turkcell investor presentation€¦ · investor presentation 1.9% 4.5% 2.0% 1.9% 2.1% 1.7% q1 19 q4...

1

Investor Presentation

TURKCELL INVESTOR PRESENTATION

May 2020


STRATEGIC FOCUS AREAS& 3-YEAR PLAN

2

33


CORE COMPETENCIES

STRATEGIC FOCUS AREAS

Digital Business Solutions Techfin ServicesDigital Services

Strong Bond With Customers

State-of-the-art Infrastructure

Advanced Analytics & Technology

Strong & Agile Team

Telecom Services

Well-Positioned to Create More Value

44


Enlarge subscriber base with dedicated focus on postpaid segment

Grow in fixed broadband through fiber and FWA

Utilize the digital channel for acquisition, device sales and growth

Leverage continued demand

Ensure standalone growth

Expand globally

Boost overall corporate business with multiplay focus

Provide end-to-endIT solutions for corporates

Trusted partner of corporates through their digital transformation

Reach wider customer base with complete portfolio of solutions

Reach out to long tail of 1.6Mn+merchants in Turkey

Launch new consumerfinance solutions

GROW IN TELECOM SERVICES

MONETIZEDIGITAL SERVICES

LEVERAGEDIGITAL BUSINESS SOLUTIONS

LEAD TECHFIN SERVICES

+1 Million Subscribers/year

in Turkey

2.5x Standalone revenue

growth in 3 years

#1 Solution Provider

in 3 years

17 Million Active Paycell users

by 2022

Strategic Focus Areas

55


MPOS

PSD2

E-money

Micro Lending

Potential regulatory changes in the definition of loan facilitations

Benefit: Potential to give micro loans to consumers

The potential adaptation of PSD2 Payment Services Directive of EU in Turkey

Benefit: Ability to reach banking system, becoming single interface for customers

Using smartphone or tablet to perform the functions of a cash register

Benefit: Increased penetration of longtail merchants

Potential legislative measure to remove the requirement to keep e-money funds in escrow account

Benefit: Potential to attract more users offering return on e-money accounts

Techfin: Regulation Becoming More Supportive

66


Turkish Techfin Ecosystem

DCB Wallet

Bill Payment

Payment Facilitators

Money Transfer

Paycell App Strategy

E-Money

VISION: Being an enabler on financial inclusion with the combination of technology and financial services

Paycell: Super App for All Techfin Solutions

77


Merchants

Go-to Market Strategy

(MPOS & QR)

Go-to Market Strategy

(App)

Customers

6,000Turkcell Stores

37 MnCustomers

4,000Direct Sales Force

TurkcellTechnology

Paycell: Go to Market Strategy

88


1 Bn

2.5 Bn

2019 2022E

Paid Subscriptions

Platform Licensing

Discovery Services

Traffic Monetization

Data Monetization

Operator Co-operations

Standalone Revenue (TRY)

DSS: The Dynamics of New Standalone Strategy

99


Telco market figures consist of mobile and fixed voice & data figures and exclude hardware sales. Mobile figures are based on Futurebright 2018Q4 Field Research. Fixed figures are based on ICTA Report 2018Q4 and Turkcell Estimation. ICT, Hardware & Software figures are based on IDC Blackbook 2019.

TELCO BUSINESS / EXISTING BUSINESS

41%

24

DIGITAL & ICT BUSINESS / GROWTH ENGINE

5%

HARDWARE & SOFTWARE BUSINESS / OPPORTUNISTIC APPROACH

• Superior network perception• Net add, increase in ARPU• Opportunity of multiplay, new services• High margin

• Fragmented market• Lack of strong system integrator• Increase in demand for digitilization

• Profitable growth with integrated solutions

TelcoMarket Share

ICTMarket Share

Billion TRY

DBS: Market & Turkcell Positioning

1010


Inflationary Pricing

Effective Balance Sheet

Risk Management

Strong Free Cash Flow

Generation

Efficient Capital Allocation

• Key to sustainable growth and profitability

• Assurance for required return on investment

• Above-market ARPU growth

• Liquidity management• Net fx position

• Sustainable revenue growth• Continued operational

profitability• Controlled capex

• Review of investment requirement in conventional services

• Investment in high growth businesses

• Ensure returns above WACC

Turkcell Finance: Key Priorities

1111


Reduce funding needsin capex heavy traditional business

Invest in new high growth areas

Global Telco Industry Challenges

Flow of funds

Turkcell’sResponses

Digital services (TV, music, etc.)

Techfin services

ICT solutions (datacenter, cloud etc.)

IPO/M&A activities

Infrastructure sharing

Sell & leaseback transactions

Heavyinvestment

need

Slowrevenuegrowth

Improve returns over WACC11

Efficient Capital Allocation


OUR INITIAL TAKE ON

COVID-19

13


Our Initial Take on the Impacts of COVID-19

KEY POINTS

At Turkcell, we are closely monitoring the situation, and act via work groups/squads at each function

We prioritize employee health, keeping our services and operations uninterrupted, and management of any potential risks related with balance sheet with an increased emphasis on liquidity management

Telecom services have become more critical for work, education & life, and demand has surged

We are also aware of potential risks due to limited mobility (roaming etc.) and a prolonged scenario

Fast forward digitalization enhances the opportunities in business & entertainment for the long run

Our unique portfolio of digital services and solutions positions us favorably in the post-crisis era

We have a robust balance sheet with strong liquidity

Turkcell has a strong balance sheet with strong liquidity and limited financial risk exposure

