Turkcell Iletisim Hizmetleri AS

Ladies and gentlemen, thank you for standing by. I am Yota Yokoro's call operator. Welcome and thank you for joining the DERCS Health Conference call to present and discuss the third quarter 2020 financial results. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Kohan Bilek, Treasury and Capital Markets Director. Please, Mr. Bilek, you may now proceed.

Thank you, Yuta. Hello, everyone. Welcome to TurkSat's third quarter 2020 results call. These speakers are our CEO, Mr. Murat Erkan, and our CFO, Mr. Osman Yılmaz. We will have a brief presentation, and afterwards, we'll be taking your questions. Before we start, I would like to kindly remind you to review the last page of this presentation for our safe harbor statement. Now I hand over to Mr. Erkan.

Thank you, Korhan. Good afternoon and good evening, everyone. Welcome to Turkcell's third quarter 2020 results call. Before we go into the results, I would like to extend my condolences to those who have lost their loved ones in last week's earthquake disaster in Izmir and in Greece, and wish a speedy recovery to the injured. As Chuck said, we did our best to support the search and rescue efforts by extending free voice and data plans to those in the region and by making sure our network operates at maximum capacity. Now, as to our performance, we had a strong quarter that beat our expectations. While the business world got used to the circumstances of the pandemic, our customers have gradually regained their mobility. Hence, the reopening of the economy has helped our strong performance. We registered 16% top-line growth with over a 44% EBITDA margin. The ARPA trend remained robust at 14% on the mobile sites. and the closest double digit on the fixed side. Meanwhile, our customer base grew by 382,000 net addition, 370,000 of which were post-paid. Trends driven by digitalization in the COVID period become permanent, such as the share of digital channels in our sales at 12% in the third quarter. We recorded solid growth all our strategy focus areas, we continue to launch new products and services and enhance existing ones. Overall, we generated 1 billion Turkish lira free cash flow during the quarter, marking a continuous solid performance. Our leverage ratio remained at 0.8 times. Moving to next slide. As international travel was not possible, our roaming revenue remained under pressure. On a year-on-year basis, the decline was around 33%. Please consider that we realized a strong growth performance despite this headwind. Given the current state of pandemic, we expect a similar trend in roaming revenue in the fourth quarter as well. We observed the shift to e-commerce in Turkey accelerated by the pandemic has continued as users enjoyed the convenience. As such, transactions through our online channels as well as through PayCell have displayed promising trends. Furthermore, demand for our digital services, particularly TV platform, remains strong, motivating us to further enhance our digital services and solutions. Now, some further details on our financial performance. We recorded a 7.6 billion Turkish lira top line with an increase of 16% year-on-year. The first nine-month growth reached 15%. Such a performance was possible with our resilient and flexible business model. Our EBITDA reach 3.4 billion TL on a 19.6% increase with a 44.4% margin. The third quarter is seasonally a strong period. Moreover, operationally, cost savings triggered by the pandemic have contributed to a higher profitability. Net income was solid at 1.2 billion TL, marking 51% yearly growth. This is the highest quarterly revenue we generated organically. We are pleased with our performance, which exceeded our expectation. Next slide. Let's take a look at our operational performance. Our total subscriber base expanded by 382,000 net addition this quarter. In the mobile business, with our continued focus on post-pay segment, the base grew by 317,000. With this post-pay share in a total mobile subscriber reach 64%. The average monthly mobile share rate was at around the same level as last year. We believe that 2% monthly share rate to be a healthy level in this market. Blended mobile output rose to 52 Turkish lira on a 14% increase. This growth was a result of rising data and digital services usage, the shift to higher data plans, and our new offers and tariffs designed to meet customer expectations. In the fixed broadband business, demand for our services has continued. We gained a net 45,000 fiber subscriber with new tariff choices. Residential fiber output growth was at 9.4% on a year-on-year basis. Further, we registered some 39,000 IPTV subscriptions during the quarter. Next slide. Now, some highlights on the performance of SuperBucks, our fixed wireless access product. SuperBucks is the pioneer product in its market. With SuperBucks, we have addressed the rising demand for fiber-speed home internet. Our well-invested LTE network has proven its ability to provide this service without interruption. SuperBucks subscribers reach 551,000 with a net add of 60,000 this quarter. With this, Superbox subscriber base was 2.5 times that of a year ago. Strong demand has triggered price adjustment in our Superbox tariff. Today, the minimum Superbox plan on shelf is 159 Turkish Lira, up from 99 Turkish Lira a year ago. This increase should gradually reflect to its output level. Next slide. We are ever focused on how to improve the lives of our customers and better serve their needs. This mindset leads us to create innovative offers. As such, this quarter we launched two tariff plans with a new value proposition. Under mega plans, our customers are offered the flexibility to buy large data plans that they can consume through a year. Under family and friends plan, our customers can form a team of up to five with whom they can share their data quota. Additionally, we continue to please our customers with our legendary Shake and Win campaign through our digital connection platform. Overall, we have recorded by far the highest MPS score in the sector with our key slang in value proposition, network quality, and brand loyalty. Next slide. Digital channels play an integral part in our distribution network model. We serve our customers through our website and our digital operator application. During the quarter, we remain focused on how to continue diverting customer demand towards these platforms. By doing so, we register savings, particularly in sales expenses. As the visitors to these digital channels reach 28 million in a month, our conversion to sales ratio has doubled on an annual basis. The