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's conference call and live webcast to present and discuss the Turkcell first quarter 2023 financial results conference call. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by 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. Aliser Daryat, Investor Relations and Corporate Finance Director. Mr. Daryat, you may now proceed.

Thank you, Gili. Hello, everyone. Welcome to Turkcell's first quarter 2023 results call. Today, our CEO, Mr. Murat Erkan, and Acting CFO, Mr. Kamil Kalyan, will be delivering a brief presentation on operational and financial results, and afterwards, we will be doing Q&As. Before we start, I'd like to kindly remind you to review our Safe Harbor Statement, which is placed at the end of the presentation. Now, I'm handing over to Mr. Ertan.

Thank you, Serdar. Good morning and good afternoon, everyone. Thank you for joining us. We have been healing the wound of the recent earthquake, which happened to be one of the worst disasters of our history. We have taken certain actions to make sure people do seamlessly communicate in the region. Turkcell also remains committed to support the local community through projects that aim to increase employment, and we will also make our digital channel available for local producers and suppliers. Moving on to Q1 highlights. Our revenue growth continued to accelerate from 37% of Q1 2022 and reached to a remarkable 61.5%. thanks to the expanding subscriber base and increasing ARPU despite the negative impact of the earthquake during the half of the quarter. Excluding the earthquake impact, the growth would have been around 65%. The strategic focus area, mainly digital business services and tech segments, also supports the top line growth with a strong performance. We are happy to see our mobile ARPA growth, which achieved 68%, exceeding the headline inflation as we reap the benefits of sequential price increase we begun at the end of 2021. On the profitability side, our EBITDA reached 6.8 billion Turkish lira with a 57% increase. And despite the ongoing inflationary pressure, we achieved a margin of just over 39%. In line with our expectation, which accounts for the impact of the disaster on our OPEX. Excluding the earthquake impact, the margin would have been 41%. Last but not least, we recorded a solid and net profit of 2.8 billion TL mainly on the back of the strong operational performance as well as lower FX losses. Next slide. Let's take a closer look at our mobile operational performance. As a part of our strategy, we have been focused on attracting premium subscribers. which led to a net addition of 342,000 postpaid subscribers in Q1, bringing postpaid share to 69%. Prepaid net additions were impacted by lower new subscriber demand in the earthquake region and from the competitive offers, as well as high involuntary churn due to significant tourist arrival in Q3 last year. While we observed the continuing impact of year-end campaigns in the beginning of the year, the market rationalized after the earthquake, and overall the MNP market contracted in Q1. To support the victims of the earthquake, all operators frozen price actions. We also paused telesays to respect our national grid. We resumed both mobile price adjustments and telesays by April. Despite the impact of the earthquake, blended mobile ARPA growth accelerated to 68% year-on-year, outpacing the 54% average annual inflation within the quarter. Without the earthquake impact, we shall note that the ARPA growth would have been around 75%. Our mobile churn rate of 1.7% is reasonably below 2% despite a slight increase year-on-year due to the higher prepaid journey. The monthly data usage of 4.5G users have reached 17.4 GB driven by 88% smartphone penetration up 1.5 points year-on-year. Next slide, please. As expected, the earthquake also had a negative impact on our fixed broadband business. However, we saw a significant demand for our services in March due to relocation in the impacted area. Our focus on fiber subscribers continued, resulting in a net addition of 38,000 fiber subscribers in Q1. Our IPTV platform also saw a net additional 28,000 subscribers in the same period. After the long-awaited notable price adjustment in Q4 last year, and due to the earthquake, there were almost no significant price adjustments in the fixed broadband market. However, we introduced uncommitted offerings in January, which were appreciated by customers. We also saw continued traction in high-speed packages with 44% of new subscribers opting for 100 Mbps or higher packages. Our annual residential fiber ARPA growth in Q1 slightly decreased to 31% compared to previous quarter, mainly due to the action we have taken for earthquake victims. Excluding this impact, the ARPA growth would have been 36%. The slight increase in fixed churn is also triggered by the destruction in the earthquake regions. As we announced previously, our target is to reach 300,000 home paths this year, and we have already exceeded half of that in Q1. With an aim to increase return on investment, We will focus on increasing our take-up rate by addressing potential subscribers in the relevant HomePass areas. Next slide. And now in the next two slides, I will be providing an update on our strategic focus areas. Let's start with the digital services and solutions. In Q1, standalone revenue of digital services and solutions grew by 65% year-on-year. This was enabled by digital OTT service revenue rising 72% year-on-year. Our flagship digital OTT services, namely cloud storage, TV, and music streaming platforms, were the main pillars of the growth. On the back of price adjustment and paid user expansion, collectively standalone, Paid user number grew 24% year-on-year, reaching 5.2 million despite a decline outreach due to suspension of marketing campaigns after the earthquakes. Our second focus area, digital business services, addressing digital transformation of enterprises, posted strong growth of 104% year-on-year. The main drivers of growth were system integration projects. data center, and cloud business. Exceeding 11% of total DBS revenue, data center and cloud services more than doubled their top line, with strong demand from both local and international clients. In this quarter, we gained more than 1,100 new contracts. The backlog from system integration projects reached 2.5 billion TL. which will contribute to the top line over the upcoming quarters. Next slide, please. Our third focus area is Techfin. In Q1, PayCell, Turkey's leading payment platform, increased its revenue by 79% year-on-year. Almost tripling transaction volume was enabled thanks to an ongoing shift into digital payments. PayLater, which is the leading product of the PayCell, maintained its strong revenue trend and doubled its transaction volume, mainly supported by the transaction repayment in Apple and Android stores. PR solution transaction size rose more than four times. Given the increased penetration in the physical force devices in the market and our exclusive role in the Joint Electric Vehicle Project Stocks Pre-Sales Project. On the consumer financing side, financials revenue grow by 65% on rising interest rate and expanding loan portfolio. Financials loan portfolio expanded 7% year-on-year mainly reflecting the increased device prices in the market as well as corporate segment initiatives due to the diversification in the portfolio as well as action taken after the earthquake cost of risk increased to 2.7 percent next slide please now let's look at the performance of our international subsidies Turkish international revenue grew by 31% year-on-year in Q1. Excluding the currency impact, the organic growth was 20%. Lifestyle revenue rose 16% year-on-year in its local currency. EBITDA margin expanded by 4 percentage points compared to the last year, reaching 60%, thanks to higher revenue growth and lower international interconnection expenses. Best revenue rose 15% year-on-year in its local currency. ABTM margin expanded by a remarkable 15 percentage point compared to last year, thanks to the recently revised MTI raise, which led to lower interconnection expenses. Next slide. I would like to say a few words about TOG, our e-mobility initiative. Our investment in Turkey's electrical vehicle initiative is a solid step towards realizing opportunity in the e-mobility ecosystem. In a promise to deliver Turkey's first smart mobility devices, as you may recall, YAMNIK Technology Campus had become ready for mass production in October last year. In March, TOK began pre-sales of its first smart mobility devices and received a strong demand of nine times. Electrical vehicle deliveries started in April. As Turkey's leading payment platform, Paysal provided the payment infrastructure for the pre-sale process through TOK's own app. Paysal managed the process around 11 billion Turkish lira transaction SmoothLib and its very first company in the world to achieve such a large transaction volume through a wallet app in a short time. In the meantime, Tok has laid the foundation of battery development and production factory adjacent to its technology campus, together with battery giant Pharisys Energy. The facility is planned to be completed by 2024. Now, I would like to leave the floor to our acting CFO, Mr. Kamil Kalyan.