Turkcell Iletisim Hizmetleri AS

Ladies and gentlemen, thank you for standing by. I am Geli, your chorus call operator. Welcome and thank you for joining the Turkcell conference call and live webcast to present and discuss the Turkcell second quarter 2021 financial results conference call. At this time, I would like to turn the conference over to Mr. Ali Sertar Yadze, Investor Relations and Corporate Finance Director. Mr. Yadze, you may now proceed.

Thank you, Geli. Yes. Good morning and good afternoon, everyone. Welcome to Turkcell's second quarter 2021 results call. Today's speakers are our CEO, Mr. Murat Erkan, and our CFO, Mr. Osman Yılmaz. We have a brief presentation, and afterwards, we will be doing Q&A. Before we start, I would like to kindly remind you to review the last page of our presentation for our safe harbor statement. Now, I hand over to Mr. Erkan. Thank you, Ali Serdar.

Good morning and good afternoon. Thank you for joining us today. Before we dive into the result, I would like to extend my condolences to every country, including our own beloved Turkey, that is fighting wildfire disaster and flood recently. The world is dealing with one of the most severe heat waves, which underlines the importance of addressing climate change under a focused sustainability strategy. In the second quarter of the year, we accelerated our outstanding performance delivering robust operational and financial results. We recorded 23.5% revenue growth and EBITDA reached 3.5 billion TL. Net income was 1.1 billion TL on 31% year-on-year growth. Despite prevailing pandemic conditions, This performance was enabled by customer-centric strategy, a diversified business model, and a digital ecosystem with high value offers. All this was possible due to remarkable subscriber base growth of 617,000 and double digit ARPA growth in mobile and fiber residential segments. Additionally, our strategy of prioritizing our digital channel has helped us during the second quarter. whereby their share in our sales reached 18%. To note, we distributed the first and second installment of the 2020 dividend on April and July 13, and the last installment planned to be distributed in October. Our stunning results and our expectation for the second half have led us to upgrade the full-year guidance. Next slide. Let's take a look Look at our operational performance in the second quarter. In the mobile business, with our continued focus on post-pay segment, the base grew by 501,000 and the post-pay share reached 66% of the total on a three-point rise year-over-year. Going forward, we aim to keep our post-pay focus and further increase the post-pay share. Despite the lockdowns in May affecting acquisition and churn numbers, after the ease of pandemic measures in June, we gained strong momentum in net addition through increased mobility. Additionally, our customer-centric approach and AI-based analytical capabilities were instrumental in the retention. As such, our mobile churn rate was 1.7%, the lowest level of the past three years. Blended mobile ARPA rose to 52 TL on a 14% increase thanks to a larger post-based subscriber share. Price adjustment upsell to higher tariffs and higher data usage. Our mobile ARPA level is 12% and 23% higher than the competition. Enabling a rational pricing environment in the market, we expect double-digit ARPA growth for the remaining quarters of the year. In the fixed broadband segment, strong demand has continued under prevailing mobility limitation. We made 40,000 fiber subscriber addition with our high-speed fiber internet offers. Our focus on fiber customer will continue. We are pleased to register a further 40,000 net addition to our IPTV subscribers, having reached the homes of 961,000 customers. We now offer this service to 62 out of every 100 households amongst our residential fiber customers. Fiber residential ARPA rose to 77 Turkish Lira on 11% growth, mainly on our upsell efforts, demand for higher speeds, and price adjustments. As a challenger operator in the fixed broadband market, our ARPA level is 21% above the incumbent. Next slide. Next, an update on the data usage and foreign house subscription trends. Average mobile data usage rose 15% year-on-year to 13.4 GB per user. Recall that last year, for this quarter, mobile data growth was the record high of the previous eight years. The lockdown period in the quarter also affected growth. This quarter's data growth is reflected on mobile ARPA growth, which indicates that we are monetizing the usage trend. Out of 33 million customers signed up for foreign energy services, And around 70% have 4.5G compatible smartphones, still indicating significant growth potential. Overall smartphone penetration is at 84%, with 92% of these being 4.5G compatible. Next slide. We recently launched Turkcell Digital Ecosystem, which reunites all digital enterprise services under a digital ecosystem roof. An individual who uses any of our digital services will be served as a Turkcell customer, regardless of the operator they use. We aim to serve all customers within our digital ecosystem with the unique Turkcell customer experience and technology. A satisfaction point accepted by all of our customers is our well-invested, high-quality network and strong infrastructure. This quarter, our AI-based retention strategy led us to reach the right customer at the right time with the right tariff. An extensive distribution channel of almost 6,000 points nationwide and our digital channels that are tailored to customer needs are instrumental in customer decision-making. As we invest further in the relationship with our customer, we are happy to see their appreciation. customers have continued to recommend Turkcell to a significantly higher degree than the competition, as confirmed by our Net Promoter Score. Next slide. Now our strategic focus areas. Let's start with our digital services. The standalone revenue from digital services and the solution continued its strong growth at 32% year-on-year, reaching The paid user base reached 3.4 million, up 0.8 million on last year. BIP, our messaging platform, reached 82 million downloads and has 26 million active users. More than a quarter of active users are being abroad. Since we have added the ability to move chat and groups from other platforms, 2 million chats have been imported to BIP today. It has also been a good quarter for our TV business. The churn level for mobile TV product is half that of last year. STV Plus has the best user experience, price, and content equation. In the big screen strategy, we are now in almost every smart TV produced over past four years. And for those that we have not integrated, we offer TV Plus rated devices. We are delighted to have reached a remarkable milestone for our personal cloud application Lifebox as the standalone paid user base has exceeded 1 million. Consistent improvement on user experience, new features, and collaboration have increased the app's user base. As communicated last quarter, we have launched the B2B