform, fizy, have reached 5.7
million. Meanwhile, Goals on Your Mobile services has been
downloaded 2.1 million times. As a result, our service revenues
increased 57.2% year-on-year.
We are advancing in line with our plans in 2016
Having seen a solid start to the year, we believe that we can
achieve our 2016 targets by providing a strong 4.5G network, along
with our converged services. We would like to congratulate the
Turkcell team and all of our stakeholders for their contribution to
our success, and to thank our Board of Directors for their
continued support. We would also like to express our gratitude
towards our customers, who have shown their trust in us throughout
our success story.
(1) We use "proforma net income" as a means of presenting our
net income net of certain non-operating items and items that we
believe are non-recurring. We define "proforma net income" in this
document as net Income excluding FX gain / (loss) (including tax
and minority impact), interest Income on time deposits of Turkcell
Iletisim Hizmetleri, share of profit of equity accounted investees
(Fintur), and one-off items. Please note that this is a non-GAAP
measure and that we may in future presentations change the scope of
items that we deduct from net income to arrive at "proforma net
income."(2) Customers with 4.5G compatible devices and SIM cards(3)
Total of mobile, fixed and IPTV subscribers(4) Breakdown among
mobile voice users which excludes subscribers who do not use their
line in the last 3 months
FINANCIAL AND OPERATIONAL REVIEW OF THE FIRST QUARTER
2016
The following discussion focuses principally on the developments
and trends in our business in the first quarter of 2016 in TRY
terms. Selected financial information presented in this press
release for the first and fourth quarters of 2015, and the first
quarter of 2016 is based on IFRS figures.
Selected financial information for the first and fourth quarters
of 2015, and the first quarter of 2016 prepared in accordance with
IFRS and Turkish Accounting standards, is also included at the end
of this press release.
Financial Review of Turkcell Group
Profit & Loss Statement (million TRY)
Q115 Q415 Q116
y/y % q/q % Total Revenue
2,978.2 3,334.5 3,225.4
8.3% (3.3%) Direct cost of revenues1 (1,828.6)
(2,054.8) (2,018.8) 10.4% (1.8%)
Direct cost of
revenues1/revenues (61.4%) (61.6%)
(62.6%) (1.2pp) (1.0pp) Depreciation and
amortization (394.3) (437.0) (454.8) 15.3% 4.1%
Gross Margin
38.6% 38.4% 37.4% (1.2pp)
(1.0pp) Administrative expenses (140.8) (165.9) (178.7)
26.9% 7.7%
Administrative expenses/revenues (4.7%)
(5.0%) (5.5%) (0.8pp) (0.5pp) Selling
and marketing expenses (476.3) (492.6) (481.2) 1.0% (2.3%)
Selling and marketing expenses/revenues (16.0%)
(14.8%) (14.9%) 1.1pp (0.1pp)
EBITDA2 926.8 1,058.2 1,001.5
8.1% (5.4%) EBITDA Margin 31.1%
31.7% 31.1% - (0.6pp)
EBIT3 532.5 621.2 546.7
2.7% (12.0%) Net finance income / (expense) (483.4)
12.5 166.2 n.m. n.m. Finance expense (735.7) (141.0) (55.0) (92.5%)
(61.0%) Finance income 252.3 153.5 221.2 (12.3%) 44.1% Share of
profit of associates 94.8 98.4 15.2 (84.0%) (84.6%) Other income /
(expense) (53.0) (31.1) (11.1) (79.1%) (64.3%) Non-controlling
interests 284.4 (7.6) (10.9) (103.8%) 43.4% Income tax expense
(234.2) (109.2) (143.4) (38.8%) 31.3%
Net Income
141.1 584.2 562.7 298.8% (3.7%)
Proforma Net Income4 472.5
567.1 543.7 15.1%
(4.1%)
(1) Including depreciation and amortization expenses.(2) EBITDA
is a non-GAAP financial measure. See page 13 for the reconciliation
and an explanation of how we calculate Adjusted EBITDA to net
income.(3) EBIT is a non-GAAP financial measure and is equal to
EBITDA minus depreciation and amortization expenses.(4) We use
"proforma net income" as a means of presenting our net income net
of certain non-operating items and items that we believe are
non-recurring. We define "proforma net income" in this document as
net Income excluding FX gain / (loss) (including tax and minority
impact), interest Income on time deposits of Turkcell Iletisim
Hizmetleri, share of profit of equity accounted investees (Fintur),
and one-off items. Please note that this is a non-GAAP measure and
that we may in future presentations change the scope of items that
we deduct from net income to arrive at "proforma net income."
