“Strong Start to the Year with a Solid Set of Results”

ISTANBUL–(BUSINESS WIRE)–Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) (BIST:TCELL):

  • Please note that all financial data is consolidated and comprises that of Turkcell Iletisim Hizmetleri A.S. (the “Company”, or “Turkcell”) and its subsidiaries and associates (together referred to as the “Group”), unless otherwise stated.
  • We have four reporting segments:

    • “Turkcell Turkey” which comprises our telecom, digital services and digital business services related businesses in Turkey (as used in our previous releases in periods prior to Q115, this term covered only the mobile businesses). All non-financial data presented in this press release is unconsolidated and comprises Turkcell Turkey only figures, unless otherwise stated. The terms “we”, “us”, and “our” in this press release refer only to Turkcell Turkey, except in discussions of financial data, where such terms refer to the Group, and except where context otherwise requires.
    • “Turkcell International” which comprises all of our telecom and digital services related businesses outside of Turkey.
    • “Techfin” which comprises all of our financial services businesses.
    • “Other” which mainly comprises our non-group call center and energy businesses, retail channel operations, smart devices management and consumer electronics sales through digital channels and intersegment eliminations.
  • In this press release, a year-on-year comparison of our key indicators is provided and figures in parentheses following the operational and financial results for March 31, 2021 refer to the same item as at March 31, 2020. For further details, please refer to our consolidated financial statements and notes as at and for March 31, 2021, which can be accessed via our website in the investor relations section (www.turkcell.com.tr).
  • Selected financial information presented in this press release for the first and fourth quarters of 2020 and the first quarter of 2021 is based on IFRS figures in TRY terms unless otherwise stated.
  • In the tables used in this press release totals may not foot due to rounding differences. The same applies to the calculations in the text.
  • Year-on-year and quarter-on-quarter percentage comparisons appearing in this press release reflect mathematical calculation.

SEGMENT INFORMATION

In accordance with our integrated communication and technology services strategy, we have reported our telecom related businesses in Turkey and outside of Turkey under Turkcell Turkey and Turkcell International reportable segments, respectively. All other businesses were reported under the Other segment until Q121.

Starting from Q121, our financial services businesses; Turkcell Finansman A.Ş., Turkcell Ödeme ve Elektronik Para Hizmetleri A.Ş., Turkcell Sigorta Aracılık Hizmetleri A.Ş., and Paycell LLC, will be reported under the new Techfin segment. In previous releases, these businesses were included under the Other segment. We made this change since these entities have similar business models, and to some extent have operations integrated with each other. Moreover, these businesses are subject to legislation and regulations, which differ from those applied to other entities reported under the Other segment.

Furthermore, operations of Turkcell Satış ve Dijital İş Servisleri Hizmetleri A.Ş. (“Turkcell Satış”), which are reported under Turkcell Turkey are separated as “Digital Business Services” and other Turkcell Satış operations: Integrated corporate business solutions, city hospitals, equipment and corporate terminal activities will continue to be reported under Turkcell Turkey as “Digital Business Services”, while other Turkcell Satış operations, which include retail channel operations, smart devices management and consumer electronics sales through digital channels, will be reported in the Other segment. We have made this change since other Turkcell Satış operations, which are reported under the Other segment, are now less connected with the integrated business model of Turkcell Turkey. Accordingly, these operations mainly comprise the procurement and sale of consumer electronics not limited to integrated telco products. They target non-Turkcell customers as well. Moreover, these operations also have different level of operating profitability compared to businesses reported under Turkcell Turkey.

There have been no changes to Turkcell International segment.

Starting from Q121, our reporting segments will be as follows:

“Turkcell Turkey” comprises “Turkcell İletişim Hizmetleri A.Ş.”, “Superonline İletişim Hizmetleri A.Ş.”, the group call center operations of “Global Bilgi Pazarlama Danışmanlık ve Çağrı Servisi Hizmetleri A.Ş.”, the abovementioned digital business services operations of “Turkcell Satış”, “Turktell Bilişim Servisleri A.Ş.”, “Turkcell Teknoloji Araştırma ve Geliştirme A.Ş.”, “Kule Hizmet ve İşletmecilik A.Ş.”, “Rehberlik Hizmetleri A.Ş.”, “Turkcell Gayrimenkul Hizmetleri A.Ş.”, “Lifecell Dijital Servisler ve Çözümler A.Ş.”, “Lifecell Bulut Çözümleri A.Ş.”, “Lifecell TV Yayın ve İçerik Hizmetleri A.Ş.”, “Lifecell Müzik Yayın ve İletim A.Ş.”, “BiP İletişim Teknolojileri ve Dijital Servisler A.Ş.” and “Turkcell Dijital İş Servisleri A.Ş.”. Hence, Turkcell Turkey comprises our telecom, digital services and digital business services related businesses in Turkey.

