Turkcell The igital perator
January 2019
1 STRATEGIC APPROACH DIGITAL SERVICES
BUSINESS MODEL Q3 2018 RESULTS HEDGING
APPENDIX
2 COMPANY OVERVIEW
• THE DIGITAL OPERATOR • 7 COUNTRIES • 50.3 MILLION TURKCELL GROUP SUBSCRIBERS • 150 MILLION DIGITAL SERVICES DOWNLOADS • LISTED ON NYSE & BORSA ISTANBUL WITH A $5.1 BILLION MARKET CAP1
SUBSCRIBER BREAKDOWN (m, Q3 2018)
Turkcell Turkey 37.8
Ukraine 10.1
Belarus 1.6
TR Northern Cyprus 0.5
2 lifecell Europe 0.2
1 As of December 31, 2018 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
150 million core app downloads 60 Min 20 Min 21 Min Watching Playing (BiP) Reading 41 16 Min Min 63.9% 48 Min Playing Playing triple play customers Listening (Playcell) (Tavla Go) 30 Min 8 Min Contest Interacting 36 30 Min Documents uploaded For VOIP users per person per day
32 Min 1.8 M Calling Searches per day
Note: Data as of Q3 2018 except for the number of downloads which is as of December 2018
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 CONTINUOUSLY BEATING TARGETS
• Digital transformation led to a record high growth with 3 pp higher EBITDA margin in 2017 • 2018 guidance revised upwards three times, last on Oct 24, 2018
REVENUE GROWTH RATE COMPARISON1 (2017) 23% TURKCELL GROUP 2018 - 2020 2018 14 Mar2 Last (24 Oct)
REVENUE 13% 14% - 16% 20% - 22% GROWTH 8% 9% 6% 6% 7% 4% 5% 5%
EBITDA MARGIN 37% - 40% 39% - 41% .
OP. CAPEX /
TelCo9 TelCo8 TelCo7 TelCo6 TelCo5 TelCo4 TelCo3 TelCo2
TelCo10 18% - 16% 18% - 19% SALES3
35% Group (1) Top 100 telecom operators in terms of market capitalization is taken into consideration. Turkcell 2017 revenue growth rate is compared to those which announced their financial results as of Feb 15, 2018. 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 2017 (3) Excluding licence fees 11 11 DIGITAL SERVICES
12 PLATFORM OF PLATFORMS
13 13 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
14 14 TELCO & DSS CROSS COLLABORATION
Shake & Win Who wants 1 GB? Surprise Point
7 Mn Shakes/Week 4.6 Mn Followers 2.4 Mn Distinct Customers - 27 Mn Gifts
7 Mn Users 5.5 Mn Followers (in 3 Weeks)
From Classic Campaigns To Phygital Experiences
15 15 BOOSTING THE SERVICES PLATFORM WITH TELCO CAPABILITIES
Digital Campaigns use BiP App2Network Calls TechFin built on Turkcell location data & assign 2nd Number integration Credit Rating Data telco benefits
16 16 BiP – INSTANT MESSAGING
Peer-to-peer money transfer
BiP Global Download Trend 2nd number integration (Million) 2.7
2.2 2.2
HD voice & Group video calls 2.0
Q417 Q118 Q218 Q318
Downloads - Top 6 Countries Discover services & games
BiP Web
17 17 fizy - MUSIC
Radio channels
Live concerts
Worldwide music playlists
Video clips
18 18 TV+
Live channels & VoD films also on mobile
24 hours timeshift
4K 4K broadcast
Save & watch
All screens + Apple TV
19 19 Dergilik- DIGITAL PUBLISHING
100 National & local newspapers
1000+ global & local magazines
4.7 Million monthly reading
Reading in airplane mode
20 20 lifebox – PERSONAL CLOUD
Auto back-up
Free-up space
Face & object recognition
5GB storage space free of charge
21 21 Yaani – SEARCH ENGINE
Smart algorithms
Location based search
Service integration
Search categories
22 22 PAYCELL: DIGITAL PAYMENT COMPANION