additional data plan purchases and TR top-up transaction volume over this platform have tripled on an annual basis. Accordingly, 12% of consumer sales of Tuxel Turkey was registered over these digital channels. Even though mobility limitations were lifted in third quarter, digitalization trend and behavior driven by the COVID period had become permanent. Next slide. Let's take a look at our performance in our strategic focus areas. First, the digital services. Stand-alone digital services revenue increased 28% year-on-year this quarter. Paid users, a key revenue source, reached 2.7 million, marking 29% year-on-year growth. We introduced our secure and seamless video conference platform Bitmeat, which is well-equipped to compete with its global peers. Moreover, the data generated by Bitmeat is securely stored at our data center located in Turkey. We also introduce our TV Plus Ready products. It is the first Android TV solution in Turkey that is launched by an operator and capable of converting a television into a smart TV with a dongle. By doing so, TV Plus customers can access over 150 live channels and archive 5,000 videos on demand in addition to music and game applications at the Android market. Last but not least, our new service, Lifebox Transfer, is a fast, easy, and secure alternative for data sharing. With this service, we suggest an alternative for those who wish to have their data stored in Turkey. Next slide. As to our second strategy focus, namely digital business solution, our digital business solution registered 40% yearly revenue growth. 938 million TL system integration project backlog is promising for the period ahead. We pursue a strategy of providing our customer an integrated service procurement from a single point. As such, we launched Turkcell Multi-Cloud Service, which offer global cloud service procurement, peer-to-peer management, and consultancy services. Our secure digital signature and Turkcell digital archive solution will enable the digitalization of the process that will require signature and generating operational efficiency. These services also contribute to our sustainable targets by reducing paper usage. Also in the period, we have built new global vendor partnership, increasing the total to 20. All these efforts have encouraged to pursue our ultimate goal of becoming the leader in the integrated solution market. Next slide. Now a few words on our tech team services. PayCell sustains its revenue growth driven by continued demand for contactless payment in the pandemic environment. Accordingly, PayCell non-group revenue grew by 85% year-on-year. This quarter, we have introduced PayCell Android Post in a pilot scheme. This device is the first in the Android POS market to have secured necessary approvals and will become a new business line for PayCell. PayCell Android Post has a smart operating system enabling the process of collection inventory tracking, and e-invoice over a single platform. It offers cost advantage to member merchants, especially for SME. In addition to QR code payment, all bank cards can be used with this device. The portfolio will expand with the inclusion of meal cards. Next slide. And now, an update on data usage and HHG subscription trends. Average mobile data usage rose 51% in a year to 12.2 GB per user. The rise in data consumption was due mainly to higher content consumption boosted by seasonality. The growing share of HHG users and superbug subscribers. Out of 32 million customers sign up for Foreigner House G services, 21.4 million have Foreigner House G compatible smartphones, still indicating room for growth. This quarter, smartphone penetration on our network reached 80%, with 90% Foreigner House G compatible. There were 1.8 million net additional Foreigner House G compatible smartphones on a yearly basis. Next slide. Let's look at our performance in international markets, which generate 9% of the group revenues. Our international operation grew by 25.3% year-on-year. This was mainly on rising voice and data usage and the positive impact of currency movement in these countries. Lifestyle Ukraine revenue grew by 14.2% in local currency terms. Lifestyle's bottom line turned positive in June for the first time, and in Q3, Lifestyle generated net income for the whole quarter. The performance of subsidiary barriers has improved with the partial recovery in voice and data revenues. Year-old top-line growth was at 1.4%, Mobile ARP grew 9.3% in a local currency term. With higher data consumption and demand for digital services, BEST launched postpaid tariffs upon demand for its customers. Our subsidiary in Turkish Republic of Northern Cyprus recorded 18.5% revenue growth on the back of data-enhanced revenues. despite continued pressure in roaming revenue. Going to next slide. A new era for our company begun the 22nd of October. The transactions and share transfer agreed among our major shareholders and Turkey Wealth Fund were completed on that day. As a result, Turkey wealth funds become the largest shareholder with its 26.2% stake. Letter 1 rises its stake in Turkcell to 24.8%. With this change, our company now has a simplified overall structure. Long-standing shareholder disputes are over. We no longer have the uncertainties created by a three-party controlling structure. Looking at the 26-year history of TÜGSEL, I consider this change a milestone. I trust that we will register great results for our company and our country in this new era with Turkey Wealth Fund. Turkey Wealth Fund has already declared its support for our strategy and that it perceives great value at TÜGSEL. I must also add that TÜGSEL's win remains TUSA will remain subject to CMB, SEC, and SOX rules and to other regulations. We will continue to have three independent board members ensuring best in class corporate governance principles. Next slide. I would like to end my presentation by sharing our new guidance for the full year of 2020. Taking into consideration our healthy nine-month performance and our expectation for the remainder of the year, we revise our guidance upwards. Accordingly, we rise our revenue growth to 14 to 15 percent, EBITDA margin to 41 to 42 percent, and EBIT margin to 20 to 21 percent. We expect to register an operational capex over sales ratio of around 19%. With this, we are glad to have come back to the target level we announced before the pandemic hit the world, bringing uncertainties. With all this performance, we are seeing the right strategy with an excellent team and offering the best-in-class service over a well-immersed network. I will now leave the floor to our CFO, Osman.