Revenues of the Group rose by 8.3% year-on-year.
Turkcell Turkey revenues, comprising 91% of Group revenues, grew
by 10.0% to TRY2,928 million (TRY2,662 million) due to a 10.0% rise
in consumer segment revenues to TRY2,338 million (TRY2,124 million)
and an 8.7% increase in corporate segment revenues to TRY525
million (TRY483 million).
- Consumer and corporate segment revenues
of Turkcell Turkey in total rose by 9.8%:
- Voice revenues fell 4.1% to TRY1,398
million (TRY1,459 million) in line with the global trend.
- Data & services revenues, at 42% of
Turkcell Turkey revenues, rose by 31.1% to TRY1,229 million (TRY937
million).Data revenues grew by 26.4% to TRY1,003 million (TRY794
million). This was driven by a 25.8% rise in mobile broadband and
28.4% increase in fixed broadband revenues with higher smartphone
penetration, more data users and a rise in data
consumption.Services and solutions revenues rose by 57.2% to TRY226
million (TRY144 million) mainly due to increased usage of Turkcell
TV and fizy, along with other mobile services.
- SMS revenues fell 2.9% to TRY132
million (TRY136 million). The slowdown in SMS revenue decline was
driven by higher bundle offer penetration.
- Other revenues comprising mainly
hardware and software sales rose by 37.0% to TRY103 million (TRY75
million).
- Wholesale revenues grew by 13.9% to
TRY81 million (TRY71 million).
Turkcell International revenues, constituting 6% of Group
revenues, rose by 2.1% to TRY197 million (TRY193 million), turning
to positive growth after 7 quarters of year-on-year decline.
Other subsidiaries' revenues, comprising 3% of Group revenues,
which includes information and entertainment services in Turkey and
Azerbaijan, call center revenues and revenues from financial
services declined by 18.0% to TRY101 million (TRY123 million), due
to lower revenues from Azerbaijan, partly driven by currency
devaluation.
Direct cost of revenues rose to 62.6% (61.4%) as a
percentage of revenues, mainly due to the rise in depreciation and
amortization expenses (0.9pp) along with increase in various other
cost items (0.3pp).
Administrative expenses rose to 5.5% (4.7%) as a
percentage of revenues, mainly due to various cost items including
new headquarters rental expense and performance related payments to
personnel.
Selling and marketing expenses fell by 1.1pp to 14.9%
(16.0%) as a percentage of revenues, driven by the decline in
selling expenses (0.9pp) with our value focused customer
acquisition strategy and other costs items (1.1pp). This was
despite the rise in marketing expenses (0.9pp), mainly due to 4.5G
launch costs.
EBITDA*rose by 8.1% year-on-year, while the EBITDA
margin was at 31.1% (31.1%). The decline in selling and marketing
expenses of 1.1pp was offset by the increase in direct cost of
revenues (excluding depreciation and amortization) of 0.3pp and
administrative expenses of 0.8pp.
- Turkcell Turkey’s EBITDA rose by 10.6%
to TRY916 million (TRY828 million), while the EBITDA margin
improved by 0.2pp to 31.3% (31.1%).
- Turkcell International EBITDA grew 0.9%
to TRY54 million (TRY53 million), despite the impact of
year-on-year devaluation in Ukraine and Belarus, while the EBITDA
margin was at 27.2% (27.5%).
- The EBITDA of other subsidiaries
declined by 30.0% to TRY32 million (TRY46 million), mainly on lower
revenues in Azerbaijan.
Net finance income of TRY166 million (net finance expense
of TRY483 million) was recorded in Q116. This was mainly driven by
lower translation losses of TRY5 million (TRY698 million)
registered in Q116. This positive impact more than offset the
decline in interest income from time deposits, due to a lower cash
balance, and the rise in interest expense in relation to loans and
4.5G payables. Please see Appendix A for translation gain and loss
details.
Income tax expense declined 38.8% year-on-year. Please
see Appendix A for details.
(*)EBITDA is a non-GAAP financial measure. See page 13 for the
reconciliation of an explanation of how we calculate Adjusted
EBITDA to net income.
Net income of the Group as per IFRS rose 298.8% to TRY563
million (TRY141 million) in Q116 year-on-year. This was mainly
driven by higher EBITDA, lower translation losses and tax expense,
despite the decline in interest income on time deposits, a lower
contribution from Fintur and increased interest expense on loans
and 4.5G payables. Proforma net income* rose 15.1% to TRY544
million (TRY473 million) in Q116. Please see Appendix A for a
reconciliation of Group proforma net income to net income per
IFRS.
