Turkcell The igital perator
March 2019
1 STRATEGIC APPROACH DIGITAL SERVICES
BUSINESS MODEL Q4 & FY 2018 RESULTS HEDGING
APPENDIX
2 COMPANY OVERVIEW
• THE DIGITAL OPERATOR • 48.9 MILLION TURKCELL GROUP SUBSCRIBERS in 5 COUNTRIES • 169 MILLION DIGITAL SERVICES DOWNLOADS GLOBALLY • 85.8 MILLION DIGITAL SUBSCRIBERS GLOBALLY • LISTED ON NYSE & BORSA ISTANBUL WITH A $5.6 BILLION MARKET CAP1
SUBSCRIBER BREAKDOWN (m, Q4 2018)
Turkcell Turkey 36.7
Ukraine 9.9
Belarus 1.6
TR Northern Cyprus 0.5
2 lifecell Europe 0.2
1 As of March 7, 2019 3 2 lifecell Europe GmbH operates in Germany under a “marketing partnership” agreement with Deutsche Telekom (DT). Its subscribers are owned by DT and are also included in the Turkcell Group subscriber figure 3 STRATEGIC APPROACH
4 5 6 DIGITAL SERVICES IN THE CENTER OF THE GROWTH STORY
EQUITY APPS CURATED APPS DIGITAL ENABLERS
Service-Focused Tariffs Service-Focused Campaigns
Data-Enabled Digital Company .
7 7 DELIVERING VALUE WITH DIGITAL SERVICES
169 million core app downloads 81 Min 17 Min 18 Min Watching Playing (BiP) Reading 17 Min 35 Min 85.8 million 48 Min Playing Playing digital subscribers Listening (Playcell) (Tavla Go) 30 Min 9 Min Contest time Interacting 41 66.7% 33 Min Documents uploaded For VOIP users multiplay customers per person per day
31 Min 2.7 M Calling Searches per day
Note: Times given are in a day unless otherwise indicated.
TRANSFORMING INTO THE DIGITAL OPERATOR Organizational State-of-the-art Sales Channel Shaping Techfin Convergence of OTT Transformation 4.5G Deployment Transformation in Turkey Services 2015 - 2018 8 88 DIGITAL SERVICES PLATFORM
DIGITAL COMMUNICATION MESSAGING & DIGITAL PAYMENT MANAGEMENT SMART PLACES & & ADVERTISING MARKETPLACE MEDIA PLATFORM DASHBOARD BUSINESS APPLICATIONS
DIGITAL PARTNERS & TURKCELL SECURE E-COMMERCE INNOVATION
CURATED SERVICES
9 9 CREATING THE DIGITAL COMPANY
Data Driven, Real Time and Transparent
2,500 Different KPIs, 24/7 Monitoring
Dashboard for Functional Organizations & Multinationals
Flexible Access Control
10 10 BUILDING THE DIGITAL FUTURE TURKCELL GİZLİ
OUR VISION Visit www.digitaloperator1440.com for more details OUR STRATEGY
Capturing 1440 Minutes of Opportunity & Growth Every Day
11 CONTINUOUSLY BEATING TARGETS
Digital transformation led to a 20.6% growth with 6 pp higher EBITDA margin in 2018
REVENUE GROWTH RATE COMPARISON1 (2018) TURKCELL GROUP 2018 - 2020 2018 21% 14 Mar2
REVENUE 13% 14% - 16% 20.8% GROWTH
7% 7% 8% 5% 5% 6% 6% 4% EBITDA MARGIN 37% - 40% 41.3%
OP. CAPEX /
Telco3 Telco9 Telco8 Telco7 Telco6 Telco5 Telco4 Telco2
Telco10 18% - 16% 18.5% SALES3
41% Group (1) Top 100 telecom operators in terms of market capitalization is taken into consideration. Turkcell 2018 revenue growth rate is compared to those which announced their financial results as of Feb 20, 2019. EBITDA 32% Source: Bloomberg Margin (2) 3 year guidance figures reflect the expected impacts of IFRS 9, IFRS 15 and IFRS 16 at the time. A positive 4-5pp impact is reflected in EBITDA margin guidance. 2015 2018 (3) Excluding licence fees 12 12 2019 OUTLOOK TURKCELL GİZLİ
2018-2020 2018 2019 TARGETS ACTUAL GUIDANCE
REVENUE GROWTH 14% - 16% 20.8% 16% - 18%
EBITDA MARGIN 37% - 40% 41.3% 37% - 40%
OP.CAPEX / SALES* 16% - 18% 18.5% 16% - 18%
*Excluding license fees 13 DIGITAL SERVICES
14 PLATFORM OF PLATFORMS
15 15 DIGITAL SERVICES COLLABORATION
Yaani recommends fizy & fizy & lifebox Paycell enables chat-like powers keyword search come «home» with TV+ money transfer in BiP in Dergilik