Thank you, Murat. Now let's take a closer look into the financial performance. Our business displayed a solid performance in the third quarter. Group revenues rose 16.1% year-on-year, corresponding to an incremental 1.1 billion TL. Of this increase, 996 million TL derived from TruXell Turkey thanks to strong data demand from both consumers and corporates, high J-Postbase subscriber base, and continued momentum in digital business solutions. Increasing use of our digital channels contributed to facilitating higher device sales. Trixel International Revenues rose by 25.3%, contributing 133 million TL in this quarter, mainly with the contribution of Lifesize Ukraine and currency movements. Trixel Finance Company's contribution remained negative due to over portfolio size, as well as lower interest on the portfolio compared to last year. Next slide. EBITDA rose by 19.6% year-on-year to 3.4 billion TL with a margin of 40.4%. Our EBITDA margin marked 1.3 percentage point improvement on a yearly basis. This was mainly due to solid rising revenues plus lower G&A and S&M expenses. Third quarter had been a high season typically with increased usage during the summer period and this was the case despite the pandemic environment. On the cost side, lower selling expenses, very limited travel expenses, lower overhead costs under our continued remote working practice have all supported the margin expansion. Moreover, decline in doubtful trade receivable provision had a positive contribution to EVTA in this quarter. Our collection performance was strong despite cautious expectations in COVID environment. Meanwhile, increasing equipment sales had negative impact on the profitability margin level. 2030's EBITDA growth was stronger at 23.2% year-on-year, corresponding to an incremental 554 million TL. The profitability margin improved with a 2 percentage point rise year-on-year to 44.3%. Next slide. Now, more detail on our free cash flow. On this slide, you can clearly see the positive trend and strengthening of Truxell's cash flow generation over the years. In Q3, we have registered 1 billion TL free cash flow, mainly on back of strong EBITDA generation. I want to emphasize that our finance company's portfolio expanded by nearly 100 million TL versus second quarter. So, our free cash flow generation performance is not related with the change in finance company portfolio, but the operational performance of TXA. With this, the first nine months free cash flow amounted to 2.6 billion TL. The major items of this 2.6 billion TL cash flow include EBITDA of 9 billion TL, acquisition of intangible assets of 4.8 billion TL, change in operating assets and liabilities of negative 130 million TL, payment of lease liabilities of 1.1 billion TL, and income tax paid of 436 million TL. Our aim is to continue free cash flow generation trend in the upcoming periods.

