TURKCELL INVESTOR PRESENTATION. October 2018

Transcription

1 TURKCELL INVESTOR PRESENTATION October

2 TRANSFORMING INTO THE DIGITAL OPERATOR OUR VISION TRANSFORMATION JOURNEY STARTED IN 2015 ORGANIZATIONAL TRANSFORMATION STATE-OF-THE-ART 4.5G DEPLOYMENT SALES CHANNEL TRANSFORMATION SHAPING TECHFIN IN TURKEY CONVERGENCE OF OTT SERVICES 22

3 3-YEAR GUIDANCE DELIVERED ONE YEAR AHEAD. New & higher 3-year guidance announced on March 14, 2018 Following the robust Q1 & Q results, 2018 guidance is revised upwards on July 25, 2018 TURKCELL GROUP (Previous Guidance) 2017 Actual Performance New (Mar 14) 2018 New (Jul 25) REVENUE GROWTH EBITDA MARGIN OP. CAPEX / SALES* 10% - 14% 32% - 35% 17% - 16% 23% Revenue Growth 35.3% EBITDA Margin 87% 4.5G Subs (G:55%) 2.2Mn TV+ Subs (G:2.0Mn) 2.2Bn Fizy Songs Streamed (G:800Mn) 14% - 16% 37% - 40% 18% - 16% 16% - 18% 37% - 40% 19% - 18% New guidance figures reflect the expected impacts of IFRS 9, IFRS 15 and IFRS 16. A positive 4-5pp impact is reflected in EBITDA margin guidance. * Excluding license 33

4 Turkcell ARPU (exl. M2M) Growth ROBUST BUSINESS MODEL Nature of our business Small share in wallet: Upside potential & insensitive to macro Digital platform for data access, entertainment&social communication Turkcell s strengths Differentiated offerings with digital services Growing corporate demand: Need for digitalization and efficiency Lowest churn in the sector in Turkey ARPU - GDP Correlation (Q115-Q218) 19% 17% 15% 13% 11% R² = % 7% 5% 3% 1% -3% -1% 1% 3% 5% 7% 9% 11% 13% GDP Growth * * Q218 GDP growth is based on Bloomberg s forecast High postpaid ratio & contracted customers Inflationary pricing policy Low sensitivity of EBITDA to FX Strong collection & NPL management 44

5 Q115 Q215 Q315 Q415 Q116 Q216 THREE PILLARS OF OUR BUSINESS MODEL HEDGING Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 INFLATIONARY PRICING FX & INTEREST RATE HEDGING LIQUIDITY Key for sustaining growth & margins Secure ROI of projects & investments Reflecting costs to the prices Proven track record Keeping all cash in hard currency FX hedged for whole maturity, both on principal & interest of loans Converted variable to fixed interest Strong cash flow for capex needs Additional committed lines 1.55Bn USD cash covers principal & interest payments until 2020-end Turkcell ARPU vs. CPI Trend (Q115=100) TCELL ARPU (exl. M2M) CPI Details of Financial Debt (After Hedging) 58% 42% Local Currency FX 13% 87% Fixed interest Variable interest Principal & Interest Payments * (Million USD) , , FX Local Currency * Data of Turkcell Group companies, exluding TCF 55

6 SOLID BALANCE SHEET SUMMARY NET DEBT/ EBITDA TRY Mn Q Q Q Total Cash 4,712 4,590 7,081 Total Assets 33,982 37,073 41,026 Total Debt * 12,536 14,002 17,313 Lease Obligations - 1,128 1, x 4, x 4, x 1.49x 4, x TCF loan porfolio Total Equity 15,045 14,248 14,952 Net Debt 1 7,824 9,413 10, x 3,576 5,014 5,541 Net Debt** Net Debt 2 3,576 5,014 5,541 Q417 Q118 Q218 Net Debt/EBITDA* Net Debt/EBITDA** 1 Impact of IFRS 16 (capitalised lease obligations) are excluded 2 Turkcell Consumer Finance Company s (TCF) loan portfolio and capitalized lease obligations related to IFRS 16 are excluded 66

