Turkcell Iletisim Hizmetleri AS Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: Turkcell reported TRY 53 bn in Q2 revenue (+12% YoY), TRY 23 bn EBITDA (+15% YoY, 43.5% margin) and net income of TRY 4.4 bn (+37% YoY).
  • Positive Sentiment: Mobile segment delivered its highest postpaid net additions in over five years at 816 k, lifting postpaid to 78% of subscribers and driving ARPU up 9.8%.
  • Positive Sentiment: Strategic businesses saw robust growth: data center & cloud services revenue surged 53%, digital business services +39%, and Paycell mobile payments +36% YoY.
  • Negative Sentiment: Investment in the TOGG automotive venture resulted in a TRY 1.2 bn loss in Q2, with no profit expected in the short term.
  • Neutral Sentiment: The company reiterated full-year guidance (7–9% real growth, 30.5% inflation assumption) and plans higher H2 CapEx focused on 5G readiness, fiber expansion and data center capacity.
AI Generated. May Contain Errors.
Earnings Conference Call
Turkcell Iletisim Hizmetleri AS Q2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. I am Jyote, your Chorus Call operator. Welcome and thank you for joining the Turkcell's conference call and live webcast to present and discuss the Turkcell's Second Quarter twenty twenty five Financial Results. All participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session.

Operator

At this time, I would like to turn the conference over to Ms. Oslem Jardem, Investor Relations and Corporate Finance Director. Mrs. Yarden, you may now proceed.

Speaker 1

Thank you, Josa. Hello, everyone, and welcome to Turkcell's twenty twenty five second quarter earnings call. On the call today, we have our CEO, Aditha Hakocha and CFO, Kamil Kalion. They will provide an overview of our operational and financial results for the quarter, followed by a and A session. Before we begin, I would like to kindly remind you to review our safe harbor statement, which is available at the end of our presentation.

Speaker 1

With that, I will now turn the call over to Mr. Al Zaha.

Speaker 2

Thank you, Ozem. Good afternoon, everyone, and thank you for joining us today. I am pleased to report that we have once again delivered a strong set of results this quarter. Let me briefly review our overall results and outstanding performances of some key metrics. Our top line reached 53,000,000,000, reflecting another remarkable double digit year on year growth of 12%.

Speaker 2

This was primarily driven by strong ARPU performance and significant expansion of the mobile subscriber base, particularly in postpaid domain. Group EBITDA rose by 15% year on year to 23,000,000,000, with a solid margin of 43.5%, mainly supported by strong operational leverage. Our impressive operational profitability, coupled with effective financial risk management, resulted in net income from continuing operations of 4,400,000,000.0, an increase of 37% year on year. The market remained highly competitive throughout the quarter. In response, we took targeted actions where necessary, while staying aligned with our long term strategic priorities.

Speaker 2

As a result of these efforts, we achieved 816,000 postpaid net additions during this quarter, marking our highest net addition in over five years, while recording high single ARPU growth. In our strategic areas, we continue to deliver robust performance. Our data center and cloud services continue to scale, posting strong growth of 53%, while our Techfin business also maintained its momentum. Next page, please. Now I will continue with the operational overview.

Speaker 2

Competitive dynamics in the mobile market remained in line with our expectations and continued at a similar pace as the past year. As a market leader, we took selective actions in response to competitive pressures, maintaining a dynamic and consumer centric approach. As a result of this strategy, we added 816,000 postpaid subscriber this quarter, bringing our yearly net additions to 2,000,000. Our postpaid share in total mobile subscribers reached 78%, underlying our continued focus on value added subscribers. Mobile ARPU increased by 9.8% year over year, reflecting the impact of expansion of our postpaid base, price adjustments and successful upselling initiatives.

Speaker 2

Our mobile churn rate was 2.2 this quarter, primarily due to highest volume in the mobile number portability market resulting from intensified competition. Next page, please. As the premium provider in the mobile market, we remain committed to leading the industry. Our approach extends beyond price competition. We differentiate ourselves through superior network quality, high speed connectivity and a strong focus on customer experience.