16 16 CROSS COLLABORATION
Shake & Win Who wants 1 GB? Surprise Point
604 Mn Gifts 4.6 Mn Followers 50 Mn Gifts
7 Mn Users 21 Mn Customers 7 Mn Followers (in 3 Weeks)
From Classic Campaigns To Phygital Experiences
17 17 BOOSTING THE SERVICES PLATFORM WITH TELCO CAPABILITIES
Digital Campaigns use BiP App2Network Calls TechFin built on Turkcell location data & assign nd 2 Number integration Credit Rating Data telco benefits
18 18 BiP – INSTANT MESSAGING
Peer-to-peer money transfer
BiP Global Download Trend (Cumulative, Million) 2nd number integration 3.0 2.7
2.2 2.2 HD voice & Group video calls 2.0
Q417 Q118 Q218 Q318 Feb.19
Downloads - Top 6 Countries Discover services & games
BiP Web
19 19 fizy - MUSIC
Radio channels
Live concerts
Worldwide music playlists
Video clips
fizy CarPlay
20 20 TV+
EPL, Bundesliga and NBA broadcast
24 hours timeshift
4K 4K broadcast
Save & watch
All screens + Apple TV
21 21 Dergilik- DIGITAL PUBLISHING
100 National & local newspapers
1000+ global & local magazines
522K daily reading (4Q18)
Reading in airplane mode
22 22 lifebox – PERSONAL CLOUD
Auto back-up
Free-up space
Face & object recognition
5GB storage space free of charge
Photo Print
23 23 Yaani – SEARCH ENGINE
Smart algorithms
Location based search
Service integration
Search categories
Yaani web
24 24 LEADERSHIP IN TECHFIN TURKCELL GİZLİ
Utility Money payments transfer
Carrier Paycell Billing Top-ups Device Device Loan Leasing
QR code Mobile payment wallet
Insurance
5.2Mn 2.6Mn 2.7Mn 1.2Mn 5.8Bn TL 4.2Bn TL 28Mn Total Paycell Paycell app Registered Paycell Total Transaction Loan Credit scored users downloads credit cards Cards on Paycell Portfolio customers 25 SECURE E-COMMERCE WITH CREDENTIALS MANAGEMENT
Traffic Management Credentials Content / Service Management Provider
Fast & Secure Seamless Payment Log-in Experience
Customer Service
Turkcell Data Center Cyber Security Services
26 26 OUR GAMING PLATFORMS TURKCELL GİZLİ
Total Games Played at BiP Gaming
(2018, Mn)
30 67Mn games played in 2018 4.8 Mn Unique Visitors in 2018
18.7 Mn 35 min Total Visitors in 2018 Per player in 2018 Q1 Q2 Q3 Q4 27 LIFECELL: THE DIGITAL PIONEER TURKCELL GİZLİ
LIFECELL SUBSCRIBERS (thousand) 3.3Mn 44.2 TL as of 2,533 Feb 15th ARPU (1.3x of Turkcell consumer)
6x 1,526 8.6 GB av. data usage of a Lifecell user 879
401 1.5% churn rate Q118 Q218 Q318 Q418 (50% lower vs. Turkcell consumer1)
1: Average monthly churn during the related quarter. 28 BUSINESS MODEL HEDGING
29 THREE PILLARS OF OUR BUSINESS MODEL HEDGING
INFLATIONARY PRICING FX & INTEREST RATE HEDGING LIQUIDITY • Key for sustaining growth & margins • Keeping all cash in hard currency • Strong cash flow for capex needs
• Secure ROI of projects & investments • FX hedged for whole maturity, both • Additional committed lines on principal & interest of loans • Reflecting costs to the prices • 1.4Bn USD cash covers principal & • Converted variable to fixed interest interest payments until 2021 • Proven track record
Turkcell ARPU vs. CPI Trend (Q115=100) Details of Financial Debt Principal & Interest Payments* 164 158 (After Hedging) (Million USD) 147 142 139136 157 131129130 147 1,706 125 138 115 115 22 111110 128132 42% 15% 106 123123 100 120 112114 874 109110 550 1,684 103103106 58% 85% 337 200 100 7 203 537 543 6 6
197 194