1.5Bn TL transaction PAYCELL 4.8Mn in Q3 2018* Mobile Payment Direct Carrier Billing users
PAYCELL APP Mobile wallet Paycell top-ups 2.0Mn 1.9Mn Utility payments downloads Registered Money transfer credit cards QR code payment
PAYCELL CARD 440K Paycell launch campaign users
and Available at: counting
23 * Transactions include subsidiary revenues 23 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
24 24 GAMING BUSINESS
• Umbrella platform • Attractive gaming market* in Turkey • New interface • 2.1Mn 3-months active users in Q3 • 31Mn gamers • Safe zone for kids up to age 12 • USD774 Mn market • Available in web & mobile • Aim to create the largest gaming brand in Turkey • 7.1Mn 3-month active users in Q3
• Segmented approach • Coming soon for age 12+
• Value proposition for gaming • TavlaGO (Backgammon) • Multiplayer online game • Subscription based business model • 162K cumulative download • App used 41 minutes per day
25 * Source: Market Report, Newzoo, 2017 25 LIFECELL: FULLY DIGITAL WITH FREEDOM OF CHOICE
SUBSCRIBERS (thousand) 55% of postpaid Lifecell acquisitions are 1,526 1.6Mn new customers as of Oct 18 2x
879 48.3 TL 2x ARPU 401 (1.3x of Turkcell consumer) 1.4% 195 8.6 GB av. data usage of a churn rate Lifecell user (~40% lower vs. Q417 Q118 Q218 Q318 Turkcell consumer) 26 Note: Average monthly churn during the related quarter. 26 BUSINESS MODEL HEDGING
27 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 • 1.5Bn USD cash covers principal & • Converted variable to fixed interest interest payments until 2020-end • Proven track record
Turkcell ARPU vs. CPI Trend (Q115=100) Details of Financial Debt Principal & Interest Payments* 164 (After Hedging) (Million USD) 147 142 139136 131129130 147 125 1,623 138 115 115 111110 128132 14% 17 106 123123 100 120 43% 114 57% 109110112 523 518 103103106 86% 427 1,606 100 4 6 170 167 213 519 512
215 165 5 162 5
Q116 Q215 Q315 Q415 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q115 Local Currency Fixed interest 2018 2019 2020 2021 2022 2023+ TCELL ARPU (exl. M2M) CPI FX Variable interest FX Local Currency 28 *Data of Turkcell Group companies, exluding TCF 28 Q3 2018 RESULTS PROVING OUR ROBUST BUSINESS MODEL
TURKCELL STRENGTHS REFLECTION ON FINANCIALS
• Mobile triple play at 63.9%, up 13.5pp yoy Ability to create revenue from new & adjacent products • Mobile ARPU growth at 18.0%
• Growth momentum, 59% 2yr revenue increase Resilience at the operating profitability level • 41.3% EBITDA Margin, 97% 2yr EBITDA increase
• Sector low monthly churn Strong customer loyalty driven by digital services • Enhanced offerings with digital services • Sector leader at NPS by far
• Hedging instruments in place Prudent financial risk management • FX impact under control • Robust asset quality 29 29 MAJOR FUNDING & HEDGING DETAILS
TYPE & AMOUNT MATURITY INTEREST PURPOSE OF FUNDING UTILIZATION HEDGING DETAILS DATE
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 - + 2.00%
Bond 5.75% CAPEX and inorganic US$500Mn 15/10/2025 - - (October 2015) (fixed rate) growth opportunities
Fully utilized EUR500Mn Debt restructuring 100% hedged with PCCS China 3-year grace in Oct 15 Development period, 10-year EURIBOR Bank maturity + 2.20% ~EUR 120 Mn utilized (October 2015) CAPEX ~86% hedged with PCCS &CCS EUR750Mn as of September 18