Total debt as of March 31, 2016 declined to TRY4,028
million from TRY4,214 million as of December 31, 2015, in
consolidated terms. The decrease in debt balance was mainly due to
Turkcell Turkey’s loan payments.
- Turkcell Turkey’s debt balance was
TRY3,630 million, of which TRY1,610 million (US$568 million) was
denominated in US$, TRY1,651 (EUR515 million) in EUR and the
remaining TRY369 million in TRY.
- The debt balance of lifecell was TRY393
million, denominated in UAH.
- BeST had a debt balance of TRY5
million, denominated in BYR.
TRY1,795 million of our consolidated debt is set at a floating
rate, while TRY655 million will mature within less than a year.
(Please note that the figures in parentheses refer to US$ or EUR
equivalents).
Cash flow analysis: Capital expenditures, including
non-operational items, amounted to TRY738 million in Q116. The net
change in debt mainly relates to Turkcell Turkey loan payments. The
cash flow item noted as “other” includes regulatory fee payments
(TRY491 million) and the negative impact of the change in working
capital (TRY195 million).
In Q116, operational capital expenditures at the Group level
stood at 20%** of total revenues.
Consolidated
Cash Flow (million TRY) Q115 Q415
Q116 EBITDA1 926.8
1,058.2 1,001.5 LESS: Capex and License
(755.5) (6,188.9) (738.4) Turkcell Turkey (343.9) (6,218.1) (675.4)
Turkcell International2 (408.4) 28.1 (61.7) Other Subsidiaries2
(3.2) 1.1 (1.3) Net interest Income/ (expense) 214.9 (32.8) 171.5
Other (1,290.6) 3,220.9 (685.8) Net Change in Debt 46.3 958.9
(145.2)
Cash generated (858.0) (983.7)
(396.4) Cash balance 8,173.8
2,918.8 2,522.4
(1) EBITDA is a non-GAAP financial measure. See page 13 for the
reconciliation of an explanation of how we calculate Adjusted
EBITDA to net income.(2) The impact from the movement of reporting
currency (TRY) against local currencies of subsidiaries in other
countries is included in these lines.
(*)We use "proforma net income" as a means of presenting our net
income net of certain non-operating items and items that we believe
are non-recurring. We define "proforma net income" in this document
as net Income excluding FX gain / (loss) (including tax and
minority impact), interest Income on time deposits of Turkcell
Iletisim Hizmetleri, share of profit of equity accounted investees
(Fintur), and one-off items. Please note that this is a non-GAAP
measure and that we may in future presentations change the scope of
items that we deduct from net income to arrive at "proforma net
income."
(**) Excluding license fees
Operational Review in Turkey
Summary of Operational data Q115
Q415 Q116 y/y %
q/q % Number of subscribers 35.6
35.8 35.2 (1.1%)
(1.7%) Mobile Postpaid (million) 15.5 16.6 16.7 7.7% 0.6%
Mobile M2M (million) 1.6 1.9 2.0 25.0% 5.3% Mobile Prepaid
(million) 18.7 17.4 16.6 (11.2%) (4.6%) Fiber (thousand) 776.1
899.4 935.4 20.5% 4.0% ADSL (thousand) 495.5 620.8 646.2 30.4% 4.1%
IPTV (thousand) 98.7 223.7 268.1 171.6% 19.8%
Churn (%)
Mobile Churn (%)1 7.7% 7.9% 7.5% (0.2pp) (0.4pp) Fixed churn (%)
4.0% 5.2% 5.0% 1.0pp (0.2pp)
ARPU (Average Monthly Revenue per
User) Mobile ARPU, blended (TRY) 22.7 25.1 24.7 8.8% (1.6%)
Postpaid 36.9 38.5 37.3 1.1% (3.1%) Postpaid (excluding M2M) 40.8
42.8 41.7 2.2% (2.6%) Prepaid 11.3 12.8 12.4 9.7% (3.1%) Fixed
Residential ARPU, blended (TRY) 47.1 50.3 50.3 6.8% -
Mobile MOU
(Avg. Monthly Minutes of usage per subs) blended
275.7 299.3 298.1
8.1% (0.4%)
(1) As per our churn policy, prepaid subscribers are
disconnected from the system if they do not top-up above TRY10
during a nine month period. Additionally, in the first quarter of
2016, 196 thousand subscriptions which had not topped-up at all
within the stipulated period were also disconnected.