Speaker 2

Looking ahead, we are firmly committed to five gs to maintain our leadership position. We are closely monitoring the upcoming spectrum tender while continuing to invest in our best in class infrastructure. Our vision extends beyond individual connectivity. We enable digital transformation across devices, cities and industries, placing us at the heart of the Turkey's digital future. Customer focus remains a key pillar of our mobile strategy.

Speaker 2

We implemented dynamic pricing practices that support both our premium positioning and the rationalization of the overall market. While doing this, we maintain our customer focus, which led our all time highest net port during this quarter. Leveraging AI powered tariff management and segment specific strategies, we are better positioned to meet evolving customer expectations. We actively address customer pain points and continually enhance our packages to drive higher retention. Our smart control service now covers nearly half of our postpaid base.

Speaker 2

Recently, we launched Tumbara, a digital loyalty program that allows customers to redeem their unused packages. The program has already engaged 4,000,000 customers, further strengthening retention and customer engagement. Our strong customer orientation is clearly reflected in our Net Promoter Score, where we led our closest competitor by 17%. Overall, we once again delivered real ARPU growth in the second quarter. Next page, please.

Speaker 2

Now let us examine the fixed broadband segment. Our fixed subscriber base remained broadly stable at 3,300,000, impacted by competitive offers from smaller ASPs and higher volume of expiring twelve month contracts. We remain focused on achieving consistent ARPU expansion. In the second quarter, we recorded a 17.5% year on year increase in the residential fiber ARPU, supported by rising penetration of high speed plans, an increase in twelve month contract share and effective pricing actions. Notably, the share of high speed packages increased by 16% points year on year.

Speaker 2

As we continue to strengthen our fiber infrastructure, we expanded our footprint with 67,000 new home passes, bringing the total to 6,100,000 pure fiber connections. Lastly, an impressive take up rate of 42.7% highlights our continued focus on fiber subscriber growth. Next page, please. Next, I would like to briefly discuss on strategic areas, starting with Digital Business Services. Digital Business Services delivered solid growth of 39%, which with revenues exceeding TRY 4,900,000,000.0.

Speaker 2

This performance was driven by the continued strength in recurring service revenues, further supported by a recovery in hardware sales within corporate projects. Our ambition is to build a seamlessly connected digital ecosystem that enhances connectivity. Data center and cloud services play a critical role in this strategy. Revenues in our high potential data center and cloud services surged by 53% this quarter. This exceptional performance reflects the successful monetization of last year's capacity investments and expanding customer base and sustained market demand.

Speaker 2

As a market leader, we continue to respond to growing demand through our investments. With two additional modules to be commissioned, we plan to expand our capacity by 8.4 megawatts, reaching a total of 15 megawatts by year end. Next page, please. Another strategic area is Techfin. In mobile payments, our Paycell business continues to scale with healthy growth in both revenue and transaction volume.

Speaker 2

Driven by the strong performance of the POS and Paylater verticals, Paycell recorded an impressive 36% year on year revenue growth. In particular, we continue to see rising demand for POS transaction and transactions in digital stores such as Google Play and the Apple Store. The consumer financing company, Finansel, generated TRY 1,300,000,000.0 in revenues, supported by a loan portfolio expansion through dedicated campaigns targeting small businesses. The net interest margin improved to 4.9%, driven by more favorable funding costs. Lastly, I would like to reemphasize that we have delivered strong results across the board.

Speaker 2

We expect a moderation in performance in the second half of the year, in line with our initial projections. We forecast year on year inflation to be 30.5%. Considering these factors, we reiterate our full year guidance. Meanwhile, we continue to closely monitor macroeconomic dynamics and market conditions. Thank you.

Speaker 2

And now I will hand over to our CFO, Mr. Kamil Kalion, for our financial highlights.

Speaker 3

Thank you very much, Al Tawes. This was certainly an exceptional quarter for us. Let's take a closer look at the financial results. We achieved a strong top line performance recording 12.5% year on year growth, supported by the strength of our core business and tech win services. Turkcell Turkey served as the primary growth engine contributing 5,000,000,000 to the top line.

