TURKCELL GROUP Q3 2018 October 24, 2018
BUSINESS OVERVIEW Kaan Terzioğlu Turkcell CEO
THIRD QUARTER HIGHLIGHTS FINANCIAL Record top line at 5.8 bn TL, up 26.1% yoy, 59% 2yr growth EBITDA Margin at 41.3% FY18 Revenue & EBITDA guidance revised upwards Second installment of dividend distributed OPERATIONAL Record high mobile ARPU growth of 18% 4.5G user data usage reached 7GB 18.2Mn 4.5G compatible smartphones 130Mn core digital services * downloaded, +16Mn qoq Revenue and EBITDA Margin Mobile Triple Play Multiplay with TV 33.3% 33.9% 34.5% 33.8% 35.5% 37.3% 4,597 4,666 4,762 4,044 4,053 4,316 3,658 42.5% 41.8% 41.3% 5,799 5,105 2,393 2,022 2,134 1,218 1,371 1,400 1,457 1,632 1,739 60.5% 63.9% 46.8% 47.5% 42.3% 50.4% Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Revenue (Mn TL) EBITDA (Mn TL) EBITDA Margin (%) Q317 Q417 Q118 Q218 Q318 Q317 Q417 Q118 Q218 Q318 * Includes BiP, Dergilik, fizy, My Account, Lifebox, Academy, Sports app, Upcall, TV+, Yaani and SİM 3
RESULTS PROVING OUR ROBUST BUSINESS MODEL TURKCELL STRENGTHS REFLECTION ON FINANCIALS Ability to create revenue from new & adjacent products Mobile triple play at 63.9%, up 13.5pp yoy Mobile ARPU growth at 18.0% Resilience at the operating profitability level Strong customer loyalty driven by digital services Growth momentum, 59% 2yr revenue increase 41.3% EBITDA Margin, 97% 2yr EBITDA increase Sector low monthly churn Enhanced offerings with digital services Sector leader at NPS by far Prudent financial risk management Hedging instruments in place FX impact under control Robust asset quality 4
TURKCELL GROUP FINANCIAL HIGHLIGHTS Consolidated TRY Million 1 Q3 2018 QoQ % YoY % 9M 2018 YoY % Revenue 5,799 13.6% 26.1% 15,666 20.8% EBITDA 2,393 12.1% 46.6% 6,549 45.9% EBITDA Margin 41.3% (0.5pp) 5.8pp 41.8% 7.2pp Net Income 241 (41.8%) (59.8%) 1,157 (34.4%) Op.Capex/Sales 2 16.1% (4.1pp) (0.9pp) 16.0% 0.3pp 59% two-year cumulative revenue growth Almost doubling EBITDA in 2 years Op.Capex/Sales at 16%, in line with the plan 1 TRY figures are based on IFRS. 2 Excluding license fees Two-year Cumulative Growth Rates 102% 107% 97% 64% 51% 46% 41% 36% 40% 37% 40% 48% 52% 59% Q117 Q217 Q317 Q417 Q118 Q218 Q318 Revenue EBITDA 5
OPERATIONAL HIGHLIGHTS TURKEY SUBSCRIBERS (million) 54% of total mobile 19.0 15.9 Total Turkey subscribers 37.8 mn 591K net add YoY 1.3 0.9 3.1 ARPU (TL) 51.6 53.5 55.3 29.5 32.8 38.7 Q316 Q317 Q318 Fixed Residential Mobile Blended (excl. M2M) * The ARPU of customers who have stayed with Turkcell for at least 14 months. 18.1% Mobile ARPU like-for-like Growth YoY* MONTHLY AVERAGE MOBILE CHURN RATE YoY 3.4% 18.0% YoY Net add QoQ Postpaid Prepaid Fiber ADSL TV 191K 63K 43K 1K 22K 2.2% 1.9% 2.2% 0.4pp lower than competitors average in Q317-Q218** YoY 654K 353K 175K - 115K Note: TV subscribers include 2.5 million of «OTT only» customers and it is excluded from net add & total subs Q316 Q317 Q318 Note: Average monthly churn during the related quarter. ** Company calculation on the basis of monthly churn rates disclosed in ICTA sector reports. 6
INCREASING APPRECIATION OF CUSTOMERS NET PROMOTER SCORE * OVER COMPETITION Turkcell Score 23 +20 Turkcell Score 26 +23 +24 +9 +12 +14 SUPERIOR 4.5G QUALITY & SPEED PIONEER CAMPAIGNS Q118 Q218 Q318 Points over next best Points over third best #1 in NPS reflecting superior overall customer satisfaction Continued to widen the gap in the third quarter DIGITAL SERVICES PORTFOLIO ENHANCED SHOPPING EXPERIENCE *NPS score comparison is for consumer segment in mobile. (Source: Future Bright) 7