“Turkcell International” comprises “Kıbrıs Mobile Telekomünikasyon Limited Şirketi”, “East Asian Consortium B.V.”, “Lifecell LLC”, “Lifecell Ventures Coöperatief U.A.”, “Beltel Telekomünikasyon Hizmetleri A.Ş.”, “CJSC Belarusian Telecommunications Network”, “LLC UkrTower”, “LLC Global Bilgi”, “Turkcell Europe GmbH”, “Lifetech LLC”, “Beltower LLC”, “Lifecell Digital Limited”, “Yaani Digital BV” and “BiP Digital Communication Technologies B.V.”. Turkcell International comprises our telecom and digital services related businesses outside of Turkey.

“Techfin” comprises “Turkcell Finansman A.Ş.”, “Turkcell Ödeme ve Elektronik Para Hizmetleri A.Ş.”, “Turkcell Sigorta Aracılık Hizmetleri A.Ş.”, and “Paycell LLC”. Techfin comprises all our financial services businesses.

“Other” comprises the non-group call center operations of “Global Bilgi Pazarlama Danışmanlık ve Çağrı Servisi Hizmetleri A.Ş.”, “Turkcell Enerji Çözümleri ve Elektrik Satış Ticaret A.Ş.” and the abovementioned other operations of “Turkcell Satış”. The Other segment mainly comprises our non-group call center and energy businesses, retail channel operations, smart devices management and consumer electronics sales through digital channels and intersegment eliminations.

FINANCIAL HIGHLIGHTS

TRY million

Q120

Q420

Q121

y/y%

q/q%

Revenue

6,658

7,872

7,827

17.5%

(0.6%)

EBITDA1

2,809

3,243

3,306

17.7%

2.0%

EBITDA Margin (%)

42.2%

41.2%

42.2%

1.0pp

EBIT2

1,437

1,608

1,651

14.9%

2.6%

EBIT Margin (%)

21.6%

20.4%

21.1%

(0.5pp)

0.7pp

Net Income

873

1,302

1,105

26.6%

(15.1%)

FIRST QUARTER HIGHLIGHTS

  • Strong set of financials:

    • Group revenues up 17.5% year-on-year mainly on Turkcell Turkey’s data and digital services revenue growth, larger subscriber base, as well as the increase in equipment revenues backed by digital channels
    • Robust performance in strategic focus areas; standalone digital services revenues up 27.5%; digital business services revenues up 27.3%; Paycell revenues up 52.6%
    • Group EBITDA up 17.7% year-on-year leading to an EBITDA margin of 42.2%; EBIT up 14.9% year-on-year resulting in an EBIT margin of 21.1%
    • Net income up 26.6% year-on-year mainly on solid operational performance and disciplined financial risk management
    • Leverage at 0.9x, despite FX fluctuations; long FX position at US$183 million
  • Robust operational performance:

    • Turkcell Turkey subscriber base up by 705 thousand quarterly net additions, highest of the past three years; solid performance towards the target of 1 million net subscriber additions for the full year
    • 410 thousand quarterly mobile postpaid net additions; postpaid subscriber share at 66%
    • Quarterly mobile prepaid customer net additions of 190 thousand
    • 50 thousand net quarterly fiber additions; 49 thousand quarterly IPTV net additions
    • Mobile ARPU3 growth of 8.7% year-on-year; fixed residential ARPU growth of 11.0% year-on-year
    • Average monthly data consumption of 4.5G users at 14.4 GB in Q121
    • Digital channels’ share in Turkcell Turkey consumer sales (excluding fixed business) at 15.7%; up 8.5pp year-on-year
  • General Assembly meeting held on April 15th:

    • TRY2.6 billion dividend distribution in three equal installments was approved; payment of first installment was performed on April 30th
    • All board members, including independent ones, were appointed

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

(2) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

(3) Excluding M2M

For further details, please refer to our consolidated financial statements and notes as at March 31, 2021 via our website in the investor relations section (www.turkcell.com.tr).