Mobile customers in Turkey declined by 673 thousand during the
quarter to 33.3 million in total, mainly on losses in the more
price-sensitive prepaid segment. We continued to disconnect
subscriptions that had not topped-up at all within the stipulated
period, which amounted to 196 thousand during the first quarter and
reached 575 thousand in total in the last two quarters. Meanwhile,
the postpaid customer base continued to expand by 124 thousand
quarterly net additions to 16.7 million, to 50.1% (45.3%) of the
total.
The fixed customer base reached 1.6 million supported by a
strong fiber network, dedicated sales force and customer care. We
recorded 61 thousand quarterly net additions, of which 36 thousand
were fiber and 25 thousand were ADSL subscribers. The Turkcell TV
platform reached 268 thousand customers on 44 thousand quarterly
net additions. Including mobile TV and web TV users, Turkcell TV
customers amounted to 679 thousand.
Mobile churn improved by 0.2pp year-on-year on the back of value
focused customer acquisitions and targeted retention actions.
Mobile ARPU rose by 8.8% year-on-year with the continued
favorable change in subscriber mix, our upsell strategy and a focus
on high value customer groups, as well as increased package
penetration. Fixed ARPU increased by 6.8% year-on-year with growth
of multiplay customers with TV1, comprising 30% of total
residential fiber customers.
Mobile MoU rose by 8.1% driven by our increased postpaid base
and upsell strategy.
Smartphone penetration on our network reached 55% as we
registered 5142 thousand quarterly net additions. Accordingly,
there were 16.6 million smartphones on our network at the end of
the quarter, where 42% are 4.5G enabled.
(1) Multiplay customers with TV: Internet + TV users &
internet + TV + voice users(2)Approximately 80 thousand of these
smartphone net additions were due to an adjustment in relation to
devices which were not previously classified as smartphones.
TURKCELL INTERNATIONAL
lifecell* Q115
Q415 Q116 y/y% q/q
% Number of subscribers (million)1
13.7 13.5 13.3
(2.9%) (1.5%) Active (3 months)2 10.3 10.6
10.4 1.0% (1.9%)
MOU (minutes) (12 months) 155.9
146.0 141.4 (9.3%) (3.2%) ARPU
(Average Monthly Revenue per User), blended (UAH) 25.5
28.4 28.2 10.6% (0.7%) Active (3
months) (UAH) 34.3 36.2 36.1 5.2%
(0.3%)
Revenue (million UAH) 1,059.0
1,158.9 1,132.6 6.9% (2.3%) EBITDA
(million UAH) 327.5 421.0 356.1 8.7% (15.4%)
EBITDA margin
(UAH) 30.9% 36.3% 31.4% 0.5pp
(4.9pp) Net loss (million UAH) (5,630.0) (130.2) (67.6) n.m
n.m
Capex (million UAH) 3,621.6
490.3 456.9 (87.4%)
(6.8%) Revenue (million TRY) 126.1 146.9 128.5 1.9% (12.5%)
EBITDA (million TRY) 39.0 53.3 40.4
3.6% (24.2%) EBITDA margin (TRY) 31.0% 36.3% 31.4%
0.4pp (4.9pp)
Net loss (million TRY) (675.2)
(16.8) (8.4) n.m
n.m
(1) 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.(2)
Active subscribers are those who in the past three months made a
revenue generating activity.
(*) Since July 10, 2015, we hold a 100% stake in lifecell.
lifecell revenues grew by 6.9% in local currency terms
reflecting rising mobile broadband revenues on the back of 3G+
services and increased smartphone tariff subscriptions with higher
ARPU. lifecell’s EBITDA rose by 8.7% in local currency terms
leading to an EBITDA margin improvement of 0.5pp to 31.4%, driven
by effective cost management efforts and an increased share of
mobile broadband in the revenue mix of lifecell. Meanwhile, the
4.9pp quarter-on-quarter decline in EBITDA margin was due to
increased network related costs and marketing expenses.
In Q116, lifecell’s revenues in TRY terms rose by 1.9%
year-on-year turning to positive growth following a series of
quarters of declining revenue trend. Meanwhile, lifecell’s EBITDA
in TRY terms grew by 3.6%.
lifecell has continued its 3G+ network roll-out, reaching 16
regional cities and smaller towns in 49 districts. 3G+ adoption
momentum continued, reaching 2.3 million three-month active data
users. Meanwhile, with a smartphone penetration of 48%, lifecell
has almost doubled data usage per user post introduction of 3G+.
lifecell’s investment in 3-carrier technology allows it to provide
the fastest 3G speed of 63.3 Mbps in Ukraine.