CONTINUED RISE IN DATA USAGE MOBILE DATA USAGE (Av. GB/User) 4.5G SUBSCRIPTION (million) 2.0 4.3 2.6 2.9 6.0 4.2 3.4 7.0 5.4 Lifecell user 8.6 GB 15.2 8.5 29.4 15.0 31.1 31.5 17.6 18.2 Q316 Q317 Q318 Non 4.5G Users 4.5G Users Total Users Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 4.5G subscribers 4.5G compatible smartphone 4.5G users are driving data usage, >2x consumption vs. non 4.5G users Significant room for further 4.5G adoption Smartphone penetration in our network reached 74% 79% of these are 4.5G compatible; +11pp yoy Vestel Venus Go General Mobile GM8 Huawei P9 Lite Mini Samsung Galaxy J7 Core 8
DIGITAL COMPANION THROUGHOUT THE DAY We aim to increase customer engagement from basic communication to potentially all digital activities 48 min listening 32 min calling 8 min interacting 30 min for VOIP users 21 min reading 60 min watching 9
INTERACT, READ, LISTEN, WATCH, STORE & SEARCH Download* INSTANT MESSAGING DIGITAL PUBLISHING** MUSIC TV PERSONAL CLOUD (lifebox) MY ACCOUNT (Hesabım) PAYCELL*** FAST LOGIN 30.3Mn 7.8Mn 19.2Mn 10.1Mn 8.6Mn 35.1Mn 6.5Mn 2.0Mn 12.2Mn registered user 3-Month Active User 9.7Mn 13.0Mn 3.2Mn 2.3Mn 2.0Mn 18.6Mn 2.6Mn 4.8Mn 5.7Mn Service KPI s 114Mn messages per day 2Mn digitized call experience per day 189K copies read per day 7.8Mn songs streamed per day 2.6Mn TV sessions per day 36 docs uploaded per person per day 32% more ARPU 1.8Mn search per day 1.5Bn TL transaction 182 Mn logins up to date *Refers to downloads as of October 22, 2018 ** 3-MAU includes users who utilised the zero rating benefit of Dergilik magazines and newspapers via browser. *** Transactions include subsidiary revenues 10
BiP IN GLOBAL MARKETS BiP Global Download Trend (Million) 2.0 2.2 2.2 2.7 Downloads - Top 6 Countries (Thousands) As of Q318 Ukraine 652 Saudi Arabia 243 Germany 188 UAE 169 Belarus 160 Q417 Q118 Q218 Q318 TRNC 134 BiP @ Times Square NYC on September 26 th! Global focus on our digital services via Lifecell Ventures Aim to reach 25 million global downloads 11
LIFECELL: FULLY DIGITAL WITH FREEDOM OF CHOICE SUBSCRIBERS (thousand) 2x 1,526 1.6Mn as of Oct 18 55% of postpaid Lifecell acquisitions are new customers 195 2x 401 879 Q417 Q118 Q218 Q318 48.3 TL ARPU (1.3x of Turkcell consumer) 8.6 GB av. data usage of a Lifecell user 1.4% churn rate (~40% lower vs. Turkcell consumer) Note: Average monthly churn during the related quarter. 12
CONSUMER FINANCE BUSINESS TCF KEY FINANCIALS * TRY MILLION Q3 2018 YoY % 9M 2018 YoY % Revenues 252 52.1% 694 64.3% Net Income 145 234.8% 308 164.5% TCF Loan Portfolio details 4.7Mn loans outstanding 1,580 TL average ticket size 91 TL average monthly installment Loan protection insurance on over 95% recently Cost of risk remains stable at 2.2% at September 2018 Handset Financing (TRY billion) 4.4 3.8 4.7 4.8 0.6 0.4 0.4 Q317 Q218 Q318 Turkcell Contracted Receivables TCF Consumer Loans 300Mn TL of Asset Backed Securities were issued to date * Turkcell Consumer Finance Company (TCF) ) 9 month net incomes includes 30 mn TL and 57 mn TL dividend from Paycell retained earnings in Q217 and Q218, respectively New Financing Regulation 5.1 5.2 What has changed? Financing for telecom devices is limited to 6 months Installments are restricted industry-wide at all channels What we expect? Room for ARPU uplift Demand will shift towards mid-segment SPs Consumers will adjust their own budgets 13
TURKCELL INTERNATIONAL HIGHLIGHTS TRY MILLION 1 Q3 2018 YoY% 9M 2018 YoY % YoY Revenue Growth (Q318, in TRY) lifecell 62.6% EBITDA Margin (Q318) 41.8% Leader in 4.5G ARPU Revenue 424 55.4% 1,035 32.9% EBITDA 151 104.8% 366 82.9% EBITDA Margin 35.5% 8.6pp 35.3% 9.7pp BeST 61.6% Kuzey Kıbrıs Turkcell 12.0% 16.1% 35.0% 4G growth on track Offering fixed broadband lifecell Europe 223K subscribers 1 TRY figures are based on IFRS 14