Q316 Q215 Q315 Q415 Q116 Q216 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q115 Local Currency Fixed interest 2019 2020 2021 2022 2023+ TCELL ARPU (exl. M2M) CPI FX Variable interest FX Local Currency 30 *Data of Turkcell Group companies, excluding TCF 30 2018 RESULTS PROVING OUR ROBUST BUSINESS MODEL
TURKCELL STRENGTHS REFLECTION ON FINANCIALS
• Mobile multiplay at 66.7%, up 10.9pp yoy Ability to create revenue from new & adjacent products • Mobile ARPU like-for-like growth at 18.0% in Q418 yoy
• Growth momentum, 49% 2yr revenue growth Resilience at the operating profitability level • 41.3% EBITDA Margin, 90.2% 2yr EBITDA growth
• Enhanced offerings with digital services Strong customer loyalty driven by digital services • Sector leader at NPS by far
• Hedging instruments in place Prudent financial risk management • FX impact under control • Robust asset quality 31 31 MAJOR FUNDING & HEDGING DETAILS
TYPE & PURPOSE OF AMOUNT MATURITY INTEREST UTILIZATION HEDGING DETAILS DATE FUNDING
3-month US$500Mn 2-year grace 80% hedged with PCCS Club Loan LIBOR/ CAPEX and inorganic Fully utilized period, 5-year (September 2015) EURIBOR growth opportunities in Jun 16 EUR445Mn maturity 7% hedged with PCCS + 2.00%
Bond 5.75% CAPEX and inorganic US$500Mn 15/10/2025 - - (October 2015) (fixed rate) growth opportunities
EURIBOR Fully utilized EUR500Mn Debt restructuring 100% hedged with PCCS China 3-year grace + 2.20% in Oct 15 Development period, 10-year Bank maturity EUR : EURIBOR + 2.20% ~EUR 320 Mn utilized (October 2015) ~57% hedged with PCCS &CCS EUR750Mn USD : LIBOR + 2.22% CAPEX as of December 18 CNY : 5.51%
Bond 5.80% US$500Mn 11/04/2028 Repayment of existing - - (April 2018) (fixed rate) indebtedness
32 32 SOLID BALANCE SHEET TURKCELL GİZLİ
SUMMARY NET DEBT/ EBITDA
TRY Mn Q2 2018 Q3 2018 Q4 2018
Total Cash 7,081 8,749 7,419
Total Assets 41,026 45,404 42,765 1.8x
Total Debt 18,449 23,055 20,156 1.5x 1.4x (incl. Lease Obl.) 4,171 TCF loan porfolio Lease 1,269 1,259 1,414 1.2x Obligations* 1.0x Total Equity 14,952 14,891 16,054 0.8x 8,565 Net Debt* Net Debt 11,368 14,306 12,736
Net Debt** 6,677 9,516 8,565 Q218 Q318 Q418
Net Debt/EBITDA Net Debt/EBITDA* * Lease obligation includes IFRS impact and financial lease figures. Q2 and Q3 2018 figures are adjusted accordingly. ** Turkcell Consumer Finance Company’s (TCF) loan portfolio is excluded. Note: Q218 and Q318 multiples exclude the IFRS impacts. 33 CONSUMER FINANCE BUSINESS TURKCELL GİZLİ
TCF KEY FINANCIALS 4.4 mn loans outstanding TRY MILLION 2017 2018 YoY %
Revenues 606 942 55.5% 1,685 TL average ticket size Net Income1 139 254 82.8%
116 TL average HANDSET FINANCING monthly installment
TRY BILLION 4.7 5.2 4.5 88% penetration of loan insurance 4.2 4.8 4.2
0.5 0.4 0.4 1.9% cost of risk2 Q417 Q318 Q418 Turkcell Contracted Receivables TCF Consumer Loans 1 Net income includes 30 mn TL and 97 mn TL dividend from Paycell in 2017 and 2018, respectively. 2 per IFRS 34 FX EXPOSURE TURKCELL GİZLİ
CASH1 DEBT NET FX POSITION2 USD MILLION Before Hedging After Hedging Effectively in long position considering 8% 8% soon expected Fintur 26% 8% 31% Share 48% transaction proceeds 176 36% 74% 50% 11% Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 (91) Nominal 7.4Bn TL 20.2Bn TL (125) (144) (203) (204) (224) USD EUR TRY Other (255) (330) (301)
1 Excluding FX swap transactions for TL borrowing. 2 Including advance payments, hedging and assuming the 4.5G license payables in TRY for the periods before April 2017 and excluding FX swap transactions for TL borrowing. 35 FINTUR DIVESTMENT TURKCELL GİZLİ