Next slide.

Now let's take a closer look at our tech think companies' performance, and let's start first with Turkcell Finance Company. In Q3, financial revenues declined by 41.9% TL to 127 million TL, on a shrinking loan portfolio and lower average interest rate on the portfolio versus last year. EBITDA declined by 32.2% to 97.3 million TL. EBITDA margin was up 10.8 percentage point year-on-year on the back of lower cost of funding and lower cost of risk, specifically this quarter. As communicated in earlier quarters, we were expecting our finance company portfolio to stabilize by mid-2020 and then to start to grow gradually afterwards. We saw an increase of nearly 100 million TL in Q3. Coupled with seasonality, pent-up demand in Q2 led to stronger sales in Q3, and continued remote education has created demand, particularly for tablets. We also observed that smartphone demand was pulled forward with the expectation of price increases given the currency depreciation. Under normal conditions, we expect the portfolio to grow by 10% to 15% per annum going forward. Meanwhile, cost of risk decreased to 2.5% by improving one percentage point on quarterly basis. Successful collection performance and continued improvements on risk assessment infrastructure were the main drivers of this decline. Integrating telco and financial data, we created the best in class scoring mechanism with widest reach in Turkey. Next slide. Our payment services company, Paysal, is well on track in monetizing to shifting consumer habits in favor of e-commerce and cashless payment methods. Direct carrier billing transactions nearly doubled while transaction volume through Paysal card is three times of last year. Quarterly growth rates in transaction volume of this business line were also strong with 26 and 63% respectively. It is worth noting that despite the fewer mobility limitations in Q3, we see prolonged trends in PayCell KPIs. Overall, PayCell revenues increased by 34% to 78 million TL. EBITDA rose to 47 million TL with a margin of 60%. Non-group revenues rose by 85%, with share of non-group revenues reaching two-thirds of total. We saw strong demand for ready-to-use limits that we launched in July with 30 million TL volume in this quarter. With this service, our customers can transfer their mobile payment limits to their PayCell cards in order to spend as any merchant credit card is accepted. As discussed, we have also launched PayCell Android POS in a plot scheme in this quarter. This service will create more value to PayCell with becoming widespread in 2021 and beyond. Next slide. Now, some highlights from our balance sheet and leverage. As at the end of the quarter, our gross debt position increased to 22.8 billion TL from 19.8 billion. Currency movements led to around 2.5 billion TL increase in total debt. In Q3, dollar appreciated by 14% and the euro by 18%. As indicated, we do not net off our derivative receivables from that, so our reported net debt in TL terms rise as FX appreciates. As of Q3, net debt was 9.3 billion TL with a 0.8x leverage ratio. Excluding the taxing business, this was at 0.7x, same as level with the previous criteria. Within 0.5 billion TL rising net debt in Q3, currency effect was 1.6 billion TL while we generated 1.1 billion TL cash from our operations. Next slide. I will end my presentation by discussing our management of foreign currency risk. We have $1.7 billion equivalent cash in hand with 7% in hard currency. We deemed this practice to be important as a natural hedging tool. With hedging instruments in place, the share of FX debt had declined from 77% to 43% as at the end of Q3. Our hedge contracts are cash flow hedge covering full maturity of related FX debt. We entered into these contracts mainly in 2016 and 17. So thanks to good timing, we have payable exchange rates and we are able to renegotiate strike levels if we see any potential in the market. As of Q3, our net FX position is $31 million, and we will continue to keep the position neutral in the coming periods. This concludes our presentation. Now we are ready to take your questions. Thank you very much.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one on the telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from the line of on day with UBS. Please go ahead.