business model of our digital services with the evident demand from the market. As the demand for remote working and education continues, we are ready to serve cooperation with our local services and aim to be a part of their digitalization process. Next slide. Next are our digital business services. Revenues from digital business services rose 22% year-on-year to 618 million Turkish lira. We signed 678 new contracts with a total contract value of nearly 170 million TL. 917 million TL system integration project backlog is promising for the periods ahead. By rendering our latest data center operational this quarter in Çorlu, we further sustain our leadership of data center and cloud business. we have launched a new interface for our cloud services, which enables our customers to make their own configurations. We have introduced our customers to a variety of new services. On cybersecurity vertical, we have focused on fraud prevention for financial institutions and strengthening firewall services. Turkcell RPA was developed for the automation of robotic process. On IoT vertical, we launched smart utility management solution. These services will continue to assist corporates in their end-to-end digital transformation journey. Next slide. Third is our Techmin focus. Techmin services revenue for the quarter rose to $243 million. on 24% year-on-year growth. The contraction trend in finance sales revenue has eased off this quarter, and year-on-year revenue are flat due to the balanced long portfolio and higher interest rates. PaySales saw another remarkable quarter, topping 5.5 million active users. The company has seen 78% year-on-year growth on the back of traction in mobile payment solutions, especially for its buy-now-pay-later products. Mobile payment transaction volume nearly doubled to 418 million TL, whereas PayCell card transaction volume grew threefold year-on-year. Financel is the market leader in microloan segment with a 20% share. It differentiates with a robust credit scoring system that produces an instant result with a much higher approval rate than the banks. Aiming to serve all Turkish customers, Finansel started to provide financing solutions to Turkcell's fast-growing corporate segment, almost reaching 4,000 clients today. With this strategy, we aim to keep our focus on our products or service while providing the financing from a specialized company. This will improve risk management and balance sheet receivable with more transparent. Next slide. Now a few words on the performance of our digital channel. Digital channels play an integral part in providing our services 24 by 7. even in extreme situations like complete lockdowns. Digitalization of our customers is among our top priorities. From the digital operator application, a customer can tap up Turkish Lira, purchase data packages or smart devices from our extensive portfolio, while even a non-Turkcell user can apply for a subscription. As such, there were 23 million active digital operator users, which we refer to as digital users. Even though we have currently witnessed limited acquisition through digital platforms, the numbers have doubled year on year. Notably, data plan purchase and Turkish lira top-up transaction volume over this platform were even higher for the quarter at 1.9 times. Overall, With a 6.5 percentage point increase, the share of Turkcell Turkey's consumer sales generated on these digital channels have reached 18% in the second quarter. Next slide. Let's take a look at our performance in our international business. Turkcell International Revenues has reached 10% of consolidated revenue, 45% year-on-year. On the back of flourishing Ukrainian business and the positive impact on currency movements, excluding the currency impact, the segment has an organic growth of 24%. Lifestyle Ukraine revenue grew by 26% in local terms. This was driven mainly by subscriber base growth, higher data consumption, and corresponding solid ARPA growth of 17%. Mobile subscribers reached 8.4 million on 11% year-on-year growth. Next slide. Now, for an update on our e-mobility initiative, Turkey's Automobile Project TOG. TOG has received one of the world's most prestigious design awards, the IF Design Award. for its fully electric SUV model. As production facility construction continues at full speed and the first SUV model vehicle is planned to roll out in the last quarter of 2022. In July, as a milestone, the company assembled the first body entirely made of domestically produced parts. As the company presents opportunities in e-mobility, a field we are also exploring, it has the potential to be the next strategic focus area for Turkcell. In line with this, in June, we announced increasing our stake in TOG from 19% to 23%. Considering the existing and potential synergies with TOG, we believe that this investment has the potential to be valuable attractive for Turkcell Group in the medium term. Next slide. I'd like to touch upon our action on the ECG front in the second quarter. Our subsidiary Turkcell Energy recently acquired a wind power plant located in Izmir with an 18 megawatt capacity. Furthermore, we installed solar panels at Çorlu data center. These investments are aimed at fulfilling our commitment of energy procurement exclusively from renewable sources by 2030. As a socially responsible company, we established TÜXEL's sustainable governance principles. These principles underline our commitment to ethical behavior, human and children's rights, and environmental sensitivity in our relations with our employees, customers, and vendors, shortly within the Turkcell ecosystem. This year, we designed an AI-based fresh graduate recruitment interview process, where AI only focuses on the talent of the applicant. To note, this year we welcomed more women graduates than males. We are in solidarity with disaster victims and heroes who are fighting the wildfires in southern Turkey. We have donated saplings, provided free data and voice packages, set up mobile base stations, and built veterinary hospitals with a local NGO in the region. Nature Conservancy is not only a disaster-related action in Turkcell, as we have donated thousands of saplings through various campaigns to date. Next slide. I would like to end my presentation by sharing our new guidance for the full year of 2021. Taking into consideration our healthy first-half performance and our expectation for the remainder of the years, we revised our guidance upwards. Accordingly, We rise our revenue growth to around 18%, still aiming for a real revenue growth in high inflationary environment. We revise our expectation to around 14.3 billion Turkish Lira. We expect to register an operational capex over sales ratio between 21 to 22%. The strong nationwide demand for fiber has led us to increase our home pest plant to 600,000 for the full year. Our CAPEX expectation is also affected by the demand arising from strong operational performance in Ukrainian business and FX fluctuation. I will now leave the floor for our CFO, Osman.