Bond 5.80% Repayment of existing 11/04/2028 - (April 2018) US$500Mn (fixed rate) indebtedness -
30 30 SOLID BALANCE SHEET
SUMMARY NET DEBT/ EBITDA
TRY Mn Q1 2018 Q2 2018 Q3 2018
Total Cash 4,590 7,081 8,749 1.83x
Total Assets 37,073 41,026 45,404 4,790 TCF loan porfolio 1.44x 1.49x Total Debt* 14,002 17,313 21,969 4,691 Lease 4,399 1,128 1,136 1,086 1.23x Obligations 0.80x 0.84x Total Equity 14,248 14,952 14,891 8,430 Net Debt** 5,541 Net Debt* 9,413 10,231 13,220 5,014
** Net Debt 5,014 5,541 8,430 Q118 Q218 Q318
Net Debt/EBITDA* Net Debt/EBITDA**
* Impact of IFRS 16 (capitalized lease obligations) are excluded 31 **Turkcell Consumer Finance Company’s (TCF) loan portfolio and capitalized lease obligations related to IFRS 16 are excluded 31 CONSUMER FINANCE BUSINESS
TCF KEY FINANCIALS* TCF Loan Portfolio Details
TRY MILLION • 4.7Mn loans outstanding Q3 2018 YoY % 9M 2018 YoY % • 1,580 TL average ticket size Revenues 252 52.1% 694 64.3% • 91 TL average monthly installment • Loan protection insurance on over 95% recently Net Income 145 234.8% 308 164.5% • Cost of risk remained stable at 2.2% in September 2018
Handset Financing New Financing Regulation (TRY billion) What has changed? 5.1 5.2 4.4 • Financing for telecom devices is limited to 6 months with a retail price TL 3.5k and above (12 months for TL 3.5k and below) 4.7 4.8 3.8 • Installments are restricted industry-wide at all channels 0.6 0.4 0.4 What we expect? Q317 Q218 Q318 Turkcell Contracted Receivables TCF Consumer Loans • Room for ARPU uplift
• 300Mn TL of Asset Backed Securities were issued to date • Demand will shift towards mid-segment SPs
*Turkcell Consumer Finance Company (TCF) 9 month net income includes 30 mn TL and • Consumers will adjust their own budgets 57 mn TL dividend from Paycell retained earnings in Q217 and Q218, respectively 32 32 FX EXPOSURE
CASH* DEBT NET FX POSITION*
USD MILLION Before Hedging After Hedging Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 6% 5% 23% 9% 30% Share 49% (91) 36% (125) (144) 77% 52% 13% (203) (204) (255) (301) Nominal 8.7Bn TL 23.1Bn TL (330) USD EUR TRY Other * Comfort Zone Excluding FX swap transactions for TL borrowing (USD 500Mn) IMPACT OF HEDGING TOOLS ON Q318 FX LOSS TRY MILLION (688) 1,580 4,291 2,711 1,994 716 FX Loss from FX FX Gain from FX FX Loss Hedge Net FX Loss Denominated Denominated Portfolio Gain Liabilities Assets *Including advance payments, hedging and assuming the 4.5G license payables in TRY33 Note: In accordance with the IFRS 9, hedge accounting is applied as of July 1, 2018 for the periods before April 2017 and excluding FX swap transactions for TL borrowing. 33 FINTUR DIVESTMENT
Fintur divestment is a milestone towards further cementing our focus EUR350 Fintur Deal Value on our digital services strategy with a stronger balance sheet million (estimated)
• Turkcell signed a binding agreement to divest its 41.45% stake in Fintur to Telia Contribution to Company on December 12, 2018 ~TRY850 Profitability million • This deal is expected to be completed following the Moldovan Competition (estimated) Authority approval.