Hi. Thank you for taking my questions, and congratulations on a very good set of results. I had a couple of questions actually. So I was just thinking, if I look at your revenue growth, obviously you outperformed on both revenues and EBITDA, but if I look at your revenue growth, I would say that the sources of the, call it beta outperformance, were from wholesale and other. I was wondering if you could clarify a bit where exactly so much of that growth is coming from, is my first question. Second question on CapEx. You're now moving your guidance to 19%. I wanted to clarify whether that is just a function of CapEx or whether there is some new investments coming through. And lastly, just a comment if you could please on your, or rather not on your, but on competition because one of your competitors yesterday was saying that the competition seems to be picking up on the acquisitions market specifically in mobile. So if you could comment on what your view on that is and what impacts would you say that that could have on your subscriber acquisition costs going forward because clearly they were up again in the third quarter compared to what we have seen before, even before COVID. Thank you.

Andre, thank you very much for the question. Let me start with the revenue growth part. This was mainly driven by Turkcell Turkey's strong R2 performance on the back of larger post-paid share and higher data consumption and upsell efforts. Equipment revenue backed by sales, particularly on digital channels and corporate projects, also had a positive impact on Turkcell Turkey's strong top-down performance. 2% international revenue, which rose 25%, mainly with the contribution of our Ukrainian operation and the positive impact of currency movement, supported group top-line growth as well. Meanwhile, we saw 15% drop in other subsidiary revenue. This was a result of declining finance business revenue due to contracting loan portfolio and declining interest rates. We also stopped our support betting operation in Turkey by the end of August 2019, which had a negative impact on other subsidies revenue as well. Excluding the finance business and support betting operation revenue, our consolidated revenue growth would have been 19% in Q3. For the second question regarding CAPEX, we implemented discipline and selective management without compromising quality in terms of coverage and capacity. By selective, we mean making new investments based on subscriber metrics while prioritizing locations having high revenue generation potentials. However, on the face of the recent volatility in Turkish Lira, as well as our continued investment, we revised our guidance and now we are targeting the higher end of our initial guidance which is around 19%. Regarding competitive environment, actually our strategy comprises different initiatives than our competition. We focus on creating higher value and richer experience to our customers by offering differentiated products and services. Hence, rather than competing on price, we focus on additional value to be offered on our customers. Our strong MPS score and customer addition performance confirms that our strategy is paying off. Appreciation of our value proposition by our customers also enables us to implement inflationary pricing. In the third quarter, we registered an output growth performance which has two percentage points above inflation and double the nearest competition. Going forward, depending on the pace of inflation, we would be reasonable to expect our ARPA growth to be in a range plus or minus a couple of percentage points around inflation level. Actually, as far as I get for the wholesale side, you asked for FX effect. Yes, we have foreign exchange FX as well. But on the wholesale side, we have also some local currency level. On the other side, I believe I already explained the equipment, digital sales and corporate equipment as well.

Yes, thank you. If I may one short follow-up on the enterprise revenues. So those seem to be very strong, but usually those are sort of by their nature usually come as sort of larger projects with pretty big upfront cost, meaning low margin, but it seems you've also done very well on the margin. So can you just talk a bit about the nature of these? Are they, for example, clouds that are by nature high margin or any comment on that would be helpful? Thank you.

I mean, we already, actually, initially you said that for the corporate market, we are going to focus in higher profitable areas. which are cloud business security iot and that type of business so yes we are entering into project sites and we are going after for instance healthcare hospital business but all of them has a part of data cloud another solution as well so i think we are focusing very much on the enterprise segment and then profitable side of the enterprise segment as well.

Thank you. I apologize to everyone on the line. Can you just please clarify in terms of the subscriber acquisition cost that I asked earlier? They seem to have jumped up again quite a bit in the third quarter. What is the outlook for those in the coming period?

To be honest, with the normalization of Our mobile customer acquisition increased 38% compared to previous quarter and third quarter, while fixed customer acquisition rose 16%. These are the main drivers behind the increased subscriber acquisition costs.

That's very clear. Thank you, and I'm sorry, everyone. Thanks.

The next question comes from the line of Ibrahim of Adelia with Citi. Please go ahead.