7 CONSUMER FINANCE BUSINESS TCF KEY FINANCIALS * TRY MILLION Q YoY % H YoY % Revenues % % Net Income % % TCF Loan Portfolio details (as of Q218) 4.7Mn loans outstanding 1,526 TL average ticket size 85 TL average monthly installment Loan protection insurance on over 90% recently Handset Financing (TRY billion) Loan Breakdown Smartphone 95% Q217 Q118 Q218 Turkcell Contracted Receivables TCF Consumer Loans 300Mn TL of Asset Backed Securities were issued to date Other** 5% * Turkcell Consumer Finance Company (TCF) net income includes 30 mn TL and 57 mn TL dividend from Paycell retained earnings in Q217 and Q218, respectively **Other includes tablet, accessories, smart watch and VINN sales. 77

8 POTENTIAL IMPACTS OF FINANCING LIMITATION What has changed? Financing for telecom devices is limited to 6 months Installments are restricted industry-wide at all channels What we expect? Smartphones will remain as necessity goods Demand will shift towards mid-segment SPs Consumers will adjust their own budgets LTE enabled smartphones under USD200 TCF financing breakdown by number of installments 66% 61% 59% >12 mth installments Vestel Venus Go General Mobile GM8 Huawei P9 Lite Mini Samsung Galaxy J7 Core 34% 39% 41% <=12 mth installments and many more Jan.18 Jun.18 Jul.18 88

9 MAJOR FUNDING & HEDGING DETAILS TYPE & DATE AMOUNT MATURITY INTEREST PURPOSE OF FUNDING UTILIZATION HEDGING DETAILS Club Loan (September 2015) US$500Mn EUR445Mn 2-year grace period, 5-year maturity 3-month LIBOR/ EURIBOR % CAPEX and inorganic growth opportunities Fully utilized in Jun 16 80% hedged with PCCS - Bond (October 2015) US$500Mn 15/10/ % (fixed rate) CAPEX and inorganic growth opportunities - - China Development Bank (October 2015) EUR500Mn EUR750Mn 3-year grace period, 10-year maturity EURIBOR % Debt restructuring CAPEX Fully utilized in Oct 15 ~EUR 120 Mn utilized as of June % hedged with PCCS ~82% hedged with PCCS &CCS Bond (April 2018) US$500Mn 11/04/ % (fixed rate) Repayment of existing indebtedness

10 FX EXPOSURE CASH * Before Hedging DEBT After Hedging NET FX POSITION ** USD MILLION Share 22% 78% 13% 5% 35% 47% 4% 55% 28% 13% Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 (144) (109) (125) (91) (203) (95) (215) (330) (86) Nominal 7.1Bn TL 18.5Bn TL USD EUR TRY Other (688) Comfort Zone (USD 500Mn) * Excluding FX swap transactions for TL borrowing IMPACT OF HEDGING TOOLS ON Q218 FX LOSS TRY MILLION (1,239) Total FX Loss Hedge Portfolio Gain Net FX Loss ** Including advance payments, hedging and assuming the 4.5G license payables in TRY for the periods before April 2017 and excluding FX swap transactions for TL borrowing. Q218 figures include USD 86 Mn stemming from lease obligations. 1010

11 FINTUR UPDATE Decided to exit with Telia Company in Q416 Classified as «assets held for sale» KCell Already divested Geocell & Azercell in Q118 Moldcell Kcell & Moldcell sale processes are on-going Geocell Azercell 111

12 Q218 RESULTS 12

13 SECOND QUARTER HIGHLIGHTS FINANCIAL Record top line at 5.1 bn TL, up 18.3% yoy, 52% 2yr growth EBITDA Margin at 41.8% Revenue guidance revised upwards to 16% - 18% Asset light strategy: infrastructure sharing protocol First installment of dividend distributed OPERATIONAL Over 100Mn core digital services * downloaded Mobile triple play at 60.5%, up 13.8 pp yoy 4.5G user data usage reached 7GB in June 18 18Mn 4.5G compatible smartphones, ~1Mn QoQ Revenue and EBITDA Margin Mobile Triple Play Multiplay with TV 42.5% 41.8% 30.7% 33.3% 33.9% 34.5% 33.8% 35.5% 37.3% 58.7% 60.5% 5, % 46.8% 4,044 4,053 3,658 3,358 4,597 4,666 4,762 4, % 40.5% 1,029 1,218 1,371 1,400 1,457 1,632 1,739 2,022 2,134 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Revenue (Mn TL) EBITDA (Mn TL) EBITDA Margin (%) Q217 Q317 Q417 Q118 Q218 Q217 Q317 Q417 Q118 Q218 * Core digital services include BiP, Dergilik, Fizy, My Account, Lifebox, Academy, Sports app, Upcall, TV+ and Yaani 1313