14


Initial Management ResponseEMPLOYEES

Remote working since March 13 including more than 10,000 call center agents

Provided field employees with necessary hygiene equipment

CUSTOMERS

Free 6 GB/mo for mobile remote education portal; free 10GB/mo TV+ users for remote education channels

Plans to provide free 6GB/mo to university students to access online education platforms (under discussion)

Free 500 minutes and 5 GB/mo provided to subscribers in health sector; 10,000 free minutes for family physicians

Collection terms eased for subscribers in health sector and subscribers above age 65

Free calls to Consulate Call Center for Turkcell subscribers abroad

RETAIL CHANNEL

Stores at malls closed (170 out of 1,300 exclusive stores. 4,000+ non-exclusive stores open)

Street stores work 6 days of the week between 12pm to 6pm; these stores are provided with hygiene materials

NETWORK

Network optimization based on AI to manage traffic load actively

Network operations teams on alert mode and back-up core capacity is ready for any need

Critical equipment orders brought forward and inventory replenished

FINANCIAL

Increased emphasis on liquidity management and collection risks

Daily financial risk management meeting with CFO; weekly status updates with Group CFOs ; monitoring cash flow on a daily basis

Dynamic revenue forecasting and cost control measures

OTHER

Three operators initiated a project with the cooperation of Ministry of Health aimed at identifying high risk groups to virus based on AI, ensuring compliance to lock up rules based on location data and developing a mobile app including updated information on pandemic

Note: Retail channel reflects the picture prior to the ease of lockdown actions

15


COVID-19 Impacts – Recap

• Rise in data usage in total network: 35%

• Customer acquisitions are:

• Mobile (postpaid): 35% lower• Fixed: 52% higher

• Churn:

• Mobile (postpaid): 37% lower• Fixed: 28% lower

• Accelerated demand for digital channel

• %30 more visitor• %76 more sales volume

• Digital Services

• Group video call in BiP increased 10x

• TV+ Login & session time: up by 15%

• Digital Business Solutions

• higher demand for cloud, security services

• city hospital projects accelerated & new ones

• Techfin solutions

• 30% increase in online payments

• 42% increase in DCB

• Quarantine rules apply in Ukraine and TRNC

• Stores open

• Customers are encouraged to use online channels

• Higher consumption (Ukraine):

• Voice traffic: 9%

• Data: 3%

OPERATIONS IN TURKEY STRATEGIC FOCUS AREAS INTERNATIONAL BUSINESS

Note: Impact figures compare last week of March to last week of February

RISKS

IMPACTS

• Roaming revenue

• Prepaid revenue

• SME segment and equipment sales

• Lower acquisition

• Lower handset sales

• Roaming revenue

• Lower acquisition

• Prepaid dominated markets

• Price increase limitations

• Digital Business Solutions

• deferral of projects

• collection risk

• Techfin solutions

• decline in consumer finance business

16


Major Challenges and RisksCONSUMER SEGMENT

Declining traffic in physical channel impacting customer acquisitions (similar but positive impact on churn levels)

Pre-paid line top-ups in physical channels (low pre-paid subs share of 38%, rev. share is <20% in mobile in Turkey)

Declining device sales due to limited mobility

CORPORATE SEGMENT

Certain industries are impacted directly by the pandemic which might lead to requests from clients regarding:

Deferral on payments; temporary discount of services

SMEs vulnerable to prolonged time and macro risks (rev. share is <10% in Turkey)

ROAMING REVENUES

Roaming income in consumer and corporate segments at risk with suspension of inbound and outbound travels (rev. share is <3%), but also lower roaming costs

CONSUMER FINANCE BUSINESS

Potential of further slow down in consumer finance business with the decline in device sales

Potential increase in cost of risk on BRSA’s resolution on deferral of loan payments

OTHER

Stricter lock down conditions might impact fixed broadband service set-ups

Any rise in unemployment or decreasing purchasing power may impact our overall business

Higher vulnerability to cyber-attacks due to remote working

17


Long Term OpportunitiesDIGITALIZATION OF CUSTOMER

Fast forward digitalization enhances the opportunities in business & entertainment

Our digital business solutions needed for online education platforms, remote work, e-commerce

Rising use of our digital services portfolio leading to established habits

DIGITALIZATION OF SERVICE CHANNELS

Optimization of our channel costs with faster shift to digital channels

Call center agents switched to home agents reducing overhead costs

FIXED WIRELESS ACCESS (FWA)

Superbox, the brand for FWA in Turkey, stands out as the sole alternative to fiber offering fiber-like speed

Faster penetration of Superbox than our plans; 125% increase in acquisitions (last week of March vs last week of Feb)

TECHFIN

Acceleration of payment habits into cashless methods

Surge in demand for digital content: Opportunity for mobile payment growth

Increase in QR based and contactless payments

18


Telecom services have become more critical for work, education & life

• Need for Turkcell’s quality service is more important than ever• We see strong demand leading to overage, upsell and behavior change

Fast forward digitalization enhances the opportunities in business & entertainment

• Our digital business solutions needed for online education platforms, remote work, e-commerce • Rising usage of our digital services portfolio• Optimization of our channel costs with faster shift to digital channels

Potential risks lie in certain area and segments

• Roaming income at risk if situation extends beyond summer (rev share is <3%) • Top-up of pre-paid cards in physical channels (we have a low pre-paid share of 38%, rev. share is <20% in mobile in Turkey)• Risk of disruption to the global supply chain depending on the duration of this crisis• Rising vulnerability to cyber-attacks given significant remote working

