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Name | Symbol | Market | Type |
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Turkcell lletism Hizmetleri AS | NYSE:TKC | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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0.08 | 1.27% | 6.37 | 6.40 | 6.32 | 6.32 | 281,991 | 01:00:00 |
“Strong Start to the Year and Targets Raised”
Turkcell Iletisim Hizmetleri (NYSE:TKC) (BIST:TCELL):
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
(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).
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).
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%).
(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.
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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