Lower than Post Deal Turkcell Transactions to date: 1.5x Leverage Company Divestment date Share Azercell March 2018 51.3% (by Fintur) Geocell March 2018 99.9% (by Fintur) Post Deal Turkcell Long KCell December 2018 51.0% (by Fintur) Net FX position Fintur January 2019 (exp) 41.45% (by Turkcell)
Note: Turkcell took the decision to exit from Fintur along with Telia Company in Q416 and classified its investment as an 34 34 «asset held for sale» on its balance sheet Q3 2018 RESULTS
35 THIRD QUARTER HIGHLIGHTS FINANCIAL OPERATIONAL Record top line at 5.8 bn TL, up 26.1% yoy, 59% 2yr growth Record high mobile ARPU growth of 18%
EBITDA Margin at 41.3% 4.5G user data usage reached 7GB
FY18 Revenue & EBITDA guidance revised upwards 18.2Mn 4.5G compatible smartphones
Second installment of dividend distributed 130Mn core digital services* downloaded, +16Mn qoq
Revenue and EBITDA Margin Mobile Triple Play Multiplay with TV 42.5% 41.8% 41.3% 35.5% 37.3% 33.3% 33.9% 34.5% 33.8% 5,799 5,105 63.9% 46.8% 47.5% 4,597 4,666 4,762 60.5% 4,316 4,044 4,053 3,658 42.3% 50.4% 2,393 2,022 2,134 1,632 1,739 1,218 1,371 1,400 1,457
Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q317 Q417 Q118 Q218 Q318 Q317 Q417 Q118 Q218 Q318 Revenue (Mn TL) EBITDA (Mn TL) EBITDA Margin (%) 36 * Includes BiP, Dergilik, fizy, My Account, Lifebox, Academy, Sports app, Upcall, TV+, Yaani and SİM 36 TURKCELL GROUP FINANCIAL HIGHLIGHTS
Consolidated TRY Million1 Q3 2018 QoQ % YoY % 9M 2018 YoY % Revenue 5,799 13.6% 26.1% 15,666 20.8%
EBITDA 2,393 12.1% 46.6% 6,549 45.9%
EBITDA Margin 41.3% (0.5pp) 5.8pp 41.8% 7.2pp
Net Income 241 (41.8%) (59.8%) 1,157 (34.4%)
Op.Capex/Sales2 16.1% (4.1pp) (0.9pp) 16.0% 0.3pp
Two-year Cumulative Growth Rates 107% • 59% two-year cumulative revenue growth 102% 97% 64% 51% • Almost doubling EBITDA in 2 years 46% 41% 59% 48% 52% • Op.Capex/Sales at 16%, in line with the plan 36% 40% 37% 40%
Q117 Q217 Q317 Q417 Q118 Q218 Q318 1 TRY figures are based on IFRS. Revenue EBITDA 37 2 Excluding license fees 37 OPERATIONAL HIGHLIGHTS
TURKEY SUBSCRIBERS (million) ARPU (TL) 18.1% Mobile ARPU like-for-like Growth YoY* Total Turkey subscribers YoY 54% 37.8 mn 51.6 53.5 55.3 3.4% of total 19.0 591K↑ net add YoY 38.7 YoY mobile 29.5 32.8 18.0% 15.9 Q316 Q317 Q318 Fixed Residential Mobile Blended (excl. M2M) 3.1 * The ARPU of customers who have stayed with Turkcell for at least 14 months. MONTHLY AVERAGE MOBILE CHURN RATE 1.3 0.9 0.4pp Postpaid Prepaid Fiber ADSL TV lower than Net add 2.2% 2.2% competitors’ 1.9% average in QoQ 191K↑ 63K↓ 43K↑ 1K↑ 22K↑ Q317-Q218**
YoY 654K↑ 353K↓ 175K↑ - 115K↑ Q316 Q317 Q318 Note: Average monthly churn during the related quarter. 38 38 Note: TV subscribers include 2.5 million of «OTT only» customers and it is excluded from net add & total subs ** Company calculation on the basis of monthly churn rates disclosed in ICTA sector reports. INCREASING APPRECIATION OF CUSTOMERS
NET PROMOTER SCORE* OVER COMPETITION
Turkcell Turkcell Score 26 Score 23 +23 +24 +20 +14 +12 SUPERIOR +9 PIONEER CAMPAIGNS 4.5G QUALITY & SPEED