Quality of balance sheet and cash strength is key

• Turkcell has a robust balance sheet with strong liquidity: USD1.4Bn cash at hand (Mar-20)• We carry a long FX position of USD114Mn as of Mar-20

Conclusions


19

Q1 2020 RESULTS

20


Q1 2020: Strong Start to the Year

REVENUE GROWTH

17.3%

6.7Bn TL

EBITDA MARGIN

42.2%

Up 2pp yoy

TOTAL SUBSCRIBERNET ADD

614K

towards 1Mn/y target

POSTPAIDSHARE

63.2%

Up 8pp yoy

MOBILEARPU GROWTH

21.5%

Double-digit growth

RESIDENTIAL FIBER ARPU GROWTH

13.4%

• Strong growth

Solid profitability

Strong net add

2 week/limited impact of COVID-19

21


Note: TRY figures are based on IFRS. 1Excluding license fees

Turkcell Group Financials

Highlights

• Double digit revenue growth and strong operational profitability

• 2 week/limited impact of COVID-19

• Excluding the 772Mn TL transaction gain in Q119, yearly net income growth is 93%

Revenue 6,658 (0.4%) 17.3%

EBITDA 2,809 2.0% 23.1%

EBITDA Margin 42.2% 1.0pp 2.0pp

EBIT 1,437 6.5% 30.3%

EBIT Margin 21.6% 1.4pp 2.2pp

Net Income 873 15.5% (28.7%)

Opr. Capex/Sales1 12.6% (12.8pp) (3.0pp)

QoQ % YoY %Q1 2020MILLION TL

22


1.9%

4.5%

2.0%

1.9% 2.1%1.7%

Q1 19 Q4 19 Q1 20

TURKEY SUBSCRIBERS ARPU

MONTHLY AVERAGE MOBILE CHURN RATE

21.0

12.2

Postpaid Prepaid

QoQ 679K↑ 113K↓ 34K↑ 28K↑

Net add

Operational Highlights

23K↓

1.5

0.7

59K

Fixed subscribers

0.7

IPTV

fiber ADSL

fiber

cable

ADSL

2.3

MILLIONTL

62.870.4 71.2

38.1

45.9 46.3

Mobile blended (excl.M2M)Q1 19 Q1 20

21.5% YoY

Fiber ResidentialQ1 19 Q1 20

13.4% YoY

Q4 19 Q4 19

63%Postpaid

Share

Total

614K↑

excluding the impact of regulatory change &

involuntary deactivated lines

23


MOBILE POSTPAID SUBSCRIBERS

Shifting to a More Valuable Portfolio

18.718.9

19.4

20.4

21.0

Q1 19 Q2 19 Q3 19 Q4 19 Q1 20

MILLION

(155K) 215K 503K 679KNet add 984K

55.4% 55.7% 56.3% 63.2%Postpaid

share 62.2%

• Solid performance in a seasonally weak quarter

• Strong start to 2020 with 679K postpaid net adds

• Rising postpaid share is encouraging

• More secure for upsell & collection during this fragile period

• Supportive of blended ARPU growth

24


56

130

217

323

400

Q1 19 Q2 19 Q3 19 Q4 19 Q1 20

SUBSCRIBER TREND

23K 73K 88K 106KNet Add

~2xthe ARPU of

fixed broadband

THOUSAND

76K

Superbox«The Brand for FWA»

• Sole alternative to fiber, offering fiber-like speed

• Demand rose %125 in late Mar; doubled in the first week of Apr

25


• Standalone revenue growth: 29% yoy

• First enterprise customer on BiP Multicloud

• New: Digital Security Service

• Turkcell Data Management Platform: 1st phase concluded

• Efforts and campaigns in all our apps to motivate «stay-at-home»

Strategic Focus Areas: First Quarter Highlights

DIGITAL SERVICES

DIGITAL BUSINESS SOLUTIONS

TECHFIN SERVICES

• Strong topline growth continued: 42% yoy

• Secured nearly 700 new projects in Q1 2020

• Rise in demand for our services for remote working &education, security & cloud

• New city hospital inauguration on 20 April: earlier than scheduled

• Highest-ever yoy transaction volume growth in March with 146%

• Active Paycell app user growth 50%; active Paycell Card users doubled yoy

• Paycell integration with Istanbulkart mobile application

• Acceleration of payment habits into cashless methods

26


3.44.4 4.7

7.4

10.8 11.6

5.9

9.0 9.8

Q1 19 Q4 19 Q1 20

Non 4.5G Users 4.5G Users Total Users

MOBILE DATA USAGE 4.5G SUBSCRIPTION

Growth Engine: Mobile Data

94% are 4.5G

subscribers

20 million with

4.5G compatible SPs89% are 4.5G

compatible SPs

Monthly data consumption of a 4.5G user reached to 13GB in March 2020

78% smartphone

penetration

31.0 30.7 31.4

18.5 19.2 20.4

Q1 19 Q4 19 Q1 20

4.5G subscribers 4.5G compatible smartphone

66%YoY data

usage growth

AV. GB/USER MILLION

27


23 22

Q1 19 Q2 19 Q3 19 Q4 19 Q1 20

Turkcell Op1 Op2

Leadership in Quality & ExperienceCUSTOMER EXPERIENCECONSUMER NET PROMOTER SCORE (POINTS)

LEADER IN QUALITY

Source: Future Bright

• Widest: 234 MHz spectrum

• Fastest: 1.2 Gbps LTE-Advanced/5G ready

• AI-based Smart network operation

• Fiber-to-the-home: 10Gbps NETWORK

SALES CHANNEL

• 1,315 exclusive stores

• 5,200+ non-exclusive stores

• Digital channel: Turkcell website and app

LEADER IN DISTRIBUTION

28


16%

1 Figures are based on IFRS

Turkcell International

SUBSIDIARIES AT A GLANCE

Note: Remaining 5% comprises lifecell Germany, other international operations and intra-company eliminations. Ukraine, Belarus and TRNC local currency growth figures are based on stand-alone financials.