In Q116, lifecell’s three-month active subscriber base declined
to 10.4 million on 199 thousand quarterly net losses. This was
mainly due to increased competition and tension in the eastern part
of the country, which led to temporary interruptions to the
lifecell network.
Blended ARPU (3-month active) rose by 5.2% driven by increased
mobile broadband usage. MoU (12-month active) fell by 9.3% due to
changing consumer behavior.
BeST* Q115 Q415
Q116 y/y% q/q % Number
of subscribers (million)1 1.5
1.5 1.6 6.7% 6.7%
Active (3 months) 1.0 1.1 1.1 10.0% -
Revenue (billion BYR)
176.6 232.3 230.9 30.7% (0.6%)
EBITDA (billion BYR) 0.4 8.7 3.9 875.0% (55.2%)
EBITDA margin
(BYR) 0.2% 3.7% 1.7% 1.5pp
(2.0pp) Net loss (billion BYR) (2,163.5) (123.7) (97.2) n.m
n.m
Capex (billion BYR) 20.2
53.4 33.9 67.8%
(36.5%) Revenue (million TRY) 30.0 38.1 32.8 9.3% (13.9%)
EBITDA (million TRY) 0.1 1.4 0.5
400.0% (64.3%) EBITDA margin (TRY) 0.3% 3.7% 1.7%
1.4pp (2.0pp)
Net loss (million TRY) (378.5)
(20.3) (13.7) n.m n.m Capex (million
TRY) 3.6 7.3 4.8 33.3% (34.2%)
(1) Starting from Q116, subscriber figure for BeST includes
suspended subscriptions whose contracts are still in place. All
figures presented in this document for prior periods have been
restated to reflect this change.
(*)BeST, in which we hold an 80% stake, has operated in Belarus
since July 2008.
BeST registered solid year-on-year revenue growth of
30.7% in Q116 in local currency terms with the increasing active
subscriber base and increased voice and terminal revenues. EBITDA
margin improved by 1.5pp to 1.7% (0.2%), mainly driven by top-line
growth and strict cost management.
In TRY terms, its performance remained impacted by yearly
devaluation of the local currency. Revenues rose by 9.3% to TRY33
million (TRY30 million), while EBITDA improved to TRY0.5 million
(TRY0.1 million).
KKTCELL (million TRY)* Q115
Q415 Q116 y/y%
q/q% Number of subscribers (million)1
0.5 0.5 0.5 -
- Revenue 31.4 33.4 32.4 3.2% (3.0%)
EBITDA
12.2 12.4 11.3 (7.4%) (8.9%)
EBITDA margin 38.9% 37.1% 34.8% (4.1pp) (2.3pp)
Net income
6.8 7.9 6.1 (10.3%) (22.8%)
Capex 1.2 14.1 2.8 133.3%
(80.1%)
(1) Starting from Q116, subscriber figure for KKTCELL includes
M2M subscriptions as well. All figures presented in this document
for prior periods have been restated to reflect this change.
(*) KKTCELL, in which we hold a 100% stake, has operated in
Northern Cyprus since 1999.
KKTCELL’s revenues increased by 3.2% year-on-year to
TRY32 million (TRY31 million), reflecting strong mobile broadband
growth driven by higher data demand. EBITDA declined by 7.4% to
TRY11 million (TRY12 million) leading to an EBITDA margin of 34.8%
(38.9%). This was driven by regulatory amendment regarding the
termination rates and additional frequency fees.
Fintur’s consolidated revenues declined by 50.1%
year-on-year, mainly due to tough competitive environment
especially in Kazakhstan and pressure on currencies due to
macroeconomic challenges. Fintur’s subscribers declined to 16.8
million during the quarter driven by the decrease in Kcell
subscribers due to the competitive environment. The contribution of
Fintur to Group’s net income decreased to US$5 million (US$38
million) year-on-year mainly driven by significant negative
currency effects in reported figures and lower earnings impacted by
negative revenue development in the several markets.