Yeah, thank you very much for the opportunity and congratulations on the strong results. I had a couple of questions on the stimulus theme where Andre was. First, maybe looking at the device sales. So if I'm looking at the – there has been strong increase, but if I'm looking at the gross margin, especially year-on-year, there's very – or relatively little dilution. Can I just ask whether the device sales coming at positive margin or maybe the margin on those are improving? And also, maybe if you have a breakdown share of equipment sales that are attributable to corporate segments, please. And my second question is on service revenue. It looks like quite a bit of growth in mobile service serving is driven by prepaid. I just wanted to check whether that's, how much of that is driven by pricing that you have put through in July, June, July, and then how much of that is driven by maybe higher consumption of data as consumer just working from home and studying from home. Thanks.

Okay, thank you very much.

First of all, regarding device sales and the impact of the gross margin, so we are not doing device sales just sake of the revenue increase. Every device that we are selling to our customer has related adjacent revenues as well, which are mainly profitable revenues. If you look at standalone device margin, It's like between 6% to 8% level, but it brings higher profitable revenue next to these device sales and also increase customers' thickness and create new opportunity, especially in the enterprise markets as well. For the hiking prepaid ARPA growth, we implement price increase to bundle offers as well as data packages in the prepaid segment at the beginning of the third quarter, aiming to reduce the price gap between prepaid and postpaid. Moreover, we follow a proactive approach to prevent possible churns that would be triggered by the price adjustment with customized and exclusive offerings using our analytical capabilities. These resulted in solid art growth in prepaid segment in the third quarter. Actually, you asked for equipment sales share, it was 10%.

So 10% of all devices?

For the corporate revenue.

Okay, thanks very much.

Sorry, sorry, coming back to the first question.

Yeah.

As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question comes from the line of Termitas, Kemal with ATA Invest.

Please go ahead.

Thank you for the presentation and congratulations for a very good result. My question is about the prospect for 2021. Could you give any indication about the trend for 2021? Any significant change in the outlook? Roughly, what are your expectations? Thank you.

Thank you very much. I think, you know, to be able to prospect from now, it might be a little bit difficult, especially in the COVID environment. So, you know, there are some revenue rely on the, for instance, roaming revenue rely on the COVID situation because if the COVID goes earlier, we would see the roaming revenue come back in the same level, even maybe higher. So as of today, we are working heavily on 2021 prospects. It is not an easy job, by the way, but we will provide guidance soon in February with fourth quarter results. But believe me, we are working hard on the prospect for 2021 these days.

Thank you. Thank you.

We have a follow-up question from the line of Idahimo Vadilia with CT. Please go ahead. Thank you very much for the opportunity to follow up.

I have three, actually, if I may. First is on margin or maybe cost structure, this quarter specifically. I understand that some of the costs may have been lower because of the lower commercial activity, for example, sales and marketing. So if the market was open as normal, where do you think your EBITDA would have been then? And the second question is on roaming. Is there any roaming revenue in Turkish revenue this quarter? And my third question is on your guidance, top line guidance, which implies 11%, 15% growth in the fourth quarter, which seems conservative considering that it tends to be a stronger quarter in device sales and the run rate that we have seen so far. Are you just being cautious in your outlook, as you mentioned, that some of the device sales have moved forward as people rush to buy equipment before inflation? Or are you just being conservative?

Thanks. Thank you very much. Let us start with the margin side. I mean, third quarter is the high season for telecom market in Turkey. It was historically like this. And this is due to increased usage during the summer period. And this was the case despite the pandemic environment. On the cost side, lower selling expenses, very limited travel expenses, lower overhead costs under our continued remote working practice have all supported the margin. Moreover, declining doubtful trade receivable provision had a positive contribution to the EBITDA in this quarter as well. Our collection performance was strong despite cautious expectation in COVID environment. We believe that we will be within our guidance range for a full year, which is between 41% to 42%. As you know, digital sales channel is a focus area for TÜVSEL. The increasing share of digital channel leads to saving in the selling and subscriber acquisition expenses as well. The pandemic environment had a positive impact on this trend and we believe this become permanent even in normalization period. We believe that we can sustain the savings on the selling side. On the marketing side, we either postpone or cancel part of marketing expense due to pandemic. This will bounce back to normal levels when things get back to normal, I would say. For the pipeline guidance, Sorry, for the roaming revenue in Turkey this quarter, as I indicated that our roaming revenue decreased by 33% year over year. So roaming part still, obviously we get some roaming revenue, but it decreased dramatically versus last year. For the top line guidance, we increased the top line to 14% to 15%. I believe this is a reasonable achievement because last year, fourth quarter was also quite strong quarter. And I think we will try to hit the higher end of the guidance. But I believe we can do this. As you said, you said that people rushed to buy equipment. This might be the case. And also, the increase of the foreign currency, I believe, will reduce the customer buying the terminal equipment. And, you know, in the third quarter, the Turkish terminal Price was in Turkish Lira, so we expect to increase in the terminal size as well.