• 12% yoy revenue growth in local currency

• 4G user data usage: 10GB/month, ↑42% yoy

• 2% yoy revenue growth in local currency

• 4G user data usage: 11GB/month, ↑35% yoy

Lifecell Ukraine

Life :) Belarus

Revenue 560 (0.2%) 31.7%

EBITDA 250 2.5% 29.0%

EBITDA Margin 44.6% 1.1pp (1.0 pp)

FINANCIAL HIGHLIGHTS1

10%

69%

KKTCell TRNC

• 14% yoy revenue growth

• Increasing contribution of fixed & corporate business

Q1 2020 Revenue ShareMILLION TL

QoQQ1 2020 YoY

29


*Excluding license

2020 Guidance Revisited

REVISEDEXISTING IMPACTS

Long Term Opportunities

Techfin

Fixed Wireless Access

Faster Digitization of Service Channels

Faster Digitization of Customer

REVENUE GROWTH 10% - 12%13% - 16%

• Lower roaming revenues• Less mobility, store working hours• Lower handset sales, consumer finance• Risk at SME and equipment revenues

EBITDA MARGIN 40% - 42%39% - 42%• S&M savings • Overhead savings

OP.CAPEX/SALES* 17% - 19%16% - 18%• Revised revenue guidance• Level to preserve quality

EBIT MARGIN 19% - 21%18% - 21%• S&M savings • Overhead savings

Important notice: Revised guidance is based on a scenario where gradual normalization of pandemic related impacts starts in 3Q 2020

30


• Yearly incremental revenue generation of 1.0 bn TL in Q120

• Top-line impacted by slowdown in TCF and exit from Inteltek

• Growth excluding TCF and Inteltek: 20.8% yoy

Revenue

* Turkcell Consumer Finance Company (Financell)

5,675

6,658

905

135 (79) 22

RevenueQ119

Δ TurkcellTurkey

Δ TurkcellInternational

ΔTCF* Δ OtherSubsidiaries

RevenueQ120

17.3%

MILLION TL

31


• 23.1% EBITDA growth via revenue increase & effective OPEX management

• 2.0pp yoy EBITDA margin improvement driven mainly by lower S&M expenses

2,281

2,2812,797 2,797 2,799 2,809

2,809983

(467)2 54 (44)

EBITDAQ119

Δ in Revenues

Δ in Direct cost of

revenues**

Δ in G&Aexpenses

Δ in S&Mexpenses

Δ Doubtful trade

receivables***

EBITDAQ120

EBITDA & EBIT

** Excluding depreciation and amortization *** net impairment losses on financial and contract assets

MILLION TL

23.1%Margin 40.2%

Margin 42.2%

EBIT: 1.10319.4%

EBIT: 1,43721.6%

32


Techfin: Consumer Finance Business

HANDSET FINANCING

0.3 0.4 0.4

3.62.4 2.1

Q1 19 Q4 19 Q1 20

Turkcell Contracted Receivables Financell Consumer Loans

3.9

2.8

MILLION TLBILLION TL

• Declining portfolio due to regulation

• Potential further decline expected due to lower handset sales

• Potential increased CoR on BRSA’s resolution on deferral of payments

Revenue 162.5 (19.2%) (32.8%)

EBITDA 101.5 (21.0%) (7.2%)

EBITDA Margin 62.5% (1.4pp) 17.2pp

Net Income 64.3 (36.6%) (21.2%)

YoYQoQQ1 20202.5

33


69%171 Million TL

DCB transactions

Techfin: Payment Services Platform

HIGHLIGHTS

• Value focus: 82% increase in non-group revenues, representing majority of revenues

• Change of payment habits towards cashless payment has set the scene for further growth for Paycell

• Big data analytics helping Paycell to achieve micro-segment marketing

• Upcoming: wide-spread use of QR code

FOUR PILLARS OF REVENUE GENERATION

DIRECT CARRIERBILLING

BILL PAYMENT

PAYCELL CARD

MERCHANT SOLUTIONS

216%3.2 million

3rd party Bill Payments

9.3KPoints Paycell Is

Accepted

73%52.6 million TL

Paycell Card transactions

61 57 58

7764

43 44 4232 36

71%77%

72%

42%

57%

Q119 Q219 Q319 Q419 Q120

Revenue EBITDAEBITDA Margin

MILLION TL

Note: Growth figures are based on non-group transactions and indicate y-o-y growth in Q1 2020.

4.6 million Paycell 3MAU*

2.4 billion TL Total transaction volume*

* includes direct carrier billing, bill payments and Paycell Cardtransaction volumes, both group and non-group

34


Solid Balance Sheet

NET DEBT/ EBITDA

1 Excludes Turkcell Consumer Finance Company’s loan portfolio

TCF loan portfolio

Net Debt1

6,9757,658 8,213

2,7242,409 2,075

1.0x 1.0x 0.9x

0.7x 0.8x 0.8x

Q3 19 Q4 19 Q1 20

Net Debt/EBITDA Net Debt/EBITDA 1

Total Cash 10,975 10,239 9,212

Total Assets 45,515 45,715 45,329

Total Debt 20,675 20,306 19,500

Lease Obligations 1,544 1,533 1,482

Total Equity 17,431 18,083 18,678

Net Debt 9,700 10,067 10,288

Net Debt1 6,975 7,658 8,213

SUMMARYMILLION TL

Q3 19 Q4 19 Q1 20

35


Liquidity Management• Maturity risk management: Average debt maturity around 5 years. Working capital is funded mainly through bank

loans matching the maturity of our obligations.