2018 GUIDANCE REVISED UPWARDS REVISED OLD REVENUE GROWTH 20% - 22% 16% - 18% EBITDA MARGIN 39% - 41% 37% - 40% OP. CAPEX / SALES * 18% - 19% 18% - 19% *Excluding licence fees 15
FINANCIAL OVERVIEW Osman Yılmaz Turkcell CFO
Q115 Q215 Q315 Q415 Q116 Q216 Q316 THREE PILLARS OF OUR BUSINESS MODEL HEDGING Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 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 1.5Bn USD cash covers principal & interest payments until 2020-end Turkcell ARPU vs. CPI Trend (Q115=100) 139 142 147 136 125 131 129130 115 111 100 106 110 115 138 110112 114 120 123 123 128132 100 103103106109 TCELL ARPU (exl. M2M) CPI 164 147 57% Details of Financial Debt (After Hedging) 43% Local Currency FX 14% 86% Fixed interest Variable interest 427 213 215 Principal & Interest Payments * (Million USD) 523 518 4 519 6 512 170 167 165 5 162 5 1,623 17 1,606 2018 2019 2020 2021 2022 2023+ FX Local Currency * Data of Turkcell Group companies, exluding TCF 17
REVENUE & EBITDA REVENUE TRY MILLION EBITDA & EBITDA MARGIN TRY MILLION 151 86 49 916 1,202 (477) (32) 68 2,393 4,597 5,799 1,632 26.1% Margin 35.5% 46.6% Margin 41.3% Revenue Q317 Δ Turkcell Turkey Δ Turkcell International ΔTCF* Δ Other Subsidiaries Revenue Q318 EBITDA Q317 Δ in Revenues Δ in Direct cost of revenues** Δ in G&A exp. Δ in S&M exp. EBITDA Q318 1.2 bn TL revenue add in Q318 yoy; Turkcell Turkey and Turkcell International are main growth contributors EBITDA margin improvement of 5.8pp yoy in Q3 including IFRS impacts * Turkcell Consumer Finance Company, Financell ** Excluding depreciation and amortization 18
SOLID BALANCE SHEET SUMMARY NET DEBT/ EBITDA TRY Mn Q1 2018 Q2 2018 Q3 2018 Total Cash 4,590 7,081 8,749 1.83x Total Assets 37,073 41,026 45,404 Total Debt * 14,002 17,313 21,969 Lease Obligations 1,128 1,136 1,086 Total Equity 14,248 14,952 14,891 1.44x 1.49x 4,399 4,691 0.80x 0.84x 4,790 1.23x 8,430 TCF loan porfolio Net Debt** Net Debt * 9,413 10,231 13,220 5,014 5,541 Net Debt ** 5,014 5,541 8,430 Q118 Q218 Q318 Net Debt/EBITDA* Net Debt/EBITDA** * Impact of IFRS 16 (capitalised lease obligations) are excluded **Turkcell Consumer Finance Company s (TCF) loan portfolio and capitalized lease obligations related to IFRS 16 are excluded 19
FX EXPOSURE CASH * Before Hedging DEBT After Hedging NET FX POSITION* USD MILLION Share Nominal 23% 77% 8.7Bn TL 9% 6% 36% 5% 30% 49% 52% 13% 23.1Bn TL Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 (91) (125) (144) (203) (204) (255) (301) (330) * Excluding FX swap transactions for TL borrowing USD EUR TRY Other IMPACT OF HEDGING TOOLS ON Q318 FX LOSS TRY MILLION (688) Comfort Zone (USD 500Mn) 4,291 FX Loss from FX Denominated Liabilities 1,580 FX Gain from FX Denominated Assets 2,711 FX Loss 1,994 Hedge Portfolio Gain Note: In accordance with the IFRS 9, hedge accounting is applied as of July 1, 2018 716 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. 20
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 1995. This includes, in particular, our targets for revenue, EBITDA and capex in 2018 or for the medium term 2018 to 2020. More generally, all statements other than statements of historical facts included in this presentation, including, without limitation, certain statements regarding the launch of new businesses, 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. 21
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