Speaker 3

This was driven by real ARPU growth and expanding postpaid subscriber base and the continued strong momentum of digital business services. Our Techne segment also maintained its growth momentum, generating $547,000,000, supported by robust performance across all Paycell verticals. On the profitability front, we improved our EBITDA margin by around one percentage point, reaching 43.5%. A decline in employee expenses as a percentage of revenue was partially offset by higher cost of goods sold, largely due to increased hardware sales in corporate projects. Other cost items, including interconnection costs, energy expenses and funding costs contributed positively to the margin, enabling us to maintain a more favorable cost structure during the quarter.

Speaker 3

That said, we expect a high cost base in the second half of the year, which is already factored into our full year guidance. Next slide, please. Moving on to profit from continuing operations, which underscores our effective and consistent management execution. Profit from continuing operations rose by 36.8% year on year, reaching 4,400,000,000.0. The primary driver of this growth was strong EBITDA generation totaling TRY 3,000,000,000 in the quarter.

Speaker 3

Despite a highly competitive market, Turkcell has maintained its market leadership as it has consistently done over the past thirty years. Our premium positioning, innovative offerings and disciplined expense management once again delivered clear and measurable results. Additionally, prudent balance sheet management and a decrease in FX losses compared to the same period last year contributed to net financial income of $670,000,000. On the tax side, strong profitability and our tax paying position resulted in higher corporate tax expenses during the quarter. Next slide, please.

Speaker 3

Turning to CapEx management. CapEx intensity for the quarter stood at 16.9%. We remain focused on strategic infrastructure investments in preparation for upcoming technology transitions. Over 80% of this quarter's CapEx was allocated to mobile and fixed networks, further strengthening quality and capacity of our core communication services. The base station fiberization rate increased to 43%, enhancing our readiness for a smooth and efficient five gs transition in the upcoming period.

Speaker 3

Additionally, we expanded our high quality fixed infrastructure by adding new home passes, bringing our service to more customers. As a reminder, a higher share of CapEx was allocated to data center investments in the first quarter. This quarter, we entered the hardware integration phase for an additional 8.4 megawatt of capacity. In renewable energy, our total installed capacity reached 109 MW with around 80 MW expected to become operational after securing the necessary permits. CapEx allocation for these assets will be recognized in the second half.

Speaker 3

Given the seasonal nature of investments, we remain on track to meet our year end CapEx targets. Next slide, please. Turning to our strong balance sheet. Our cash position reached 117,000,000,000 in second quarter. In June, we paid the first installment of our dividend.

Speaker 3

Our gross debt stood at 173,000,000,000, resulting in a net debt position of TRY 25,000,000,000 at the end of the quarter. As a result, our net leverage ratio rose slightly to 0.3x. We remain focused on keeping it below our long term target of 1x. By year end, we are scheduled to repay approximately $1,000,000,000 in debt, of which $854,000,000 is foreign currency denominated. Following the successful lifestyle life sale and Euroboard issues, our liquidity position has strengthened to around 3,500,000,000.0 US dollars, more than sufficient to cover our debt obligations for the next next four and a half years.

Speaker 3

Next slide, please. Finally, let's look at how we manage foreign currency risk. The majority of our cash remains in foreign currencies with 87% of our cash holdings in hard currency, providing a natural hedge for 83% of our hard currency debt. At the end of Q2, our FX debt stood at USD 3,900,000,000.0, while FX denominated financial assets totaled $3,200,000,000 We also have a derivative portfolio equivalent to $574,000,000 In the medium term, we will maintain our current foreign exchange risk management strategy. Due to high costs, we avoid using cross currency stood at minus 102,000,000 US dollars, keeping it our neutral range of plus or minus $200,000,000 Our disciplined risk management approach has reduced the impact of currency fluctuations on our balance sheet and strengthened our overall financial position.

Speaker 3

This concludes our presentation. We would be happy to take any questions you have. Thank you.