• Liquidity: Sufficient buffer to sustain operations with:

• ~1.4Bn USD equivalent cash, mostly in hard currency

• Lower debt service until 2023 (~1Bn USD in 3 years excluding short term local currency loans)

• Available credit lines from diversified funding sources

• Potential for further slow down in consumer finance business will mean additional working capital release

PRINCIPAL & INTEREST PAYMENTS*

*Data of Turkcell Group companies, excluding TCF

253 221 271 211

1,675

335

2020 2021 2022 2023 2024+

FX Local Currency

588

221 271 211

1,675~USD1.4Bn cash covers payments until 2024

USD MILLION

36


(224)

216 207155

115 114

Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20

FX Exposure

USD MILLIONNET FX POSITION2

2 Including advance payments, derivative transactions for hedging purposes and excluding FX swap transactions1 Excluding FX swap transactions.

9.2Bn TLNominal

52%28%

11%

9%

CASH1 DEBT

Before Hedging After Hedging

19.5Bn TL

Share

USD EUR TRY Other

88%

5%7%

36%

4%

53%

8%


APPENDIX

3838


Top-Notch Features

TranslationGroup Video CallSecret Message

Telco-OTT Power

App2NW2nd NumberFixed Number

Quality of ServiceDedicated BandwithOTT Box

Integrated Experiences

fizyDigital MagsTV+

Timeshift & Cloud RecordingLyricsMusic VideoLive Broadcasting

CrossPlatform

Recommendation

Strategic Focus:Digital Services

Differentiation with Unique Skills

3939


TURKEY

Potential

Subsidiaries

Done Deal

Negotiation

Global Expansion

Strategic Focus:Digital Services

4040


16KCOMPANY

COMPANY

COMPANY

528K

2.5Mn

OPTIMIZECOSTS

INCREASEREVENUES

Strategic Focus:Digital Business Solutions

3 MILLION COMPANIES

Corporate Customers’ Needs in Turkey

4141


Strategic Focus:Techfin Services

400 Mn**

900 Mn*

>1 Bn*

* Active users**Registered users

286 Mn*310 Mn*383 Mn**

23 Mn*140 Mn*

E-Commerce Tech Savvy Regulatory Environment

KEY DRIVERS IN WEST

Unbanked Population Tech Savvy Regulatory Environment

KEY DRIVERS IN EAST

Global Techfin Revolution

4242


77%

Smartphonepenetration

82Mn

Youngest & largest

population in Europe

1.6Mn

Merchant

60%

Cashspending

30Mn

Unbankedpopulation

17th

Largest economyin the World


Turkey: Attractive Dynamics

4343


MPOS

PSD2

E-money

Micro Lending

Potential regulatory changes in the definition of loan facilitations

Benefit: Potential to give micro loans to consumers

The potential adaptation of PSD2 Payment Services Directive of EU in Turkey

Benefit: Ability to reach banking system, becoming single interface for customers

Using smartphone or tablet to perform the functions of a cash register

Benefit: Increased penetration of longtail merchants

Potential legislative measure to remove the requirement to keep e-money funds in escrow account

Benefit: Potential to attract more users offering return on e-money accounts


Regulation Becoming More Supportive

4444



Key Performance Metrics

2019 2022E

3-Month Active User 4.5Mn 17Mn

Volume (TRY) 5.7Bn 41Bn

Revenue (TRY) 252Mn 750Mn

4545


234.4 MHz

TOTAL FREQUENCYBEFORE TENDER

Turkcell Vodafone Türk Telekom

62.0 57.064.8

172.4

82.8

110.2

AWARDED FREQUENCY IN

TENDER

TOTAL FREQUENCYAFTER TENDER

139.8 MHz

175.0 MHz

€0.3

€0.4

€0.5

• Price / MHz / Population in Turkey: €0.12 per MHz per sub cost

Frequencies Before and After 4.5G Tender

4646


234.4 MHz

Turkcell Vodafone Türk Telekom

62.0 57.064.8

172.4

82.8

110.2

139.8 MHz

175.0 MHz

Main layer for 4.5G Terminal support, capacity and coverage layer

2600 MHz

2100 MHz

1800 MHz

900 MHz

800 MHz 4.5G main coverage layer

2G/3G coverage and voice layer

Mobile broadband layer for 3G4.5G usage for mid/long term

4.5G capacity boost layer for hot spots

€0.3

€0.4

€0.5

• Price / MHz / Population in Turkey: €0.12 per MHz per sub cost

60.040.0 35.0

70.0

35.0 30.0

59.6

20.070.0

24.8

24.8

20.0

20.0

20.0

20.0

Frequency Bands After 4.5G Tender

4747


SPEED

1,200 Mbps

2018

* Source: https://gsacom.com/paper/progress-gigabit-lte-networks-2/

QUALITY

CarrierAggregationall network

The BestExperts

4x44x4 MIMOall network

MIMO: Multi Input Multi Output

SPEED QUALITY

Fastest & Best & Widest

4848


Source: IRIS Telecommunication Engineering Services, January 2019

USER EXPERIENCE

82

7574

0-100

DATA SPEED

49

21

13

17

11 10

Download(Mbps)

Upload(Mbps)