Thank you.

Just one more addition, it's regarding economic revenue. In total, it is 2% of Turkey's revenue, so it has such an impact.

Sorry, just to confirm, this quarter, the roaming revenue was 2% of total.

Historically, roaming revenue is around 2% of Turkey's revenue. But this quarter, it decreased to... Sorry, just let me... Okay, this is the same. In this quarter, it is 2% of Turkish and Turkish revenue, the roaming revenue.

Thank you very much. As a reminder, if you would like to ask a question, please press star and one on your telephone. We have a follow-up question from the line of Kabachek Andre with UBS. Please go ahead. Mr. Kabachek, can you hear us?

Apologies, I was on mute. I wanted to ask a question on the consumer finance business. So clearly, the loan book of it has sort of bottomed out, but I believe it's bottomed out quite below what you were sort of expecting it to reach about a year ago. So I wanted to ask whether that is intentional, for example, relating again to your focus on profits or marginality on devices or whether that was simply something natural that the COVID situation, for example, made happen. Can you comment on that, please? Thank you.

First of all, at the beginning of the year, in Turkey, the regulations changed for the number of installments in the device business. So it reduced 3 installments for the price of 3500 Turkish Lira range and 6 installments lower than 3500 Turkish Lira range. So this impacted our finance business top line and number of device credited to customer. The main reason of this is not intentionally, it is due to regulation.

Okay, but so you can confirm that despite this happening earlier this year, we've sort of annualized that or it's in the base now and the growth, like you said, should come sort of in line with revenues from where we are today?

Yeah, we see that hit down to the like mid of the year and then we're recovering, but obviously going forward, We can expect 10% to 15% portfolio growth on an annual basis.

Okay, thank you. And one more follow-up, please, on the prepaid market. You said you, if I understood correctly, your strategy would be to sort of converge prepaid to postpaid pricing. Logically, that would be making the prepaid services more expensive. How confident you are that the market is going to call you on that one? Because one of your medium-term targets is also to be adding 1 million RGUs per year. So are you not scared of market share losses in this segment?

To be honest, we would like to close the gap between prepaid and postpaid pricing so that customers would like to move to the postpaid environment rather than prepaid environment, which is more sustainable. more output and more thickness for us. So this is intentional job that we're doing during the year actually. This is the case I think. As for the 1 million target, I think obviously the COVID environment impact the customer acquisition side. Mainly, we didn't see foreigner to come to Turkey and acquire more mobile lines. This has impact, but we would like to get as much as we can to the 1 million target.

Okay, thank you very much. And if there's no one else in the line, maybe one follow-up on TV, please. Your competitor yesterday announced a new suite of TV services with more content. Is there any reaction or potential reaction from your side in terms of how you run the TV business at Terxel?

Yeah, our TV business is quite strong, and you know, growth is also quite positive on our side. I didn't know what the competition announced, but one of the richest content is in Turkcell TV+. Actually, we announced new things like TV+, which means we can attack the competition broadband infrastructure by using OTT download box. So this is also, I think, one of the important achievement on our side so for the content side I believe we are the probably we have the richest content in Turkey in terms of in terms of TV content obviously we don't have local Turkish league rights but I believe our competition doesn't have anyway yes

All right. Thank you. Thank you. I appreciate all the answers. Thank you.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Turkcell Management for any closing comments. Thank you.

Okay.

This is the end of our call. Thank you all for taking time to participate in our call. Have a nice weekend. Thank you very much.

Ladies and gentlemen, the conference is now concluded and you may disconnect your phone. Thank you for calling and have a pleasant evening.