Fintur* Q115 Q415
Q116 y/y % q/q %
Subscribers (million) 1 17.8
17.3 16.8 (5.6%) (2.9%)
Kazakhstan 10.8 10.4 9.9 (8.3%) (4.8%) Azerbaijan 4.2 4.1 4.1
(2.4%) - Moldova 0.9 0.9 0.9 - - Georgia 1.9 1.9 1.9 - -
Revenue
(million US$) 387 219 193 (50.1%) (11.9%)
Kazakhstan 233 92 100 (57.1%) 8.7% Azerbaijan 113 90 59 (47.8%)
(34.4%) Moldova 15 15 14 (6.7%) (6.7%) Georgia 25 22 21 (16.0%)
(4.5%)
Fintur’s contribution to Group’s net income (million
US$) 38 34 5
(86.8%) (85.3%)
(1) Telia Company disclosed a change to the definition of
prepaid mobile subscription for all countries of operations in its
Q115 results announcement on April 21, 2015. Prepaid subscriptions
are counted if the subscriber has been active during the last three
months. In line with Telia Company’s reporting, we disclose Fintur
operations’ subscriber numbers as three-month active. Prior periods
are restated accordingly.
(*) We hold a 41.45% stake In Fintur, which has interests in
Kazakhstan, Azerbaijan, Moldova and Georgia.
Turkcell Group Subscribers
Turkcell Group subscribers amounted to approximately 67.6
million as of March 31, 2016. This figure is calculated by taking
the number of subscribers of Turkcell Turkey and each of our
subsidiaries and unconsolidated investees. It includes the total
number of mobile, fiber, ADSL and IPTV subscribers of Turkcell
Turkey, the mobile subscribers of lifecell and BeST, as well as
KKTCELL, Turkcell Europe and Fintur.
Turkcell Group Subscribers Q115
Q415 Q116 y/y %
q/q % Mobile Postpaid (million) 15.5 16.6
16.7 7.7% 0.6% Mobile Prepaid (million) 18.7
17.4 16.6 (11.2%) (4.6%) Fiber (thousand) 776.1 899.4 935.4 20.5%
4.0% ADSL (thousand) 495.5 620.8 646.2 30.4% 4.1% IPTV (thousand)
98.7 223.7 268.1 171.6% 19.8%
Turkcell Turkey subscribers
(million)1 35.6 35.8 35.2
(1.1%) (1.7%) Ukraine 13.7 13.5 13.3 (2.9%) (1.5%)
Belarus2 1.5 1.5 1.6 6.7% 6.7% KKTCELL3 0.5 0.5 0.5 - - Turkcell
Europe4 0.3 0.3 0.3 - -
Consolidated Subscribers (million)
51.6 51.6 50.8 (1.6%) (1.6%)
Fintur5 17.8 17.3 16.8 (5.6%) (2.9%)
Turkcell Group Subscribers*
(million) 69.5 68.9
67.6 (2.7%) (1.9%)
(*) Turkcell Group subscribers figure includes the subscriber
figures of our non-consolidated subsidiaries.
(1) Subscribers to more than one service are counted separately
for each service.(2) Starting from Q116, subscriber figure for BeST
includes suspended subscriptions whose contracts are still in
place. All figures presented in this document for prior periods
have been restated to reflect this change.(3) Starting from Q116,
subscriber figure for KKTCELL includes M2M subscriptions as well.
All figures presented in this document for prior periods have been
restated to reflect this change.(4) 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.(5)Telia Company disclosed a
change to the definition of prepaid mobile subscription for all
countries of operations in its Q115 results announcement on April
21, 2015. Prepaid subscriptions are counted if the subscriber has
been active during the last three months. In line with Telia
Company’s reporting, we disclose Fintur operations’ subscriber
numbers as three-month active. Prior periods are restated
accordingly.
OVERVIEW OF THE MACROECONOMIC ENVIRONMENT
The foreign exchange rates used in our financial reporting,
along with certain macroeconomic indicators, are set out below.