Turkcell Telco1 Telco2

Differentiated Through Quality

4949


46.2%

Incumbent51.2%

Other players2.6%

6.6 6.6 6.8 7.27.8

8.79.5 9.7

0.551.2

1.461.67

1.93

2.29

2.803.21

0.490.49

0.560.63

0.74

0.83

0.93

1.08

10.2%11.0% 11.5%

12.1%13.2%

14.7%

16.3%17.1%

2012 2013 2014 2015 2016 2017 2018 2019

xDSL Fiber Cable PenetrationNote: Company calculation based on data in ICTA Q4 2019 Report

14.2 mnTotal

Subscribers

3 majorOperators

17.1%Penetration

TURKISH FIXED BROADBAND MARKET FIXED BROADBAND MARKET BY TECHNOLOGY (MN)

FIBER SUBSCRIBER MARKET SHARE

Q4 2019

Fixed Broadband Market

5050


21 28Number of cities

In partnership withTürksat & Vodafone

Turkcell (stand-alone)

Turkcell infrastructure

Overlapping

Türksat infrastructure

First in Europe

10 GbpsFiber to the home

The map displays the cities in Turkey where Turkcell offers fiber and cable internet services through its partnership with Türksat and Vodafone. HFC stands for hybrid fiber-coaxial.

3.6 mn 3.6 mn fiber + 3.0 mn cable (HFC)Homepass

Well-invested Infrastructure: Focus on Sharing

5151


MassiveMachine Type

Communication

Ultra ReliableLow-LatencyCommunication

EnhancedMobileBroadband

5G is an Evolution

5252


5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Turkcell Group EEMEA

Source: Bloomberg Industry Data and company announcements*Excluding licence fees

Turkcell Group Average: 18.0%*

EEMEA Average: 16.9%Between 2009 and 2019

Capex/Sales Trend

5353


Internet ~59%

Pay TV ~30%

~24 MnHouseholds

Determining household via network and social network analysis

Capturing potential via house profiling by using big data

Raising wallet share with cross contracting, household offers and new products

s Share

53%

Source: Turkey Household: Turkcell expectation based on TurkStat 2018 announcement Internet & Pay TV: ICTA Q219 Turkcell’s Share: Future Bright Convergence & Household Penetration Research Q119

New Definition of The Customer

5454


AnalyzeCustomer Behaviour

Social networkApplication usage

Location baseNetwork metrics

BIG DATA

Adaptive learningRule-based

management

ARTIFICIAL INTELLIGENCE

+8%+20%Lower benefit

Lower price

Higher benefitHigher price

Multiple layered offersfor value maximization

Special offer for customers with churn risk

RIGHT OFFER TO THE RIGHT CUSTOMER AT THE RIGHT TIME

Utilize Big Data to Maximize Consumer Surplus

5555


1HYBRIDOFFERS

Mix of postpaid & prepaid offers

Flexible postpaid management

No bill shock

2YEARLY

PACKAGES

Data benefit which can be used flexibly

during 12 months

3SEMI

CONTRACTS

Contract based on benefit

Flexible price

4PURE

DIGITAL OFFER

Game changer tariff

Low cost play

Digital channels only

New Pricing Approach

5656


POTENTIAL ACTIONS

• Established in 2015, fully owned by Turkcell

• Standalone payment and e-money company

• Payment institution and e-money licenses from BRSA

• Mobile payment solutions in several verticals

• Share know-how

• Invest jointly

• Diversify risk

STRATEGIC PARTNER

INORGANIC GROWTH

• Acquire local techfin companies to

expand vertical solutions

• Look for synergies

Paycell: Turkey’s Leading Techfin Company

5757


548900

1,276

2,070

2,429

2015 2016 2017 2018 2019

1,719

2,429

3,210

4,076

4,823

2015 2016 2017 2018 2019

NET REVENUE TREND EBITDA TREND

TRY Mn TRY Mn

• 46 thousand km rollout, 21 cities

• 1.5 Mn fiber customers

• Data speed up to 10Gbps

• Infrastructure sharing (Turksat & Vodafone)

• 3.6 Mn fiber homepass

INITIAL PUBLIC OFFERING

• More transparent articulation of equity story

• Diversify risk

• Invest jointly

• Share know-how

STRATEGIC PRE-IPO PARTNER

INORGANIC GROWTH

• Acquire local or regional fiber assets, smart-home and security companies

• Look for synergies

INFRASTRUCTURE SHARING

• Asset light model

POTENTIAL ACTIONS

Turkcell Superonline: Turkey’s Fastest Fiber

5858


68

112139

223

290

2015 2016 2017 2018 2019

168212

257

338

431

2015 2016 2017 2018 2019

Note: Tower portfolio includes owned and managed towers and towers for which contract management services are provided.

NET REVENUE TREND EBITDA TREND

TRY Mn TRY Mn

• First and only TowerCo of Turkey

• Tower portfolio of 10,726 (owned + right of use)