Q118 Q218 Q318 Points over next best Points over third best
• #1 in NPS reflecting superior overall customer satisfaction
• Continued to widen the gap in the third quarter DIGITAL SERVICES ENHANCED PORTFOLIO SHOPPING EXPERIENCE 39 *NPS score comparison is for consumer segment in mobile. (Source: Future Bright) 39 CONTINUED RISE IN DATA USAGE
MOBILE DATA USAGE (Av. GB/User) 4.5G SUBSCRIPTION (million)
31.1 31.5 7.0 29.4 6.0 Lifecell 5.4 user 4.3 4.2 8.6 GB 15.2 17.6 18.2 3.4 15.0 2.6 2.9 2.0 8.5
Q316 Q317 Q318 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318
Non 4.5G Users 4.5G Users Total Users 4.5G subscribers 4.5G compatible smartphone
• 4.5G users are driving data usage, >2x consumption vs. non 4.5G users
• Significant room for further 4.5G adoption
• Smartphone penetration in our network reached 74%
• 79% of these are 4.5G compatible; +11pp yoy Vestel Venus General Mobile Huawei P9 Samsung Go GM8 Lite Mini Galaxy J7 Core 40 40 INTERACT, READ, LISTEN, WATCH, STORE & SEARCH
INSTANT DIGITAL MUSIC TV PERSONAL MY ACCOUNT PAYCELL*** FAST LOGIN MESSAGING PUBLISHING** CLOUD (Hesabım) Download* (lifebox)
30.3Mn 7.8Mn 19.2Mn 10.1Mn 8.6Mn 35.1Mn 6.5Mn 2.0Mn 12.2Mn registered user
3-Month Active User 9.7Mn 13.0Mn 3.2Mn 2.3Mn 2.0Mn 18.6Mn 2.6Mn 4.8Mn 5.7Mn
Service KPIs 114Mn messages 189K 7.8Mn 2.6Mn 36 32% 1.8Mn 1.5Bn TL 182 Mn per day copies read songs streamed TV sessions docs uploaded more search transaction logins up per day per day per day per person ARPU per day to date 2Mn per day digitized call experience per day 41 *Refers to downloads as of October 22, 2018 ** 3-MAU includes users who utilised the zero rating benefit of Dergilik magazines and newspapers via browser. *** Transactions include subsidiary revenues 41 INCREASING MULTIPLAY
MOBILE* (TRIPLE PLAY«3P») MOBILE MULTIPLAY
60.5% 63.9% TRIPLE PLAY SHARE IN MOBILE REVENUE 50.4%
11pp 69% 77% 80% YoY
Q317 Q218 Q318 FIBER RESIDENTIAL (MULTIPLAY WITH TV)
46.8%47.5% 42.3%
Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 42 42 *Share of mobile voice line users which excludes subscribers who do not use their line in the last 3 months. Triple Play refers to mobile customers who use voice, data and one of core digital services. TURKCELL INTERNATIONAL
YoY Revenue Growth EBITDA Margin HIGHLIGHTS (Q318, in TRY) (Q318) lifecell Leader in 4.5G ARPU TRY MILLION1 Q3 2018 YoY% 9M 2018 YoY % 62.6% 41.8%
BeST 4G Revenue 424 55.4% 1,035 32.9% growth 61.6% 16.1% on track EBITDA 151 104.8% 366 82.9% Kuzey Kıbrıs Turkcell Offering EBITDA fixed 35.5% 8.6pp 35.3% 9.7pp broadband Margin 12.0% 35.0%
lifecell Europe 223K subscribers
43 1 TRY figures are based on IFRS 43 APPENDIX - Network Dynamics - New Opportunities - International Business - Regulatory - Currency Trends
44 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 45 45 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 46 46 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 47 47 DIFFERENTIATED THROUGH QUALITY