Q115 Q415
Q116 y/y % q/q % US$ / TRY
rate Closing Rate 2.6102
2.9076 2.8334 8.6% (2.6%) Average Rate 2.4633 2.9366 2.9202 18.5%
(0.6%)
EUR / TRY rate Closing Rate 2.8309 3.1776 3.2081
13.3% 1.0% Average Rate 2.7934 3.2000 3.2172 15.2% 0.5%
Consumer
Price Index (Turkey) 3.0% 2.5% 1.8%
(1.2pp) (0.7pp) GDP Growth (Turkey)
2.5% 5.7% n.a n.a n.a US$ /
UAH rate Closing Rate 23.44 24.00 26.22 11.9% 9.3% Average Rate
21.18 23.18 25.77 21.7% 11.2%
US$ / BYR rate Closing Rate
14,740 18,569 20,133 36.6% 8.4% Average Rate 14,528
17,909 20,552 41.5% 14.8%
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, Direct Cost of
Revenue excluding depreciation and amortization, Selling and
Marketing expenses and Administrative expenses, but excludes
translation gain/(loss), finance income, share of profit of equity
accounted investees, gain on sale of investments, income/(loss)
from related parties, 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)
Q115 Q415 Q116 y/y
% q/q % Adjusted EBITDA
926.8 1,058.2 1,001.5
8.1% (5.4%) Finance income 252.3 153.5 221.2
(12.3%) 44.1% Finance costs (735.7) (141.0) (55.0) (92.5%) (61.0%)
Other income / (expense) (53.0) (31.1) (11.1) (79.1%) (64.3%) Share
of profit of equity accounted investees 94.8 98.4 15.2 (84.0%)
(84.6%) Depreciation and amortization (394.3) (437.0) (454.8) 15.3%
4.1%
Consolidated profit before income tax & minority
interest 90.9 701.0 717.0 688.8%
2.3% Income tax expense (234.2) (109.2) (143.4) (38.8%)
31.3%
Consolidated profit before minority interest
(143.3) 591.8 573.6
n.m. (3.1%)
FORWARD-LOOKING STATEMENTS: 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 in 2016 and our 4.5G
development in Turkey. More generally, all statements other than
statements of historical facts included in this press release,
including, without limitation, certain statements regarding 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 2015 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.
ABOUT TURKCELL: Turkcell is a converged telecommunication
and technology services provider, founded and headquartered in
Turkey. It serves its customers with voice, data, TV and
value-added consumer and enterprise services on mobile and fixed
networks. Turkcell launched LTE services in its home country on
April 1st, 2016, employing LTE-Advanced and 3 carrier aggregation
technologies in 81 cities. In 2G and 3G, Turkcell’s population
coverage is at 99.85% and 95.05%, respectively, as of March 2016.
It offers up to 1 Gbps fiber internet speed with its FTTH services.
Turkcell Group companies serve 67.6 million subscribers in 9
countries – Turkey, Ukraine, Belarus, Northern Cyprus, Germany,
Azerbaijan, Kazakhstan, Georgia, Moldova – as of March 31, 2016.
Turkcell Group reported a TRY3.2 billion revenue with total assets
of TRY26.2 billion as of March 31, 2016. 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: Translation gain and loss details
Million TRY
Q115 Q415 Q116 Turkcell Turkey
308.2 45.9 (6.9) Turkcell International (1,008.2) 2.2 3.2
Other Subsidiaries 1.7 (2.9) (1.6)
Turkcell Group
(698.3) 45.2 (5.3)
Table: Income tax expense details
Million TRY Q115
Q415 Q116 y/y % q/q
% Current Tax expense (251.9) (46.3)
(113.6) (54.9%) 145.4% Deferred Tax income/expense
17.7 (62.9) (29.8) (268.4%) (52.6%)
Income Tax expense
(234.2) (109.2) (143.4)
(38.8%) 31.3%
Table: Reconciliation of Group proforma net income to net
income per IFRS
Net income impacts (million TRY)
Q115 Net income impacts (million
TRY) Q116
Proforma net income 473
Proforma net income 544 FX impact (467) FX impact (3)
Interest income (net off tax) 106 Interest income (net off tax) 14
One-off impacts One-off impacts
Provision for commercial agreements (46) Fintur contribution 95
Fintur contribution 15 Other impacts (20) Other impacts (7)
Net
income - IFRS 141 Net income
-IFRS 563
TURKCELL ILETISIM HIZMETLERI A.S.
