TURKCELL GROUP Q1 2017 April 26, 2017 1
BUSINESS OVERVIEW Kaan Terzioğlu Turkcell CEO 2
TURKCELL GROUP DELIVERING ON OUR STRATEGY GSM 3G Fiber 2G 4.5G DIGITAL SERVICES COMPANY 3 WITH GLOBAL BRANDS
TURKCELL GROUP FIRST QUARTER HIGHLIGHTS FINANCIAL OPERATIONAL Record growth of top-line and EBITDA Highest Q1 EBITDA margin since 2009 Success story of 4.5G in its 1st year Mobile multi-play offers doubled yoy 94% data and digital services growth FX position under control First asset-backed security issued ~53 mn core digital services downloaded 42K QoQ net add both in fiber and TV+ SP penetration up to 68% in TCF s 1st year 4
TURKCELL GROUP FINANCIAL HIGHLIGHTS Consolidated GROUP Q1 2016 Q1 2017 Growth YoY % TRY Million 1 Revenue 3,225 4,053 25.6% EBITDA 1,002 1,400 39.8% EBITDA Margin 31.1% 34.5% 3.4pp Net Income 563 459 (18.5%) Op.Capex/Sales 2 21% 13% (7.8pp) Record first quarter revenue and EBITDA, both at the Group and Turkcell Turkey Below EBITDA impacts: amortization and interest expenses Capex/Sales trend is under control and declining SHARE OF REVENUES 88% Turkcell Turkey 6% 6% Turkcell International Other Businesses 5 1 TRY figures are based on IFRS TRY figures 2 Excluding license fees
TURKCELL GROUP FINANCIAL HIGHLIGHTS TURKEY TRY Million 1 Q1 2016 Q1 2017 Growth YoY % Revenue 2,928 3,563 21.7% EBITDA 916 1,269 38.5% EBITDA Margin 31.3% 35.6% 4.3pp Net Income 536 454 (15.3%) Turkcell Turkey revenue growth including financial services is 25.4% in Q117, EBITDA margin is 35.4% Revenues from Universal Service Project is included in top-line starting from Q117 EBITDA margin without Universal Service Project is 35.9% 6 1 TRY figures are based on IFRS TRY figures
7 TURKCELL TURKEY OPERATIONAL HIGHLIGHTS 70% 25% Total 50.4 mn SUBSCRIBER 3% 1% 1% Turkcell Turkey Ukraine Belarus Turkcell Turkey (mn) 35.8 Mobile Postpaid 17.7 Mobile Prepaid 15.7 Northern Cyprus Turkcell Europe 1.1 Fiber ADSL 0.9 IPTV 0.4 47.1 50.3 51.3 51.6 51.1 53.1 23.7 26.0 27.1 29.5 30.9 30.5 Q115 Q116 Q216 Q316 Q416 Q117 Fixed Residential Mobile Blended (excl. M2M) 7.7% 7.5% ARPU (TL) MOBILE CHURN RATE* 8.0% 6.3% 5.6% 5.0% Q115 Q116 Q216 Q316 Q416 Q117 YoY 5.6% YoY 17.3% YoY 2.5pp *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 Q117 disclosed in this document have been positively impacted by this change.
TURKCELL TURKEY FIRST ANNIVERSARY OF 4.5G LAUNCH 8 15 19 ~12mn smartphones with 4.5G 81 cities 83% pop. coverage 0 Q116 Q216 Q316 Q416 Q117 23 7 8 9 11 12 ~26 mn subscribers 4.5G subscribers (mn) 4.5G compatible smartphone (mn) 26 1.8 MOBILE DATA USAGE (Av. GB/User) 4.3 4.3 4.3 4.6 2.3 2.6 2.8 3.0 Q116 Q216 Q316 Q416 Q117 Total Users 4.5G Users 55% 60% 62% 64% 68% 16.6 17.5 18.5 19.2 20.5 Q116 Q216 Q316 Q416 Q117 Number (million) SMARTPHONE Penetration 5.1GB in March
TURKCELL TURKEY POSITIVE TREND IN MULTIPLAY MOBILE* (TRIPLE PLAY) 41.8% 42.4% 20.7% 24.0% 28.2% FIBER RESIDENTIAL (MULTIPLAY WITH TV) 29.8% 32.6% 33.9% 35.9% 38.7% 9 Q116 Q216 Q316 Q416 Q117 *Share of mobile voice users which excludes subscribers who do not use their line in the last 3 months
TURKCELL TURKEY TV HIGHLIGHTS OTT TV* and IP TV (Thousand) 875 776 665 411 480 268 303 323 360 402 1.3 million customers Q116 Q216 Q316 Q416 Q117 IP TV & OTT TV customers OTT TV only customers Turkcell TV+ is the leader in mobile and tablet with 4.5G experience Enrichment of content in sports, movies and TV shows will continue Turkcell users mobile TV watching duration increased to 40 min from 7 min since its launch 10 *OTT refers to TV subscribers on mobile device, computer, tablet etc