Fintur divestment is a milestone towards further cementing our focus on our digital services strategy and strengthening our balance sheet
KAZAKHSTAN Fintur Deal Value EUR 350 million (estimated) KCell
MOLDOVA Contribution to Moldcell Profitability ~TRY 650 million GEORGIA (estimated) Geocell Azercell AZERBAIJAN Post Deal Turkcell TURKEY LONG Net FX position
• Binding agreement to divest our 41.45% stake in Fintur to Telia Company on December 12, 2018 • Completion following the Moldovan Competition Authority approval – in Q1 2019
36 Q4 & FY 2018 RESULTS
37 TURKCELL GİZLİ 2018: SUCCESSFUL EXECUTION OF STRATEGIES
RECORD REVENUE BUSINESS MODEL HEDGING THE DIGITAL OPERATOR FX & Interest Rate 169 Mn 21.3 Bn TL Hedging << downloads 20.8% yoy 2.8 Bn TL Cash generated
RECORD EBITDA ASSET-LIGHT STRATEGY LEADER IN TECH-FIN
EBITDA EUR 350 ~TRY 650 8.8 Bn TL Mn Mn 5.8 Bn TL transaction 41.3% margin Fintur Expected P&L Deal Contribution
38 TURKCELL GİZLİ 2018: AN OUTSTANDING YEAR FINANCIAL OPERATIONAL Record top line at 21.3Bn TL, 20.8% yoy, 49.0% 2-year growth Mobile ARPU like-for-like growth of 18% in Q418 (2-yr %27)
EBITDA at 8.8Bn TL, 41.1% yoy growth, 90.2% 2-year growth 8GB data usage (of 4.5G subs) in Dec 2018
Net income at 2.0Bn TL 347K post-paid mobile net additions in 2018
1.9Bn TL distributed in dividends 169 mn digital services downloads
Fintur deal close to completion 3.3 mn Lifecell subs by Feb 2019
Revenue, EBITDA and EBITDA Margin Turkcell Total Shareholder Return (TSR) 0.44 18 16 20 41.3% 0.42 14 TSR: 53% 0.4 14.92 21.3 12 15 17.6 0.38 10 Total dividend: 8.8Bn TL (4TL/share) TL/share 14.3 10 12.0 12.8 35.3% 0.36 8 9.77 6 3.9Bn 3.0Bn 32.4% 32.3% 8.8 0.34 TL/share 1.9Bn 5 31.2% 4 6.2 0.32 4.1 4.6 2 0 3.8 0.3 0 2014 2015 2016 2017 2018 Apr 2015 2015 2017 2018 Feb 2019 Revenue (Bn TL) EBITDA (Bn TL) EBITDA Margin (%) Dividend yield: 13.2% 9.9% 7.2% 39 GUIDANCE DELIVERED TURKCELL GİZLİ
INITIAL REVISED GUIDANCE1 GUIDANCE ACTUAL
REVENUE GROWTH 14% - 16% 20% - 22% 20.8%
EBITDA MARGIN 37% - 40% 39% - 41% 41.3%
OP.CAPEX / SALES2 18% - 19% 18.5%
1 Guidance disclosed on March 14, 2018 at Capital Markets Day 2 Excluding license fees 40 TURKCELL GROUP FINANCIAL HIGHLIGHTS
Consolidated TRY Million1 Q4 2018 YoY % 2018 YoY % 49.0% Revenue Two-year 5,626 20.6% 21,292 20.8% revenue growth in 2018 EBITDA 2,239 28.8% 8,788 41.1%
EBITDA Margin 39.8% +2.5pp 41.3% +6.0pp 90.2% Net Income 864 300.1% 2,021 2.1% Two-year EBITDA growth in 2018 Op.Capex/Sales2 25.7% -10.0 pp 18.5% -2.5 pp
• Net income strong at full year; stable quarterly run-rate
• Operational capex/Sales resulted at 18.5%, in line with the plans
1 TRY figures are based on IFRS. 41 2 Excluding license fees 41 OPERATIONAL HIGHLIGHTS 18.0% MOBILE ARPU (TL) TURKCELL DIGITAL SERVICES KPIs Mobile ARPU DSS Downloads (mn) Digital Subscribers (mn) like-for-like Growth YoY* 169 85.8 37.4 YoY 32.3 30.9 15.8% 87 66.9 26.3 102 TL Superbox ARPU in Q418 2017 2018 2017 2018 Q415 Q416 Q417 Q418 DSS downloads include 21 applications. Mobile Blended (excl. M2M) TURKEY SUBSCRIBERS (million) MONTHLY AVERAGE MOBILE CHURN RATE 18.8 56% of total mobile 14.9 3.4 2.9% 2.4% 1.4 2.4% Excluding 0.9 involuntary deactived churn Net add Postpaid Prepaid Fiber ADSL & Superbox TV Q417 Q118 Q218 Q318 Q418
YoY 347K↑ 676K↓ 181K↑ 16K↑ 1,257K↑ Note: Average monthly churn during the related quarter. Note: TV subscribers and the related net add figure include the total of and the change for 2.8 million of «OTT only» 42 42 cumulative active users. * The ARPU of customers who have stayed with Turkcell for at least 14 months. CUSTOMER APPRECIATION CONTINUES