MONTHLY TRENDS (2017) 53.8 Turkcell 53.4 up to 3x DL T.put 35.7 33.2 (Mbps) Operator-2 19.7 Operator-3 19.0 faster in Downlink 21.0 18.5 UL T.put up to 15.4 14.7 2x (Mbps) 11.1 10.9 faster in Uplink 36 34 37 Latency 34 (msec) up to 10 ms 29 28 lower Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Latency
Source: Ookla, December 2017 48 48 5G: MORE THAN HIGHER SPEED eMBB
10x Faster Data Rate
10x Lower Latency 5G 100x Higher Capacity eMTC URLLC
49 49 5G: ROADMAP
We do not worry about 5G You should not worry either… • Investment based on use cases
234.4 MHz • Widest spectrum
• SW upgradable
50 50 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
51 51 FIXED BROADBAND MARKET
TURKISH FIXED BROADBAND MARKET FIXED BROADBAND MARKET BY TECHNOLOGY (MN) CAGR 14.7% 2012-17 13.2% 0.83 ↑11% 12.1% 13.0 mn 16.0% 3 major 11.5% 11.0% Total Penetration Operators 0.74 2.33 ↑34% Subscribers 10.2% 0.63 0.56 1.93 0.49 1.67 0.49 1.46 1.2 FIBER SUBSCRIBER MARKET SHARE 0.55 Q3 2018 8.7 ↑6% 7.8 7.2 6.6 6.6 6.8
Incumbent 50% 48%
Other 2012 2013 2014 2015 2016 2017 players xDSL Fiber Cable Penetration 2% Note: Company calculation based on data in ICTA Q3 2018 Report 52 52 TURKCELL SUPERONLINE
NEW BUSINESS MODEL ON FIXED INFRASTRUCTURE FIBER CUSTOMERS • Infrastructure sharing protocol signed by Turkcell, Türk Telekom, thousand 1,204 1,331 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 Sep 2018 • A new capex model on fixed business NET REVENUE TREND TRY Mn 3,210 3,026 2,429 CAGR Turkcell Superonline Fiber Backbone 1,719 2015-2017 • 42.6 thousand km rollout 37% 2015 2016 2017 2018 9M • 20 cities EBITDA TREND • Data speed up to 10Gbps TRY Mn 1,276 1,376 CAGR 900 2015-2017 • 41% take up rate 548 57% 2015 2016 2017 2018 9M 53 53 SUCCESSFUL IPTV SERVICES
IP TV Subscriber Market Share1
As of Q318
CableTV 18% D-Smart 8% 14%
Digitürk Tivibu (beIN) 38% 23%
3.1 million Turkcell TV+ subscribers2 in Q3 2018 1Source: ICTA Q3 2018 Report 54 2Includes IP TV and OTT TV subscribers 54 GLOBAL TOWER
NET REVENUE TREND Turkey 8,288 TRY mn CAGR 257 2018-2020 Ukraine 1,103 Tower portfolio: 15%-20% 10,337 Belarus 831 2017 2018E 2019E 2020E
TRNC 115 TENANCY RATIO
• First and only TowerCo of Turkey Medium Term • Regional player operating in 4 countries 1.53 1.8x-1.9x • Long term, visible revenue stream & strong profitability • Listing still on the agenda 2017 2018E 2019E 2020E 55 Note: Tower portfolio includes owned and managed towers and towers for which contract management services are provided 55 CAPEX/SALES TREND
Turkcell Group Average: 17.1%* 25% EEMEA Average: 18.0% Between 2007 and 2017
20%
15%
10%
5%
0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Turkcell Group EEMEA
Source: Bloomberg Industry Data and company announcements *Excluding licence fees 56 56 OPERATIONS IN UKRAINE
UKRAINE MOBILE MARKET FACTS* lifecell PERFORMANCE
UAH MILLION Q3 2018 YoY% FY17 YoY%
54.6m 129% 3 Revenue 1,367 9.1% 4,876 0.8% Total Mobile Operators subscribers Penetration EBITDA 610 64.0% 1,327 (2.2%)
EBITDA Margin 44.6% 14.9pp 27.2% (0.8pp)
