Turkcell Iletisim Hizmetleri AS

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call Operator. Welcome and thank you for joining the Turkcell Conference Call and Live Webcast to present and discuss the Turkcell Third Quarter 2022 Financial Results Conference Call. At this time, I would like to turn the conference over to Mr. Ali Serdar Yagyar, Investor Relations and Corporate Finance Director. Mr. Yagyar, you may now proceed.

Thank you very much, Mina. Hello, everyone. Welcome to Turkcell's third quarter 2020 results call, 2022 results call. Today's speakers are our CEO, Mr. Murat Erkan, and our CFO, Mr. Osman Yilmaz. We have a brief presentation, and afterwards, we'll be taking your questions. Before we start, I'd like to kindly remind you to review the last page of the presentation for our safe harbor statement. Now, I hand over to Mr. Erkan.

Thank you, Serdar. Good morning and good afternoon, everyone. Welcome to Turkcell's third quarter earning call and thank you for joining us. We left behind another quarter where microeconomics challenges continue to wait on the economic activity around the world. While inflation remained to be a major concern, especially in Turkey, domestic demand was still strong as rising prices prop up consumer spending. We recorded 57% revenue growth in the third quarter, enabled by consecutive price adjustment and upsell performance coupled with a growing subscriber base. Strong rebound in roaming, ongoing momentum in digital business services, and tech win, also positive contribution from international operation, support top-line growth. Amidst continuing inflationary pressures on EBITDA grew by 49% year-on-year, implying just short of 41% margin. On the back of growing EBITDA and proactive effects management, we recorded a net income of 2.4 billion TL, increasing 68% year-on-year. Higher mobility and strong tourism activity enabled us to accelerate the growth in the subscriber base with 1 million net additions. In the first nine months, we gained a total of 2.2 million net subscribers, further strengthening our leadership in the market. Lastly, this quarter, with a focused approach, the revenue share of digital channels in the consumer sales achieved 23% and set in a record. In consideration of these results, we further increase our full year guidance, which I will elaborate on my last slide. Moving to the next slide. Let's take a look at our operational performance in mobile. In line with historical trends, this quarter was marked by increasing mobility, coupled with a sharp rise in foreign visitors to Turkey, exceeding pre-pandemic levels. The market continued to grow on back of the... Sorry for interruption. So let me start with the second slide. Let's take a look at our operational performance in mobile. In line with historical trends, this quarter was marked by increasing mobility coupled with a sharp rise in foreign visitors to Turkey, exceeding pre-pandemic levels. The market continued to grow on the back of tourist arrival as well as the demand from the corporate segment. Accordingly, we recorded strong net ads of 420,000 in postpaid and 506,000 in prepaid subscribers. Blended mobile art growth ramped up to 49% year-on-year from 33% in the previous quarter. The main reasons behind the acceleration were consecutive price adjustments since December of last year, upsell performance, and the higher data usage during the summer. On top of the price adjustment of the past three quarters, we made another increase in September, and tariffs have been doubled for new subscribers compared to last year. Despite price adjustment, we continue to observe stable churn levels in the mobile segments, thanks to our analytic capabilities, strong brand perception, network quality, and extensive distribution channels. Despite a very slight increase compared to the previous quarter, as expected due to increased mobility, our churn rate was identical to that of last year in this quarter. Confirmed by our net promoter score, the consumer continues to recommend Turkcell to a significantly higher degree than the competition, underlining our premium position in the mobile segment. Moving to the next. In the fixed broadband segment, we gained net 68,000 fiber subscriber on the back of rising demand for high-speed connection in the back-to-school period. Our focus on price adjustment and upsell to the higher speed packages has supported ARPU growth of 27%. ARPU growth in the fixed segment lags behind that of mobile for two reasons. First, contract terms are longer as per market dynamics. And the second, the incumbent operator was reluctant to make meaningful price adjustments until October. We have started to offer 12 months contract to address the first concern and also increase price following the income's very recent actions. The fiber churn rate of 1.2% was not much affected by price increase and higher mobility in this quarter. Thanks to our speed and customer service quality. Proceeding with our fiber rollout plan, we added 240,000 home passes in this quarter. Year-to-date, we have reached around 90% of our annual target with over 700,000 additions. On the IPTV side, we are pleased to see continued interest in our TV Plus service with 45,000 net addition this quarter. Overall, IPTV penetration in our fiber subscriber base has exceeded 66%, rising three points year on year. Next slide. And now, in the next two slides, we go through the developments of our strategic focus areas. Let's start with our digital services and solution, where we gain 1.2 million paid users year-on-year, reaching almost 5 million. The revenue of digital OTT services, which include core OTT services, rose 66% year-on-year, mainly driven by cloud storage, TV, and music streaming. On the TV Plus side, our paid subscriber base continued to grow. As we successfully deliver on our big screen and TV plus ready strategy, our OTT TV subscriber reach 932,000, up 25% year on year. Our cloud storage platform, Lifebox, reached 1.7 million paid subscriber on a solid rise of 47% year on year, successfully addressing rising interest in cloud storage services as a result of ongoing digitalization of everyday lives. On digital business services side, where we serve corporates and enterprises, this quarter was marked by exceptional revenue growth of 107%. Tailor-made and digital transformation projects were instrumental in this growth. Additionally, by more than doubling the revenues, data center, cloud, and business application services further supported growth. The backlog from the system integration project totalled 1.5 billion TL, which is set to contribute to the top line over the upcoming quarters. We continue to acquire new value-added business, for instance, the establishment of Turkey's electric vehicle talks IT infrastructure with high processing power.