IFRS SELECTED FINANCIALS (TRY
Million)
Quarter
Ended Quarter Ended Year Ended Quarter
Ended March 31, December 31, December 31,
March 31,
2015
2015
2015
2016
Consolidated Statement of Operations Data
Turkcell Turkey 2,662.2 2,997.8 11,480.9 2,927.5 Consumer 2,124.4
2,391.0 9,127.3 2,337.9 Corporate 482.7 529.2 2,031.7 524.5 Other
55.1 77.6 321.9 65.1 Turkcell International 192.9 223.8 856.1 196.9
Other 123.1 112.9 432.4 101.0 Total revenues 2,978.2 3,334.5
12,769.4 3,225.4 Direct cost of revenues (1,828.6) (2,054.8)
(7,769.5) (2,018.8) Gross profit 1,149.6 1,279.7
4,999.9 1,206.6 Administrative expenses (140.8) (165.9) (625.3)
(178.7) Selling & marketing expenses (476.3) (492.6) (1,901.9)
(481.2) Other Operating Income / (Expense) (53.0) (31.1)
(225.9) (11.1) Operating profit before
financing costs 479.5 590.1 2,246.8 535.6 Finance costs (735.7)
(141.0) (799.5) (55.0) Finance income 252.3 153.5 756.1 221.2 Share
of profit of equity accounted investees 94.8 98.4
367.3 15.2 Income before taxes and minority interest 90.9
701.0 2,570.7 717.0 Income tax expense (234.2) (109.2)
(667.1) (143.4) Income before minority interest
(143.3) 591.8 1,903.6 573.6 Non-controlling interests 284.4
(7.6) 164.1 (10.9) Net income 141.1 584.2
2,067.7 562.7 Net income per share 0.06 0.27
0.94 0.26
Other Financial Data Gross margin
38.6% 38.4% 39.2% 37.4% EBITDA(*) 926.8 1,058.2 4,140.5 1,001.5
Capital expenditures 755.5 6,188.9 8,536.2 738.4
Consolidated Balance Sheet Data (at period end) Cash and
cash equivalents 8,173.8 2,918.8 2,918.8 2,522.4 Total assets
23,977.7 26,207.3 26,207.3 26,175.2 Long term debt 549.7 3,487.8
3,487.8 3,373.2 Total debt 4,127.3 4,214.2 4,214.2 4,028.3 Total
liabilities 11,050.4 11,788.4 11,788.4 11,273.4 Total shareholders’
equity / Net Assets 12,927.3 14,418.9 14,418.9 14,901.8
* 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
2016 on our web site.
TURKCELL ILETISIM
HIZMETLERI A.S.
TURKISH ACCOUNTING STANDARDS SELECTED
FINANCIALS (TRY Million)
Quarter
Ended Quarter Ended Year Ended Quarter
Ended March 31, December 31, December 31,
March 31,
2015
2015
2015
2016
Consolidated Statement of Operations Data
Turkcell Turkey 2,662.2 2,997.8 11,480.9 2,927.5 Consumer 2,124.4
2,391.0 9,127.3 2,337.9 Corporate 482.7 529.2 2,031.7 524.5 Other
55.1 77.6 321.9 65.1 Turkcell International 192.9 223.8 856.1 196.9
Other 123.1 112.9 432.4 101.0 Total revenues 2,978.2 3,334.5
12,769.4 3,225.4 Direct cost of revenues (1,828.0) (2,054.2)
(7,766.5) (2,018.3) Gross profit 1,150.2 1,280.3
5,002.9 1,207.1 Administrative expenses (140.8) (165.9) (625.3)
(178.7) Selling & marketing expenses (476.3) (492.6) (1,901.9)
(481.2) Other Operating Income / (Expense) 569.9 (15.9)
925.0 220.4 Operating profit before financing and
investing costs 1,103.0 605.9 3,400.7 767.6 Income from investing
activities 3.6 6.2 14.9 9.3 Expense from investing activities
(22.4) (27.5) (74.3) (7.0) Share of profit of equity accounted
investees 94.8 98.4 367.3 15.2 Income before
financing costs 1,179.0 683.0 3,708.6 785.1 Finance expense
(1,087.5) 18.6 (1,135.1) (67.6) Income before
tax and non-controlling interest 91.5 701.6 2,573.5 717.5 Income
tax expense (234.3) (109.4) (667.7) (143.5)
Income before non-controlling interest (142.8) 592.2 1,905.8 574.0
Non-controlling interest 284.4 (7.6) 164.1
(10.9) Net income 141.6 584.6 2,069.9 563.1 Net income per
share 0.06 0.27 0.94 0.26
Other Financial Data
Gross margin 38.6% 38.4% 39.2% 37.4% EBITDA(*) 926.8 1,058.2
4,140.5 1,001.5 Capital expenditures 755.5 6,188.9 8,536.2 738.4
Consolidated Balance Sheet Data (at period end) Cash
and cash equivalents 8,173.8 2,918.8 2,918.8 2,522.4 Total assets
23,952.5 26,184.2 26,184.2 26,152.6 Long term debt 549.7 3,487.8
3,487.8 3,373.2 Total debt 4,127.3 4,214.2 4,214.2 4,028.3 Total
liabilities 11,046.5 11,784.9 11,784.9 11,270.1 Total shareholders’
equity / Net Assets 12,906.0 14,399.3 14,399.3 14,882.5
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TurkcellInvestor RelationsNihat Narin, Tel: + 90
212 313 1888investor.relations@turkcell.com.trorCorporate
Communications:Tel: + 90 212 313
2321Turkcell-Kurumsal-Iletisim@turkcell.com.tr
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