COMMENTS BY CEO, MURAT ERKAN

We began the year strongly with our customer-driven approach

Having made a strong start, we have concluded this quarter with strong operational and financial results matching up with our targets. In this period in which we managed our business successfully, in spite of the challenging conditions of the COVID-19 pandemic, we continued our strong growth and achieved successful results. This was made possible by offering enriched value offers to our customers with our “Customer First” focus, and reflective of our diversified business model with strategic focus areas.

Our consolidated revenues rose 17.5% year-on-year, reaching TRY7.8 billion. Consolidated EBITDA1 grew by 17.7% to TRY3.3 billion, resulting in an EBITDA margin of 42.2%. 26.6% growth in Turkcell International business contributed to the topline growth. Net income increased by 26.6% to TRY1.1 billion. These results, in line with our targets, have reinforced our confidence in reaching our guidance for the year 2021, despite the challenging environment due to the pandemic.

The highest subscriber additions of the past 3 years

Thanks to our value offers meeting changing customer needs and our innovative campaigns facilitating the lives of our customers, we recorded 410 thousand postpaid subscriber and 190 thousand prepaid subscriber net additions in this quarter. Including the fixed broadband and IPTV services, the total 705 thousand net subscriber addition marks our highest level of the past 3 years. Our strong and fast network, convenient digital sales channels and brand loyalty have been instrumental in customers opting for Turkcell. Our postpaid customer base reached 22.4 million, reflecting 66% of the total mobile base on a 3 point rise year-over-year. Mobile blended ARPU (except for M2M) has reached TRY49.9 on an annual 8.7% rise on the back of a larger postpaid subscription base, rising data and digital service use and upsell efforts, despite the negative effect of the pandemic. We enhanced our customer loyalty by combining our customer-driven approach and analytical competences; accordingly, the average monthly churn rate of 1.8% was the lowest level of the past 3 years.

The strong demand for fixed broadband has continued in this quarter, too, under the prevailing mobility restrictions within the scope of measures against the pandemic, and more widespread remote working. We gained a net 50 thousand fiber subscribers with our high-speed and unlimited fiber internet offers designed to meet the need for speed in homes where a large number of devices are connected at the same time. Accordingly, our fixed broadband customer base reached 2.5 million.

Interest in our digital services is rising daily

We continue pioneering the digital transformation of Turkey with the instant messaging, TV and music platforms, personal cloud services, search engine and e-mail services developed by Turkcell engineers. Enjoying increasing recognition, BiP, our instant messaging application, saw 32 million new downloads in this quarter. With its total downloads reaching 77 million, BiP has been the most downloaded local application in Turkey. With no imposition or discriminating among its users in terms of data privacy, BiP has reached 40 million three-month active users, approximately one third of which are outside of Turkey. TV+, our web-based digital TV platform, has been another outstanding service this quarter. Both IPTV and the OTT TV+ service users have accelerated in this quarter thanks to enriched content, as well as its accessibility through smart televisions. With the addition of net 49 thousand IPTV customers, we now offer IPTV services to 61 out of every 100 households among our residential fiber customers.

We launched GAMEPLUS, our new gaming platform on which we have been focusing recently, in March in collaboration with NVIDIA GeForce NOW, a cloud-based gaming service. Thanks to the cloud-based gaming technology eliminating the need for particular hardware to play games, users can access over 950 games. We believe that the strong interest in this platform, which has reached 10.4 thousand premium users within just 15 days will continue in the coming periods.

Overall, the stand-alone revenue of our digital services business reached TRY367 million with an increase of 28% year-over-year in this quarter, mainly on the back of these developments. We aim at more diversified monetization with the launch of the B2B models of fizy business, lifebox business and BiP Meet services over the coming months.