ENGAGING & PIONEER CAMPAIGNS NET PROMOTER SCORE* OVER COMPETITION
Turkcell «All-out war against inflation» campaign Score 25 6 mn participants +23 +24 +23 +20 +14 +12 +13 Surprise Points +9 7 mn followers 50 mn gifts Q118 Q218 Q318 Q418
Points over next best Points over third best Shake & Win 21 mn customers • #1 in NPS reflecting superior overall customer satisfaction 604 mn gifts
43 *NPS score comparison is for consumer segment in mobile. (Source: Future Bright) 43 CONTINUED RISE IN DATA WITH DIGITAL SERVICES
MOBILE DATA USAGE (Av. GB/User) DATA CONSUMED ON DIGITAL SERVICES (TB) 7.6 20.7 5.9 5.9 2.2x 4.3 4.3 3.4 2.8 3.0 2.2 9.5
Q416 Q417 Q418 Q417 Q118 Q218 Q318 Q418
Non 4.5G Users 4.5G Users Total Users 4.5G SUBSCRIPTION (million) 30.8 29.8 91% 4.5G 18 million with 22.9 18.0 subscribers 4.5G compatible SPs 15.7 11.3
74% smartphone 80% are 4.5G Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 penetration compatible SPs 4.5G subscribers 4.5G compatible smartphone 44 44 OUR TRACK RECORD OF DIGITAL SERVICES TURKCELL GİZLİ 1M Cumulative Downloads 2015 2016 2017 2018 15 Feb 2019 reached in day Digital M 367 5M 10M 20M 30M Operator 38.8
Money Transfer 1M 5M 10M 20M 30M 34.6M 89 2nd number
in Europe M 86 5M 10M in Ukraine 20M 20.9 & Belarus
Launch 1M 5M 10M 11.8M 600
1M 5M 10M10.5M 240
Image 1M 5M 10M 10.1M 523 Recognition
Launch 1M 5M 7.6M 9
Launch 1M 2.6M 259 45 INTERACT, READ, LISTEN, WATCH, STORE & SEARCH
INSTANT DIGITAL MUSIC TV4 PERSONAL DIGITAL PAYCELL5 FAST LOGIN MESSAGING PUBLISHING2 CLOUD OPERATOR3 Download1 (lifebox)
34.6Mn 10.5Mn 20.9Mn 11.8Mn 10.1Mn 38.8Mn 7.6Mn 2.6Mn 15.3Mn registered user
3-Month Active User 11.5Mn 12.5Mn 3.2Mn 3.1Mn 2.6Mn 19.2Mn 3.0Mn 5.2Mn 8.2Mn
Service KPIs 148Mn messages 3.4Mn 41 232Mn per day 522K 7.0Mn 27% 2.7Mn 5.8Bn TL copies read songs streamed TV sessions docs uploaded more search Transactions in logins per day per day per day 2018 to date 2.3Mn per day per person / day ARPU digitized call experience per day 1: Refers to downloads as of Feb 15, 2019 2: 3-MAU includes users who utilised the zero rating benefit of Dergilik magazines and newspapers via browser. 3: My Account is renamed as Digital Operator 46 46 4: 3-Month active users also include IPTV users 5: Transactions include subsidiary revenues. Active users include DCB, app and Paycell card customers TURKCELL INTERNATIONAL: DIGITAL OPERATORS
HIGHLIGHTS TURKCELL INTERNATIONAL REVENUE BREAKDOWN (2018)
Other2 TRY MILLION1 Q4 2018 YoY% 2018 YoY % 5% KKTcell 12% Revenue 422 46.3% 1,457 36.5% BeST EBITDA 247 285.3% 613 132.1% 20% lifecell 63% EBITDA 58.5% +36.3 pp 42.1% +17.4 pp Margin
2 Other comprises lifecell Germany, other international operations and intra-company 47 1 Figures are based on IFRS eliminations. Lifecell, BeST, KKTcell figures are based on stand-alone financials. 47 TURKCELL INTERNATIONAL: ASSET-LIGHT APPROACHTURKCELL GİZLİ
LIFECELL DIGITAL BUSINESS MODEL Adopt Acquire Adapt Our partner acquires our Our partner acquires a We white label all source full portfolio of offerings. selection of our offerings codes and our partner Daily support, business on an as-needed basis. develops their own consultancy, and full Daily support and environment. Business customer integration is business consultancy is consultancy is included. included included.