HIGHLIGHTS ** • Operational performance: • 7.6 million subscribers in Q3 2018 (3 months active) with UAH 59 Ownership Ownership Ownership ARPU (up 17.7% yoy) 100% Turkcell 100% VEON 100% MTS 4.2 million 3-month active 3G and 4.5G data users • 73% SP penetration (market leader) • Expanding digital services footprint with fizy, lifebox, magazines and TV+ • First to launch 4G services in Ukraine on 2600 MHz • 4.5G services on the 1800 MHz frequency since Jul 1st *Source: Global Wireless Matrix Q2 2018 57 57 ** MTS Ukraine changed its legal name to Vodafone Ukraine with a marketing agreement UKRAINE: MOBILE MARKET PERFORMANCE
MARKET SHARE FINANCIALS lifecell VDF Kyivstar Subscriber* Mobile Revenue Growth (in UAH) (YoY) 14.2% 15% 10% 11% 11% 12% 9% 9% KYIVSTAR 7% 9% 1% 2% 48.6% VDF 6% 4% -3% lifecell 37.2%
Q317 Q417 Q118 Q218 Q318 (*) 3 month active subscribers
Mobile Revenue EBITDA Margin (%)
58.0% 56.7% 57.2% 14.8% 54.4% 55.1% 46.1% KYIVSTAR 43.7% 44.1% 46.6% 41.4% 48.9% VDF 44.2% 44.6% 29.7% 41.8% lifecell 26.1% 36.3%
Q317 Q417 Q118 Q218 Q318
Source: Company announcements (Q3 2018). 58 Note: lifecell EBITDA margins in Q1 2018, Q2 2018 and Q3 2018 include new IFRS impacts (IFRS 9, 15 and 16) 58 OPERATIONS IN BELARUS
BELARUS MOBILE MARKET FACTS* BeST PERFORMANCE
BYN MILLION Q3 2018 YoY% FY17 YoY% 11.4m 121% 3 Total Mobile Revenue 32.2 7.7% 111.8 13.4% Operators subscribers Penetration EBITDA 5.5 189.5% 4.3 10.3%
EBITDA Margin 17.1% 10.6pp 3.8% (0.2pp)
HIGHLIGHTS
Ownership Ownership Ownership • 1.2 million 3 month-active subscribers in Q3 2018 80% Turkcell 51% Belarusian State 100% Telekom Austria 20% Belarusian State 49% MTS • 4G services since September 2017 (through becloud) • Expanding digital services footprints
• *Source: Company calculation based on Q3 2018 results New gaming platform for kids in Q3 2018 59 59 BELARUS: MOBILE MARKET PERFORMANCE
MARKET SHARE FINANCIALS LIFE:) VELCOM MTS Subscriber* Mobile Revenue Growth (in BYN) (YoY) 10.8% 22% 20% 21% 18% 18% 17% 19% 22% 16% MTS 13% 11% 46.5% VELCOM 15% 8% LIFE :) 11% 42.7% 8%
(*) 3 month active subscribers Q317 Q417 Q118 Q218 Q318
Revenue life :) EBITDA Margin Trend* 6.4% 18.2% 17.1% 14.4% MTS 44.6% VELCOM 7.0% 6.0% 48.9% LIFE :)
Q317 Q417 Q118 Q218 Q318
Source: Company announcements (Q2 2018). 60 60 Note: life :) Q1 2018, Q2 2018 and Q3 2018 EBITDA margins 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 61 3 GSMA/Turkey Report, 2016 61 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 62 Source: BEREC July 2017 report, Cullen International 62 CURRENCY TRENDS
USD / TRY EUR / TRY Average Period-End 5.99 6.95
4.52 6.44 5.52 3.71 3.52 3.77 3.18 2.91 4.11 3.63 3.02 3.32 2.73 3.01
2015 2016 2017 Q318 2015 2016 2017 Q318
USD / BYN USD / UAH
27.19 28.07 28.30 2.11 1.96 1.97 24.00 1.86 27.43 25.56 26.64 1.98 1.93 2.04 21.79 1.59
2015 2016 2017 Q318 2015 2016 2017 Q318
63 63 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 2018 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.
64 64 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.
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