Operator

Session. The first question comes from the line of Singh Madi with HSBC. Please go ahead.

Speaker 4

Yes, hi. Thanks a lot for taking my question. I have two questions. The first question is on the fixed concession and the five gs update. If you could share what you have in terms of the latest update on these and any update on the timing as well?

Speaker 4

And then second is on your CapEx target. Just wondering, you said that you are happy for the full year guidance on CapEx as well, given the run rate has been much lower in the first half. So in which areas do you see the acceleration happening for CapEx in the second half, especially? Thank

Speaker 2

you very much. Let's start with the fixed concession. The Minister of Transport and Infrastructure recently indicated an indication to renew the Turk Telekom's congestion for twenty five years. We believe that a policy framework designed to support infrastructure investments should be inclusive and applied under equal terms. In this context, we see value in broadening such opportunities to also support mobile operators' five gs deployments.

Speaker 2

As Turkcell, we continue to invest heavily in both mobile and fixed infrastructure and remain committed to contributing to Turkey's digital transformation. Ensuring competitive equality in policy decisions will help foster a healthy and dynamic telecom sector for the benefit of all stakeholders. For the five gs front, we are still waiting for the official timeline and details of the five gs tender. However, the Minister of Transport and Infrastructure recently stated that the goal is to make five gs services available by 2026 next year. He also mentioned that the different frequency will be allocated as part of the tender process.

Speaker 2

We expect actually the regulatory authorities to adopt a balanced approach that promotes technological advancement while ensuring the industry's long term investment sustainability. We're always talking with the regulatory body. A well structured tender process is critical to enabling operators to invest efficiently and effectively and support Turkey's digital transformation. For the full year, the second question, we plan to increase our investments in telecom infrastructure to enhance our 4.5 gs capabilities and also reinforce our readiness for five gs because we're expecting a five gs is going to be live in 2026, while continuing our fiberization efforts. We're going to keep on building more home passes.

Speaker 2

Accordingly, approximately 65% of our CapEx budget will be allocated to fixed and mobile businesses. Additionally, 13% of the 2025 CapEx is allocated to data center investments. We have also renewable energy investments plans to meet our own electricity demand. To this end, 7% of the 2025 CapEx is allocated to the renewable energy projects.

Speaker 4

Okay. Thank you.

Operator

The next question is from the line of Dermotas Kemal with ATA Invest. Please go ahead.

Speaker 5

Thank you for the presentation and congratulations for the results. My first question is about the guidance. How do you evaluate the second quarter when we think that when we see that the growth is already high in second quarter as well as in first quarter. So still you maintain the same guidance. What is the reason behind that?

Speaker 5

Could you further elaborate that? Because for reaching seven to 9% real growth, you need to go down maybe like 5%, 6% in the second half. Could you further elaborate that with some further clarification? It will be helpful. And the second one is already Turkcell had been a profitable company and has been when it's growing.

Speaker 5

But recently, talk project, which is a very important project for the country. But when I look at the details in second quarter regarding your share of 23% in talk, you recorded TRY 1,200,000,000.0 loss. And when you look at for the first half of the year, Tog recorded around $226,000,000 loss. And when we look at your profits, you have 4,200,000,000.0 net income. But if TOG was net in it, you could have TRY 1,200,000,000.0 higher net income.

Speaker 5

I know it's a long term project, and it's related to the developments and it's like Turkish car, very important. But what if I come to my question, how do you see the future of this side? Do you expect this profit loss making to change in the following quarters? Or could when we make a calculation for the following years, should we assume similar loss from the talks? I just want to understand more detail because currently, it is having higher impact on your financials.

Speaker 5

That's why maybe I'm asking a sensitive question. Thank you very much. Thank you very much, Jamal, for the questions. Actually,

Speaker 2

I'm just going to answer the first question about the guidance. Our strong first half performance gives us some headroom for the year end guidance. However, given our twelve month contract structure, the positive impact of the price adjustments we implemented in July will begin to taper off in the third quarter. And additionally, the magnitude of price adjustment is reduced compared to last year, in line with the inflation. We should also take into account that the high base effect.