TURKCELL GROUP CONSISTENT GROWTH IN CORE DIGITAL SERVICES 12.9 M 9.1 M INSTANT MESSAGING MUSIC 26.1 44.2 51.4 53.3 PERSONAL CLOUD (lifebox) DIGITAL PUBLISHING 4.3 M 1.3 M 17.4 M MY ACCOUNT SPORTS 3.3 M 2.9 M MOBILE TURKCELL TV+ Q116 Q416 Q117 Apr 17 Total Core Services Downloads (mn) TURKCELL ACADEMY 1.4 M 11 Downloads are as of April 2017 CALL MANAGEMENT (UPCALL) 0.7 K
TURKCELL TURKEY GROWTH DRIVERS 40% MOBILE DATA 763 1,400 1,438 89% YoY 33% Data&Digital Services TRY 2.4 bn 94.2% YoY 9% TRY MILLION FIXED DATA TRY MILLION Q116 Q416 Q117 240 289 317 Q116 Q416 Q117 32% YoY 12 Mobile Data Digital Services 18% Fixed Data Voice+SMS+Other DIGITAL SERVICES TRY MILLION 226 537 631 Q116 Q416 Q117 180% YoY
TURKCELL GROUP NEW SERVICES UNDERWAY FINANCIAL SERVICES DIGITAL SERVICES ENERGY SERVICES 13 Smartphone penetration Revenue stream Cash flow management Fintech apps; digital wallet, payment systems Prepaid cards Revenue stream Different value propositions Customer loyalty New customers Asset-light approach
TURKCELL GROUP ENERGY COMPANY Customer Brand strength Sales channel Customer Service Billing Big data Digital services Technology Telecom & Digital services Consumer Finance Energy Different value propositions (smart home, uninterrupted service, battery wall) Customer loyalty New customers Muti-play offers 14
OTHER BUSINESSES CONSUMER FINANCE COMPANY COMMENCED OPERATIONS IN MARCH 2016 Improve working capital management Securitization of receivables (1st ABS issued) Support smartphone penetration growth TRY MILLION Fintech applications FINANCIAL KPIs Q116 Q416 Q117 Consumer loans 269 2,396 3,020 Revenues 2 90 116 Gross profit 2 48 57 Fitch Ratings AA local/currency TRY 575 mn Paid-in capital TRY 3.0 bn Consumer loans 2.9 mn Loans outstanding 15
TURKCELL GROUP TURKCELL INTERNATIONAL HIGHLIGHTS lifecell 24.3% 27.1% Leader in 3G coverage TRY MILLION 1 Q1 17 YoY Growth BeST* Revenue 248 26.0% 50.6% 7.5% Digital services focus EBITDA 60 12.7% EBITDA Margin 24.3% (2.9pp) Kuzey Kıbrıs Turkcell 12.0% 36.0% 4K «lifecell» customers 16 1 TRY figures are based on IFRS TRY figures Q117 YoY Revenue Growth (in TRY) Q117 EBITDA Margin * Excluding one-off items mainly related to the inventory write-off
FINANCIAL OVERVIEW Bülent Aksu Turkcell CFO 17
TURKCELL GROUP REVENUE & EBITDA REVENUE EBITDA 18 TRY MILLION 3,225 Revenue Q116 635 Δ Turkcell Δ Turkcell Turkey International 0.8bn TL revenue add in Q1 * Turkcell Consumer Finance Company 51 114 28 25.6% ΔTCF* Turkey growth driven by 17% ARPU growth Δ Other Subsidiaries TCF is a one of the strong contributors of growth 4,053 Revenue Q117 TRY MILLION 1,002 Margin 31.1% EBITDA Q116 827 Δ in Revenues (424) Δ in Direct cost of revenues* *Excluding depreciation and amortization 39.8% (21) 17 Δ in G&A exp. Δ in S&M exp. 1,400 Margin 34.5% EBITDA Q117 EBITDA increase via top-line growth & opex management Flat expenses thanks to opex management programme
TURKCELL GROUP NET INCOME DEVELOPMENT TRY MILLION 4.5G investments 398 (174) (211) 563 (15) (102) 13 (14) 459 Net income Q116 Δ in EBITDA Δ in D&A Δ in Interest Inc./Exp. Δ in Fintur Δ in FX Gain/Loss* Δ in Other Inc/Exp. Δ in Taxation Net income Q117 19 *FX/Gain loss includes impact of fair market value change of swap contracts