48 APPENDIX - Network Dynamics - New Opportunities - International Business - Regulatory - Currency Trends
49 FREQUENCIES BEFORE AND AFTER 4.5G TENDER
€0.3 €0.5 TOTAL FREQUENCY 234.4 MHz AFTER TENDER €0.4 175.0 MHz
AWARDED 139.8 MHz FREQUENCY IN 172.4 TENDER 110.2 82.8
64.8 TOTAL FREQUENCY 62.0 57.0 BEFORE TENDER Turkcell Vodafone Türk Telekom
• Price / MHz / Population in Turkey: €0.12 per MHz per sub cost 50 50 FREQUENCY BANDS AFTER 4.5G TENDER
€0.3
234.4 MHz €0.5 4.5G main coverage layer 800 MHz 20.0 €0.4 24.8 175.0 MHz 900 MHz 2G/3G coverage and voice layer 59.6 20.0 172.4 139.8 MHz 20.0 Main layer for 4.5G Terminal support, 20.0 1800 MHz capacity and coverage layer 24.8 110.2 70.0 70.0 82.820.0 2100 MHz Mobile broadband layer for 3G 4.5G usage for mid/long term 35.0 30.0 64.8 62.060.0 57.0 40.0 35.0 2600 MHz 4.5G capacity boost layer for hot spots Turkcell Vodafone Türk Telekom
• Price / MHz / Population in Turkey: €0.12 per MHz per sub cost 51 51 FASTEST & BEST & WIDEST
SPEED QUALITY COVERAGE SPEED QUALITY COVERAGE
4x4 1,200 Mbps 4x4 MIMO all network
Carrier Aggregation all network • 2G > 99.5% • > 97% 2018 The Best 3G Experts • 4.5G > 90%
* Source: https://gsacom.com/paper/progress-gigabit-lte-networks-2/ MIMO: Multi Input Multi Output 52 52 DIFFERENTIATED THROUGH QUALITY
DATA SPEED USER EXPERIENCE
Download Upload 0-100 (Mbps) (Mbps) 82 49
75 74 21 17
13 11 10
Turkcell Telco1 Telco2
Source: IRIS Telecommunication Engineering Services, January 2019 53 53 5G: MORE THAN HIGHER SPEED eMBB
10x Faster Data Rate
10x Lower Latency 5G 100x Higher Capacity eMTC URLLC
54 54 5G: ROADMAP
We do not worry about 5G You should not worry either… • Investment based on use cases
139.8 175 234.4 • Widest spectrum MHz MHz MHz
• SW upgradable
55 55 POTENTIAL GROWTH AREAS FOR TURKCELL
ENERGY & TRANSPORTATION EDUCATION HEALTH End-to-end «Hospital Information Smart home, city, transportation & Offering education services nationally to Management Systems» infrastructure energy solutions, connected car a wide range of customer groups and operation services • Turkcell Energy • Turkcell Academy • 5 projects • Member of Joint Initiative Group • Hello Hope (Syrian customers) • Leader in terms of # of beds in «Turkey’s Automobile Project» • Sign Language • Strong pipeline of new projects
56 56 FIXED BROADBAND MARKET
TURKISH FIXED BROADBAND MARKET FIXED BROADBAND MARKET BY TECHNOLOGY (MN) 16.0% 14.9% 0.88 13.0 mn 16.0% 3 major 13.2% 12.1% 0.83 Total Penetration Operators 11.5% 2.64 Subscribers 11.0% 10.2% 0.74 2.33 0.63 0.56 1.93 0.49 1.67 1.46 FIBER SUBSCRIBER MARKET SHARE 0.49 1.2 0.55 Q3 2018 9.3 8.7 7.8 7.2 6.6 6.6 6.8 Incumbent 50% 48%
Other 2012 2013 2014 2015 2016 2017 Q318 players xDSL Fiber Cable Penetration 2% Note: Company calculation based on data in ICTA Q3 2018 Report 57 57 TURKCELL SUPERONLINE
NEW BUSINESS MODEL ON FIXED INFRASTRUCTURE FIBER CUSTOMERS thousand • Infrastructure sharing protocol signed by Turkcell, Türk Telekom, 1,386 1,204 Vodafone TR, Türksat and Telkoder in May 1,044 Fiber market 899 share (%) • Bilateral agreements to follow: 3.6Mn additional homepass through 50% Türksat and potential for more 2015 2016 2017 2018 • A new capex model on fixed business NET REVENUE TREND TRY Mn 4,076 3,210 CAGR 2,429 Turkcell Superonline Fiber Backbone 1,719 2015-2018 • 43.3 thousand km rollout 24% 2015 2016 2017 2018 • 21 cities EBITDA TREND • Data speed up to 10Gbps TRY Mn 2,070 1,276 CAGR 900 2015-2018 • 42% take up rate 548 39%