• Regional player operating in 4 countries

• Long term, visible revenue stream & strong profitability

• More transparent articulation of equity story

POTENTIAL ACTIONS

INFRASTRUCTURE SHARING

INITIAL PUBLIC OFFERING


Tenancy ratio

1.7x

Global Tower: Turkey’s First & Only TowerCo

5959


87

207

346

803

314

2015 2016 2017 2018 2019

• 112k m2 datacenter space

• 33.5k m2 white space

• 8 locations

• Ankara datacenter: 44k m2 datacenter space, 12k m2 white space

• Gebze datacenter: 33k m2 datacenter space, 10k m2 white space

• İzmir datacenter: 15k m2 datacenter space, 2.4k m2 white space

CUMULATIVE DATACENTER INVESTMENTS

TRY Mn


FUTURE FUNDING

SELL AND LEASE BACK

FREE CASH FLOW GENERATION

Datacenters: Largest White Space Capacity in Turkey

6060


100105113

119118119126124

129134

149144147

157

175177178

100101103105110113114118122

127136

145146150154160163

Q1

16

Q2

16

Q3

16

Q4

16

Q1

17

Q2

17

Q3

17

Q4

17

Q1

18

Q2

18

Q3

18

Q4

18

Q1

19

Q2

19

Q3

19

Q4

19

Q1

20

TCELL ARPU (exl. M2M) CPI

Q1

16

Q2

16

Q3

16

Q4

16

Q1

17

Q2

17

Q3

17

Q4

17

Q1

18

Q2

18

Q3

18

Q4

18

Q1

19

Q2

19

Q3

19

Q4

19

TCELL Operator 1 Operator 2

TURKCELL ARPU VS. CPI TREND MOBILE ARPU COMPARISONQ116=100Company and TUIK announcements

Q116=100Based on ICTA market report

Key for sustaininggrowth & margins

Secure ROI of projects & investments

Reflecting coststo the prices

ARPU growth above competition

60

Inflationary Pricing

6161


Short FX

position

Limited Short FX

position

Positive/NeutralFX

position

253 221 271 211

1,675

335

2020 2021 2022 2023 2024+

FX Local Currency

221 271 211

1,675

• US$1.4 Bn equivalent of cash holdings covers maturities until 2024

• Strong free cash flow generation

• Available credit lines from diversified funding sources

• Almost all cash in hard currency

• 50% of FX denominated debt is hedged

• Hedging for whole maturity (principal & interest)

LIQUIDITY MANAGEMENT NET FX POSITIONPrincipal & Interest Payments1

(1) Data of Turkcell Group, excluding consumer finance business.

Dec15 Dec16 Dec18 Dec19

US$ Mn

Effective Balance Sheet Risk Management

588

6262


Major Funding & Hedging Details

TYPE & DATE AMOUNT MATURITY INTERESTPURPOSE OF

FUNDINGUTILIZATION HEDGING DETAILS

Bond(October 2015)

USD 500M 15.10.20255.75%

(fixed rate)CAPEX and inorganic growth opportunities

- -

China Development Bank(October 2015)

EUR 500M3-year grace

period, 10-year maturity

EURIBOR+2.20%

Debt restructuring Fully utilized in Oct 15 100% hedged with PCCS

EUR 750MEUR: EURIBOR+2.15%

USD: LIBOR+2.17%CNY: 5.51%

CAPEX~EUR 560M fully utilized and availability period has expired

~84% hedged with PCCS & CCS

Bond(April 2018)

USD 500M 11.04.20285.80%

(fixed rate)Repayment of existing

indebtedness- -

EKN-Covered(March 2019)

USD 150M 10-year maturity1st Tranche: LIBOR+2.10%2nd-3rd Tranche: 5.35%

CAPEXUSD 50M utilized

as of March 20Interest Rate Swap: 56% of the

utilized amount

Sustainability Linked Loan(May 2019)

EUR 50M 3-year maturity EURIBOR + 1.95%General Corporate

PurposesFully utilized

in May 19-

Green Loan(Mar 2020)

EUR 50M 5-year maturity EURIBOR + 1.95%General Corporate

PurposesFully utilized

in Mar 20-

6363


LIFECELL UKRAINE LIFE :) BELARUS KKTCell TRNC LIFECELL VENTURES NL

• Growth driven by data

• Expand digital services

• Net profit by 2021

• Growth driven by data

• Expand digital services

• Grow in fixed broadband

• New revenue streams(Corporate & SystemIntegration)

• Expand DSS footprint

• Make new strategic alliances

• Revenue generation

Strategic Focus Areas of Turkcell International

6464


lifecell PERFORMANCE

HIGHLIGHTS

UKRAINE MOBILE MARKET FACTS*

55.1mTotal

subscribers

3Operators

132% Mobile

Penetration

Ownership 100% Turkcell

Ownership 100% VEON

Ownership 100% MTS

*Source: Global Wireless Matrix Q4 2019 ** MTS announced the sale of its Ukrainian operations to Bakcell (Azerbaijan) on Nov 25, 2019.

UAH MILLION Q1 2020 YoY% FY19 YoY%

Revenue 1,580 11.6% 5,984 13.6%

EBITDA 798 (2.1%) 3,243 17.4%

EBITDA Margin 50.5% (7.1pp) 54.2% 1.8pp

**

• Operational performance (3 months active):

• 7.5 million subscribers in Q1 2020

• UAH 69.5 ARPU (up 4.2% yoy)

• 80% SP penetration (market leader)

• First to launch 4G services in Ukraine on 2600 MHz

• 4.5G services on the 1800 MHz frequency since Jul 1st, 2018

• NCCIR issued license for both GSM and LTE in 900 MHz band

• New license will become valid July 1st, 2020 (for 5 years)

Operations in Ukraine

http://en.wikipedia.org/wiki/File:Flag_of_Ukraine.svg

6565


49.1%

37.0%

13.9%

KYIVSTAR

VDF

lifecell

17% 16%12% 10% 12%

20% 24%18% 16% 16%19% 21%

30%

-11%

Q119 Q219 Q319 Q419 Q120

FINANCIALS

57.6% 53.9% 53.0% 52.6% 50.5%

52.8% 51.7%54.6%

49.1%

62.9% 65.0% 64.8%69.5% 67.9%

Q119 Q219 Q319 Q419 Q120

Mobile Revenue

Subscriber*

(*) 3 month active subscribers

Mobile Revenue Growth (in UAH)(YoY)

lifecell VDF Kyivstar

EBITDA Margin (%)