14 TURKCELL GROUP FINANCIAL HIGHLIGHTS Consolidated TRY Million 1 Q Q QoQ % YoY % H YoY % Revenue 4,762 5, % 18.3% 9, % EBITDA 2,022 2, % 46.5% 4, % EBITDA Margin 42.5% 41.8% (0.7pp) 8.0pp 42.1% 8.0pp Net Income (17.1%) (41.0%) 916 (21.2%) Op.Capex/Sales % 20.2% 8.6pp 3.5pp 16.0% 1.0pp Two-year Cumulative Growth Rates 102% 107% Growth momentum continued; 52% two-year cumulative revenue growth Limited net income volatility QoQ despite TL depreciation in Q2 Operational capex as a percentage of sales in line with expectations in H1 1 TRY figures are based on IFRS. 2 Excluding license fees 64% 51% 46% 41% 36% 40% 37% 40% 48% 52% Q117 Q217 Q317 Q417 Q118 Q218 Revenue EBITDA 1414

15 TURKEY SUBSCRIBERS (million) 54% of total mobile 18.8 OPERATIONAL HIGLIGHTS 16.0 Total Turkey subscribers 37.6 mn 950K net add YoY 2.6 ARPU (TL) % Mobile ARPU like-for-like Growth YoY 1 YoY 5.1% 13.3% YoY Q216 Q217 Q218 Fixed Residential Mobile Blended (excl. M2M) MOBILE CHURN RATE Net add QoQ Postpaid Prepaid Fiber ADSL TV 205K 31K 40K - YoY 664K 18K 171K 10K 124K Note: TV subscribers include 2.1 million of «OTT only» customers, which are excluded from net add & total subs 1 The ARPU of customers who have stayed with Turkcell for at least 14 months. 2 Company calculation on the basis of monthly churn rates disclosed in ICTA sector reports. 25K 8.0% 4.2% 5.5% Q216 Q217 Q218 ~7% competitors average in Q217-Q118 2 Note: In Q117, our churn policy was revised to extend from 9 months to 12 months (the period at the end of which we disconnect prepaid subscribers who have not topped up above TRY10). Additionally, under our revised policy, prepaid customers who last topped up before March will be disconnected at the latest by year-end. Please note that figures for prior periods have not been restated to reflect this change in churn policy. The net mobile subscriber addition figures and mobile churn rate for Q217 disclosed in this document have been positively impacted by this change. 1515

16 INCREASING APPRECIATION OF CUSTOMERS NET PROMOTER SCORE * OVER COMPETITION SUPERIOR 4.5G QUALITY & SPEED PIONEER CAMPAIGNS Q118 Points over next best Q218 Points over third best #1 in NPS reflecting superior overall customer satisfaction Continued to widen the gap in the second quarter *NPS score comparison is for consumer segment in mobile. (Source: Future Bright) DIGITAL SERVICES PORTFOLIO ENHANCED SHOPPING EXPERIENCE 1616

17 CONTINUED RISE IN DATA USAGE MOBILE DATA USAGE (Av. GB/User) 4.5G SUBSCRIPTION (million) GB 4.5G data usage in June Q216 Q217 Q218 Non 4.5G Users 4.5G Users Total Users Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q G subscribers 4.5G compatible smartphone* 4.5G users are driving data usage o 2x consumption vs. 2G&3G users Significant room for further 4.5G adoption 77% of smartphones on our network are 4.5G compatible Up by 12pp yoy * adjusted to reflect the updated 4.5G smartphone figures on our network 1717

18 INCREASING MULTIPLAY MOBILE* (TRIPLE PLAY«3P») MOBILE MULTIPLAY 58.7% 60.5% TRIPLE PLAY SHARE IN MOBILE REVENUE 46.7% 65% 75% 77% 12pp YoY FIBER RESIDENTIAL (MULTIPLAY WITH TV) Q217 Q118 Q % 46.8% 40.5% Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 *Share of mobile voice line users which excludes subscribers who do not use their line in the last 3 months. Triple Play refers to mobile customers who use voice, data and one of core digital services. 1818