2015 2016 2017 2018 58 58 SUCCESSFUL IPTV SERVICES
IP TV Subscriber Market Share1
As of Q318
CableTV 18% D-Smart 8% 14%
Digitürk Tivibu (beIN) 38% 23%
3.4 million Turkcell TV+ subscribers2 in Q4 2018 1Source: ICTA Q3 2018 Report 59 2Includes IP TV and OTT TV subscribers 59 GLOBAL TOWER
NET REVENUE TREND Turkey 8,501 TRY mn CAGR 338 2019-2021 Ukraine 1,132 Tower portfolio: 25%-30% 10,581 Belarus 833 2018 2019E 2020E 2021E
TRNC 115 TENANCY RATIO
• First and only TowerCo of Turkey Medium Term • Regional player operating in 4 countries 1.60 1.8x-1.9x • Long term, visible revenue stream & strong profitability • Aim to increase efficiency by consolidating towers in Turkey 2018 2019E 2020E 2021E 60 Note: Tower portfolio includes owned and managed towers and towers for which contract management services are provided. 60 CAPEX/SALES TREND
Turkcell Group Average: 17.7%* 25% EEMEA Average: 17.6% Between 2008 and 2018
20%
15%
10%
5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Turkcell Group EEMEA
Source: Bloomberg Industry Data and company announcements *Excluding licence fees 61 61 OPERATIONS IN UKRAINE
UKRAINE MOBILE MARKET FACTS* lifecell PERFORMANCE
UAH MILLION Q4 2018 YoY% FY18 YoY%
54.1m 127% 3 Revenue 1,417 11.6% 5,269 8.0% Total Mobile Operators subscribers Penetration EBITDA 1,084 227.0% 2,762 108.2%
EBITDA Margin 76.5% 50.4pp 52.4% 25.2pp
HIGHLIGHTS ** • Operational performance: • 7.3 million subscribers in Q4 2018 (3 months active) with UAH 47 Ownership Ownership Ownership ARPU (up 27.6% yoy) 100% Turkcell 100% VEON 100% MTS 4.1 million 3-month active 3G and 4.5G data users • 76% SP penetration (market leader) • First in Ukrainian market to deploy NB-IoT network for smart devices • First to launch 4G services in Ukraine on 2600 MHz *Source: Global Wireless Matrix Q3 2018 st ** MTS Ukraine changed its legal name to Vodafone Ukraine with a marketing agreement • 4.5G services on the 1800 MHz frequency since Jul 1 62 62 UKRAINE: MOBILE MARKET PERFORMANCE
MARKET SHARE FINANCIALS lifecell VDF Kyivstar Subscriber* Mobile Revenue Growth (in UAH) (YoY) 17% 14.2% 14% 11% 11% 15% 10% 9% 14% 12% KYIVSTAR 2%3% 9% 9% 48.6% VDF -3% lifecell 37.2%
Q417 Q118 Q218 Q318 Q418 (*) 3 month active subscribers
Mobile Revenue EBITDA Margin (%)
14.8% 76.5%
58.0% KYIVSTAR 56.7% 55.1% 57.2% 55.8% 44.1% 48.9% VDF 43.7% 46.6% 46.1% 41.8% lifecell 44.6% 36.3% 26.1% 44.2%
Q417 Q118 Q218 Q318 Q418
Source: Company announcements (Q3 2018). 63 Note: lifecell EBITDA margins in 2018 include new IFRS impacts (IFRS 9, 15 and 16) 63 OPERATIONS IN BELARUS
BELARUS MOBILE MARKET FACTS* BeST PERFORMANCE
BYN MILLION Q4 2018 YoY% FY18 YoY% 11.4m 121% 3 Total Mobile Revenue 32.9 8.2% 124.9 11.7% Operators subscribers Penetration EBITDA 12.7 605.6% 27.9 548.8%
EBITDA Margin 38.6% 32.6pp 22.3% 18.5pp
HIGHLIGHTS
Ownership Ownership Ownership • 1.2 million 3 month-active subscribers in Q4 2018 80% Turkcell 51% Belarusian State 100% Telekom Austria • 4G services since September 2017 (through becloud) 20% Belarusian State 49% MTS • Expanding digital services footprints • Launched lifebox, TV+ and lifecell Digital MIX offerings