Source: Company announcements (Q4 2019)

MARKET SHARE

53.9%30.6%

15.5%

KYIVSTAR

VDF

lifecell

Ukraine: Mobile Market Performance

6666


*Source: Company calculation based on Q4 2019 results

BeST PERFORMANCE

HIGHLIGHTS

BELARUS MOBILE MARKET FACTS*

11.9mTotal

subscribers

3Operators

125% Mobile

Penetration

Ownership 80% Turkcell20% Belarusian State

Ownership51% Belarusian State49% MTS

Ownership100% Telekom Austria

Q1 2020 YoY% FY19 YoY%

Revenue 32.5 1.9% 135.0 8.1%

EBITDA 8.4 13.5% 35.5 27.2%

EBITDA Margin 26.0% 2.9pp 26.3% 4.0pp

BYN MILLION

• 1.0 million subscribers in Q1 2020 (3-month active)

• Provides 4G LTE services in 6 regions and ~191 cities

• Average monthly data consumption grew by 35% yoy to 11GB

• 4G users reached 58% of 3-month active users, driving further data and digital services usage.

Operations in Belarus

http://zhenghe.tripod.com/b/belarus/flags.html

6767


47.0%

41.0%

12.0%

MTS

A1

life:)

FINANCIALS

9% 10% 10%

3% 2%7% 6% 5%

9%

19%20%18% 19%

15%

Q119 Q219 Q319 Q419 Q120

49.5%44.7%

5.8%

MTS

A1

life:)

Source: Company announcements (Q4 2019)

Subscriber*

Revenue

(*) 3 month active subscribers

life :) EBITDA Margin Trend*

Mobile Revenue Growth (in BYN)(YoY)

23.1%

32.9%

27.2%

21.7%

26.0%

Q119 Q219 Q319 Q419 Q120

life:) A1 MTSMARKET SHARE Belarus: Mobile Market Performance

6868


10%

20%

30%

40%

50%

60%

70%

Turkey Hungary Jordan UK Croatia Greece Italy Spain Egypt

Special Communication Tax (SCT) 7.5% 7.5%

VAT 18% 18%

Treasury Share1 15% 1%

TRX fees 5%(of net sales)

-

Contribution Share to Telecom Authority

0.35%(of net sales)

0.35%(of net sales)

New subscription SCT2

(at first enrollment)TRY 79.00 -

Wireless license fees (per acquisition)

TRY 34.15 -

Wireless usage fees (annual)

TRY 34.15 -

TAX MOBILE FIXED TURKEY HAS THE WORLD’S HIGHEST MOBILE SERVICE TAXES3

1Under the license agreement Turkcell pays a treasury share equal to 15% of its gross revenue from Turkish GSM operations2 Excluding M2M SIMs3 GSMA/Turkey Report, 2016

Taxation in Turkey

6969


13.6

9.1

6.6

3.1 3.1 3.12.5 2.5 2.5 2.5 2.5 2.5

2.5

17.2 15.714.4

11.1 11.1

8.16.5

4.94.8 4.2 4.4 4.5

5.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

MTR-Turkcell Europe-MTR

MTR: Mobile Termination Rate Source: BEREC July 2019 report, Cullen International

EVOLUTION OF MTR TRY kuruş per min.

MTR RATESTRYkr.

OLD Since 2013 Asymmetry OLD Since 2013 Asymmetry

Turkcell 3.13 2.50 - 1.70 0.43 -

Vodafone TR 3.23 2.58 3% 1.73 0.43 -

TTKOM 3.70 2.96 18% 1.87 0.47 9%

Mobile Voice Rates SMS Rates

Turkcell MTR is halfof the European

MTR level

Mobile/SMS Termination Rates in Turkey

7070


4.11

5.606.33

6.794.52

6.036.65

7.22

2017 2018 2019 Q1 2020

Average Period-End

3.63

4.765.66

6.143.77

5.265.94

6.52

2017 2018 2019 Q1 2020

1.93 2.03 2.10 2.24

1.972.16 2.10

2.60

2017 2018 2019 Q1 2020

26.64 27.32

25.90

25.12

28.07 27.69

23.69

28.06

2017 2018 2019 Q1 2020

USD / TRY EUR / TRY

USD / BYN USD / UAH

Currency Trends

71


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 ExchangeAct 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,EBIT and capex in 2020 or for the medium term 2020 to 2022. More generally, all statements other than statements of historical facts included in thispresentation, including, without limitation, certain statements regarding the launch of new businesses, our operations, financial position and business strategymay constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the written or oral use of forward-lookingterminology such as, among others, "will," "expect," "intend," "estimate," "believe", "continue" and “guidance”.

Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that suchexpectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety byreference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our AnnualReport on Form 20-F for 2019 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty toupdate 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 toverification, 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 oralinformation 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 thispresentation totals may not foot due to rounding differences. The figures used in this presentation are rounded while percentage changes are calculated based onthe figures disclosed in the press release.

72


THANK YOUFor further information please e-mail

[email protected] call Turkcell Investor Relations at

(+90 212 313 1888)

Turkcell IR Website

THANK YOU

mailto:[email protected]

https://www.turkcell.com.tr/en/aboutus/investor-relations

turkcell investor presentation€¦ · investor presentation 1.9% 4.5% 2.0% 1.9% 2.1% 1.7% q1 19 q4...

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