19 INTERACT, READ, LISTEN, WATCH, STORE & SEARCH Download 1 INSTANT MESSAGING UPCALL DIGITAL PUBLISHING MUSIC TV PERSONAL CLOUD (lifebox) MY ACCOUNT (Hesabım) 21.3Mn 3.2Mn 6.5Mn 17.6Mn 8.7Mn 7.7Mn 32.1Mn 5.4Mn Monthly Active User 6.5Mn 1.0Mn 7.9Mn 2 1.8Mn 1.9Mn 1.3Mn 11.8Mn 0.9Mn Service KPI s 70Mn messages per day 1Mn calls per day 176K copies read per day 6.8Mn songs streamed per day 2.8Mn TV sessions per day 46 docs uploaded per person per day 33% More ARPU 2.0Mn Search per day Q2 Updates 2 nd number on one phone New interface International magazines introduced Infrastructure renewed Peak traffic during elections and World Cup Paycell integration 85Mn Shake&Win Web version launched 1 Refers to downloads as of July 16, Includes users who utilised the zero rating benefit of Dergilik magazines and newspapers via browser. 1919

20 LIFECELL: TREND IN DIGITAL BRAND CONTINUES SUBSCRIBERS (thousand) 2x 879 >1Mn as of July 18 70% of postpaid Lifecell acquisitions are new customers Q417 Q118 Q x ARPU (vs. Turkcell consumer subscriber) 8 GB av. data usage of a Lifecell user (in June 2018) 21% Lower churn rate (vs. Turkcell subscriber) 2020

21 PAYCELL: DIGITAL PAYMENT COMPANION 169 Mn TL transaction in Q218* PAYCELL Direct Carrier Billing 5Mn Mobile Payment users PAYCELL APP Mobile wallet Paycell top-ups Utility payments Money transfer QR code payment 1.5Mn downloads 1.6Mn Registered credit cards Paycell launch campaign PAYCELL CARD 277K users Available at: *Excludes TCF transactions and counting 2121

22 GAMING BUSINESS Attractive gaming market * in Turkey 31Mn gamers USD774 Mn market Aim to create the largest gaming brand in Turkey Segmented approach Umbrella platform New interface 5Mn games played in June 18 Safe zone for kids up to age 12 Available in web & mobile 1.4Mn users in June 18 Coming soon for age 12+ Subscription based business model Launched TavlaGO (Backgammon) Multi player online game * Source: Market Report, Newzoo,

23 TURKCELL INTERNATIONAL HIGHLIGHTS TRY MILLION 1 Q YoY% H YoY % YoY Revenue Growth (Q218, in TRY) lifecell 31.6% EBITDA Margin (Q218) 47.6% 4.5G launched on 1800MHz Revenue % % EBITDA % % EBITDA Margin 36.9% 11.3pp 35.2% 10.2pp BeST 25.0% Kuzey Kıbrıs Turkcell 13.0% 16.0% 38.0% 4G growth on track Now offering fixed broadband lifecell Europe 260K subscribers 1 TRY figures are based on IFRS 2323

24 TAKING OUR DIGITAL STRATEGY GLOBAL Digital services are available at our international subsidiaries and other operators through lifecell Ventures International downloads of our services reached ~3 Mn Turkcell&lifecell Ventures booth at GSMA Barcelona 2018 Franchise holder for a digital services portfolio Introduced in GSMA Mobile World Congress *Refers to downloads as of June 30,

25 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 Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of This includes, in particular, our targets for revenue, EBITDA and capex in 2018 or for the medium term 2018 to More generally, all statements other than statements of historical facts included in this presentation, including, without limitation, certain statements regarding the launch and goals of our payment card business, our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the written or oral use of forward-looking terminology 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 such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2017 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty to update 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 to verification, 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 oral information 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 this presentation totals may not foot due to rounding differences. The figures used in this presentation are rounded while percentage changes are calculated based on the figures disclosed in the press release. 2525

26 THANK YOU For further information please or call Turkcell Investor Relations at ( ) Please download our IR App via here for ios and here for Android mobile devices or via below QR codes. For Android For ios 26