Turkcell Digital Business Services continues pioneering the digital transformation of companies

The total revenues of Digital Business Services through which we offer a wide range of new generation technologies to our corporate customers, from access to cyber security, from cloud technologies to data centers, and from managed services to the internet of things, reached TRY452 million on an annual increase of 27% in this quarter. We have supported corporates on their digitalization journey by signing over 700 new contracts. As of the end of the first quarter, we have put into practice 1,589 system integration and managed services projects to date; from these projects we have a contract value (backlog) of TRY1.1 billion to be realized after the first quarter of 2021. We have continued to strengthen our ecosystem by increasing the number of our global partnerships. In the first quarter we launched the SOAR (Security Orchestration Automation and Response) Service allowing for instantaneous actions to be taken over security components against incidents of cyber-attack, a Forensics service enabling corporations to learn about the trajectory of events taking place, including the weaknesses being exploited and likely remedial methods to be employed following probable cyber-attacks, as well as the Turkcell Digital Facility, our first IoT Platform service. Along with these, we continued enriching our portfolio by relaunching Kopilot Filom and a brand-new user experience on turkcellbulut.com.tr.

Growth of the Techfin sector’s rising star, Paycell, gains speed

Paycell, our innovative payment services platform in the field of techfin, marked a successful quarter with its rising users and growing mobile payment volume. As the number of three-month active Paycell users reached 5.3 million, mobile payment volume reached TRY351 million, doubling on an annual basis. During the same period, the Paycell Card transaction volume quadrupled. Overall, Paycell revenues grew by 53% on an annual basis in this quarter; non-group revenue increased 81%. In the forthcoming period, we aim at the widespread use of our Android POS service, an increased number of member merchants, and reaching more customers with our new services.

We have set our sustainability targets

We, as Turkcell Group, have prioritized the use of renewable sources towards our goal of maximizing the efficient use of natural resources, reflective of our business model which is sensitive to the environment and based on shaping technology according to the needs of society. As we have also shared at the ‘GSMA Mobile Net Zero’ event on April 20, we aim to meet 100% of our electricity consumption through renewable resources by 2030.

Also this quarter, as a pioneer in mobile working in Turkey, we have put into practice our “Flexible Working Model” designed together with our employees. Accordingly, our employees, reflecting their preferences and planning, can work remotely or at our offices if need be, for an indefinite period without any limitation on location. With this model, we aim at enhancing the comfort and productivity of our employees, while at the same time offering the best working experience.

Dividend of TRY 2.6 billion approved at the Ordinary General Assembly

As part of our disclosure about the change in our shareholding structure, we had stated that the number of seats on the Board of Directors was increased to nine. At the Turkcell Ordinary General Assembly meeting held on April 15, these appointments were realized and the number of members set forth in our articles of association has been completed. At the same meeting, the distribution of the dividend of TRY2.6 billion, corresponding to 61% of the net distributable period profit, in three equal installments was approved. We are pleased to have distributed the first installment on the same day as this earnings disclosure.

We will continue to serve our country and people with sustained investments in the upcoming period

In firm hopes that the COVID-19 pandemic may finally be behind us in the near future, I believe wholeheartedly that we will achieve new successes, while serving our country and people in the quarters ahead.

I extend my thanks to all our colleagues for their contribution that has enabled our strong start to the year, and to our Board of Directors for their confidence in us and their invaluable support. I also express our gratitude to our customers and business partners, ever with us on our journey to success.

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

FINANCIAL AND OPERATIONAL REVIEW

Financial Review of Turkcell Group

Profit & Loss Statement (million TRY)

Q120

Q420

Q121

y/y%

q/q%

Revenue

6,658.2

7,872.2

7,826.5

17.5%

(0.6%)

Cost of revenue1

(3,197.4)

(3,938.1)

(3,913.0)

22.4%

(0.6%)

Cost of revenue1/Revenue

(48.0%)

(50.0%)

(50.0%)

(2.0pp)

Gross Margin1

52.0%

50.0%

50.0%

(2.0pp)

Administrative expenses

(188.3)

(210.7)

(199.4)

5.9%

(5.4%)

Administrative expenses/Revenue

(2.8%)

(2.7%)

(2.5%)

0.3pp

0.2pp

Selling and marketing expenses

(348.7)

(400.8)

(358.2)

2.7%

(10.6%)

Selling and marketing expenses/Revenue

(5.2%)

(5.1%)

(4.6%)

0.6pp

0.5pp

Net impairment losses on financial and contract assets

(114.8)

(79.5)

(49.5)

(56.9%)

(37.7%)

EBITDA2

2,809.0

3,243.0

3,306.5

17.7%

2.0%

EBITDA Margin

42.2%

41.2%

42.2%

1.0pp

Depreciation and amortization

(1,372.1)

(1,634.6)

(1,656.0)