TURKCELL GROUP SOLID BALANCE SHEET SUMMARY TRY MILLION Q1 2016 Q4 2016 Q1 2017 Total Cash 2,522 6,052 6,451 Total Assets 26,175 31,600 32,955 Total Debt 4,028 9,781 10,730 Total Equity 14,902 16,068 16,536 NET DEBT/ EBITDA 3 «investment grade» 0.6x 2,485 0.8x 0.9x 3,729 4,280 20 Net Debt 1,506 3,729 4,280 TCF loan portfolio has grown by 0.6bn TL QoQ, and consolidated Net Debt increased by 0.6bn TL Securitization of TCF loans will help improve cash generation Q3 2016 Q4 2016 Q1 2017 Net Debt (TRY mn) Net Debt/EBITDA Growth in consumer finance led to the increase in Net Debt EBITDA improvement limited the rise in leverage
TURKCELL GROUP CASH DEVELOPMENT Decrease in trade payables (698) Increase in trade receivables (277) Prepaid subscriber frequecy usage fee (309) Change in other working capital items 293 1,400 (571) 11 550 (991) 6,052 6,451 Q416 EBITDA Capex* Net int income Net chg in debt Other Q117 21 * Including operational and non-operational Capex
TURKCELL GROUP FX EXPOSURE CASH DEBT NET FX POSITION* (million USD) Before Hedging After Hedging Q115 Q116 Q216 Q316 Q416 Q117 Share 31% 69% 28% 72% 45% 55% ~70% (217) (1,987) (1,239) (688) (125) (91) FX position minimized Nominal 6.5 Bn TL 10.7 Bn TL FX Local Currency 22 * Including advance payments, hedging, and assuming the remaining 4.5G license payment in TRY
NOTICE 23 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 1995. This includes, in particular, our targets for revenue, EBITDA and capex in 2017 or for the medium term 2017 to 2019. 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 forwardlooking 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 2016 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.
THANK YOU For further information please e-mail investor.relations@turkcell.com.tr or call Turkcell Investor Relations at (+90 212 313 1888) Have you updated Turkcell IR app? For Android For ios 24
25 APPENDIX
Summary Income Statement As Per CMB 1 Financials (TRY MILLION) Summary income statement Q1 2016 Q4 2016 Q1 2017 YoY (%) QoQ (%) Revenue 3,225 4,044 4,053 Direct Cost of Revenues 2 (2,019) (2,608) (2,617) 26% 0% 30% 0% S&M (481) (479) (465) (3%) (3%) G&A (179) (190) (200) 12% 5% EBITDA 1,002 1,371 1,400 40% 2% EBITDA Margin 31.1% 33.9% 34.5% 3.4pp 0.6pp Net Income 563 351 459 (19%) 31% 26 1 Capital Markets Board of Turkey 2 Depreciation and amortization is included
Consolidated Balance Sheet (TRY MILLION) Consolidated Balance Sheet (TRY mn) 1Q 2016 4Q 2016 1Q 2017 YoY(%) QoQ(%) Cash & Bank 2,522 6,052 6,451 156% 7% CURRENT ASSETS 8,645 13,351 14,720 70% 10% TOTAL NON-CURRENT ASSETS 17,530 18,249 18,235 4% (0.1%) TOTAL ASSETS 26,175 31,600 32,955 26% 4% S/T Debt 658 2,846 3,322 407% 17% TOTAL CURRENT LIABILITIES 5,759 7,359 7,674 33% 4% L/T Debt 3,373 6,935 7,409 120% 7% TOTAL NON-CURRENT LIABILITIES 5,514 8,173 8,745 59% 7% MINORITY INTEREST 66 57 33 (50%) (42%) SHARE CAPITAL 2,200 2,200 2,200 0% 0% TOTAL EQUITY 14,902 16,068 16,536 11% 3% TOTAL EQUITY AND LIABILITIES 26,175 31,600 32,955 26% 4% 27
Currency Trends USD / TRY 2.32 2.73 3.01 2.19 USD / BYN 2.91 3.52 3.64 3.67 2014 2015 2016 1Q17 1.86 1.96 1.87 0.95 1.19 1.98 0.89 1.03 1.59 1.91 2013 2014 2015 2016 1Q17 EUR / TRY Average Period-End 2.82 3.18 3.71 3.91 2.90 3.02 3.32 3.90 2014 2015 2016 1Q17 USD / UAH 24.00 27.19 26.98 15.77 21.79 25.56 27.09 11.87 2014 2015 2016 1Q17 28