*Source: Company calculation based on Q3 2018 results 64 64 BELARUS: MOBILE MARKET PERFORMANCE
MARKET SHARE FINANCIALS LIFE:) VELCOM MTS Subscriber* Mobile Revenue Growth (in BYN) (YoY) 10.7% 20% 21% 18% 17% 18% 22% 16% MTS 15% 46.4% 11% VELCOM 8% life :) 11% 42.9% 8% 8%
(*) 3 month active subscribers Q417 Q118 Q218 Q318 Q418
Revenue life :) EBITDA Margin Trend* 38.6% 6.3%
MTS 45.4% 18.2% 17.1% VELCOM 14.4%
48.3% LIFE :) 6.0%
Q417 Q118 Q218 Q318 Q418 Source: Company announcements (Q3 2018). 65 65 Note: life :) EBITDA margins in 2018 include the impacts of IFRS 9, 15 and 16 TAXATION IN TURKEY
TAX MOBILE FIXED TURKEY HAS THE WORLD’S 70% 3 Special Communication Tax (SCT) 7.5% 7.5% HIGHEST MOBILE SERVICE TAXES
VAT 18% 18% 60%
Treasury Share1 15% 1% 50%
TRX fees 5% - (of net sales) 40%
Contribution Share to 0.35% 0.35% Telecom Authority 30% New subscription SCT2 TRY 65.00 - (at first enrollment) 20% Wireless license fees TRY 27.86 - (per acquisition) 10% Wireless usage fees Turkey Hungary Jordan UK Croatia Greece Italy Spain Egypt TRY 27.86 - (annual)
1Under the license agreement Turkcell pays a treasury share equal to 15% of its gross revenue from Turkish GSM operations 2 Excluding M2M SIMs 66 3 GSMA/Turkey Report, 2016 66 MOBILE/SMS TERMINATION RATES IN TURKEY
MTR RATES Mobile Voice Rates SMS Rates TRYkr.
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% EVOLUTION OF MTR TRY kuruş per min.
17.2 15.7 Turkcell MTR is 13.6 14.4 1.8x below EU 11.1 11.1 9.1 8.1 MTR -Turkcell Europe-MTR 6.6 6.5 4.9 4.8 3.1 3.1 3.1 4.2 4.4 4.5 2.5 2.5 2.5 2.5 2.5 2.5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 MTR: Mobile Termination Rate 67 Source: BEREC July 2017 report, Cullen International 67 CURRENCY TRENDS
USD / TRY EUR / TRY Average Period-End 5.26 6.03 3.77 4.52 3.52 4.76 3.71 2.91 3.18 5.60 3.63 4.11 2.73 3.01 3.02 3.32
2015 2016 2017 2018 2015 2016 2017 2018
USD / BYN USD / UAH
27.19 28.07 27.69 2.16 24.00 1.86 1.96 1.97 25.56 26.64 27.32 1.98 1.93 2.03 21.79 1.59
2015 2016 2017 2018 2015 2016 2017 2018
68 68 NOTICE
This presentation may contain 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 2019 or for the medium term 2018 to 2020. More generally, all statements other than statements of historical facts included in this presentation, including, without limitation, certain statements regarding the launch and goals of our payment card business, our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the written or oral 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 2017 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 presentation, 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 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 the charts or tables used in this presentation totals may not foot due to rounding differences. The figures used in this presentation are rounded while percentage changes are calculated based on the figures disclosed in the press release.
69 69 THANK YOU
For further information please e-mail [email protected] or call Turkcell Investor Relations at (+90 212 313 1888)
Please download our IR App via here for iOS and here for Android mobile devices or via below QR codes.
For Android For iOS
70