20.7%

1.3%

EBIT3

1,437.0

1,608.4

1,650.5

14.9%

2.6%

EBIT Margin

21.6%

20.4%

21.1%

(0.5pp)

0.7pp

Net finance income / (costs)

(221.4)

(381.8)

(207.1)

(6.5%)

(45.8%)

Finance income4

621.5

(316.0)

1,601.9

157.7%

n.m

Finance costs4

(842.9)

(65.8)

(1,809.0)

114.6%

n.m

Other income / (expense)

(94.0)

(366.9)

(12.1)

(87.1%)

(96.7%)

Non-controlling interests

(1.2)

(0.0)

(100.0%)

Share of profit of equity accounted investees

(3.2)

(5.2)

17.7

n.m

n.m

Income tax expense

(244.4)

447.6

(344.1)

40.8%

(176.9%)

Net Income

872.7

1,302.0

1,104.9

26.6%

(15.1%)

(1) Excluding depreciation and amortization expenses.

(2) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

(3) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

(4) Fair value loss and interest expense regarding derivative instruments and the respective fair value gain and interest income regarding derivative instruments are represented on a net basis. Starting from Q219, interest income on financial assets and interest expenses for financial liabilities, both measured at amortized cost, are represented on a net basis. Historical periods were restated to reflect this change.

Revenue of the Group grew by 17.5% year-on-year in Q121. This resulted mainly from Turkcell Turkey’s revenue growth supported by a larger subscriber base, price adjustments, higher data consumption and digital services usage. Turkcell International’s strong revenue growth and equipment sales backed by digital channels also assisted the Group revenue rise.

Turkcell Turkey revenues, comprising 76% of Group revenues, rose 13.3% year-on-year to TRY5,979 million (TRY5,276 million).

– Consumer segment revenues grew 11.3% driven mainly by a larger subscriber base, increased data consumption and digital services usage.

– Corporate segment revenues rose 19.6% backed by robust performance on digital business services, which grew 27.3%.

– Standalone digital services revenues registered as part of consumer and corporate segments grew 27.5% year-on-year in Q121 supported by the increase in the number of paid users.

– Wholesale revenues grew 22.0% to TRY340 million (TRY279 million), mainly with data capacity upgrades of customers and the positive impact of currency movements, despite lower roaming revenues impacted by limited mobility.

Turkcell International revenues, comprising 9% of Group revenues, increased 26.6% to TRY708 million (TRY560) million. This was mainly driven by strong revenue growth in Ukrainian operations and the positive impact of currency movements.

Total techfin segment revenues, comprising 3% of Group revenues, were at TRY223 million (TRY220 million). The decline in the finance company’s revenues, which was due mainly to loan portfolio contraction, was more than offset by the increase in Paycell revenues. Please refer to the Techfin section for details.

Other subsidiaries’ revenues, at 12% of Group revenues, which mainly includes non-group call center and energy business revenues, and consumer electronics sales revenues rose 52.2% to TRY917 million (TRY603 million). This was driven mainly by the increase in equipment revenues supported by digital channels.

Cost of revenue (excluding depreciation and amortization) rose to 50.0% (48.0%) as a percentage of revenues in Q121. This was due mainly to the increase in cost of goods sold (2.9pp), despite the decline in treasury share expense (0.6pp) and other cost items (0.3pp) as a percentage of revenues.

Administrative Expenses declined to 2.5% (2.8%) as a percentage of revenues in Q121, driven mainly by lower office overhead costs and travel expenses.

Selling and Marketing Expenses declined to 4.6% (5.2%) as a percentage of revenues in Q121. This was driven mainly by the decline in selling expenses (0.6pp) as a percentage of revenues.

Net impairment losses on financial and contract assets declined to 0.6% (1.7%) as a percentage of revenues in Q121 mainly with the better collection performance.

EBITDA1 rose by 17.7% year-on-year in Q121 leading to an EBITDA margin of 42.2% (42.2%), driven mainly by strong revenue growth.

– Turkcell Turkey’s EBITDA rose 14.4% year-on-year to TRY2,731 million (TRY2,388 million) leading to an EBITDA margin of 45.

Contacts

Turkcell
Investor Relations

Ali Serdar Yagci, Tel: + 90 212 313 1888

investor.relations@turkcell.com.tr
or

Corporate Communications:

Tel: + 90 212 313 2321

Turkcell-Kurumsal-Iletisim@turkcell.com.tr

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