Speaker 2

It means that in the Q3 and Q4 last year, we have a strong growth. So from the second half of this last year. Therefore, as we approach year end, we expect our results to converge closer to our current guidance range. At this point, we prefer to remain prudent and believe it is more appropriate to wait for the third quarter results before making any adjustment to our outlook. Moreover, how inflation will conclude and what path it will follow will also be another variable.

Speaker 2

Our current guidance is based on a year end inflation assumption of 30.5%, which still looks reasonable. By then, we will also have a clearer view. At the end of the third quarter, we will be having a clearer view of the inflation dynamics and market condition. So that's the reason that we prefer to remain prudent and to keep it our guidance.

Speaker 3

For the second question, Cemal, thank you very much for the question. As you might observe, the automotive industry, not only for top but in Turkish automotive industry is cyclical and has been under pressure globally due to macroeconomic factors, due to both of macroeconomic factors and Turkish economical some, you know, regarding these problems impacting the consumer demand. Tok, being a young company, will naturally need some time to before reaching sustainable profitability. As we are always underlining for Turkcell, this is not an only automotive automobile investment. We see it as a broader step into the e mobility ecosystem.

Speaker 3

As you know, we have already integrated our Paycell payment solutions, our solutions, TV, TV plus into the top top ecosystem. As you might aware, in the near past, the Ministry of Finance has had made some taxation regulation change, which will affect positively the automotive industry, especially top in near future. And top management also have taken some measures to manage their costs effectively. I think we will see the results of the positive effects in the half two. For this year, we are not expecting to generate profits in the short term side.

Speaker 3

But in the midterm or long term side, I think we are very confident that top investment will create a long term value for Turkcell and for Turkey.

Speaker 5

Thank you, Kamil Bey. And as follow-up related to your financing costs, financial costs and financial income, I see some increase from first quarter to second quarter. Could you also further elaborate that we don't see major increase in the currencies or others? But I would like to understand the reason behind some increase on that front. And how should we think for the rest of the year in terms of financing cost plus financing income.

Speaker 5

Could you just give us some at least indications about that?

Speaker 3

Yes. Normally, we have a very strong balance sheet management in Turkcell side, and we are managing our balance sheet and liquidity position very effectively. When you look at our positions, for example, our net FX position is around minus USD 102,000,000, which you compare with the competitors and our market, so it's very, how can I say, low rate from our perspective? As you mentioned, starting from the year end, the euro, especially euro terms, they are very regulated very highly. But then we we are looking at we are using short term hedge instruments to hedge our FX position, and we are trying to put our FX position, net FX position in the normal position in order not to affect it from the FX deviations and the higher interest rate.

Speaker 3

But as you know, the high the interest rates are a little bit high with this quarter, first quarter and the second quarter. But I believe that due to our effective management balance sheet management situation, we, for example, recorded a $670,000,000 net income positive income to the FX management side. Therefore, we believe that we are managing this side very well properly.

Speaker 5

Thank you. Thank you very much.

Operator

The next question comes from the line of Bistrova Evgenia with Barclays. Please go ahead.

Speaker 6

Yes, hello. Thank you very much for the presentation and congrats on results. I have just one question. There were news about Turkcell entering mobile market and basically becoming the fourth mobile operator. So I would like to hear maybe your thoughts on that.

Speaker 6

How do you think this will affect Turkcell competitive position, margins, subscriber base? Basically, you could please provide any color on that would be very helpful. Thank you.

Speaker 2

Thank you very much for the question. Also, we have also seen this news in the press. However, we have not seen any statement from the regulatory body or any government entities. While there's currently no clear information regarding this matter, we closely follow all initiatives that may affect the competitive landscapes in the Turkish telecommunication market. And not in just mobile side as well as in the fixed side.

Speaker 2

Turkcell has begun its operation in 1994 and has a proven ability to compete effectively in any condition, leveraging on its strong network infrastructure, customer oriented service approach and continuous focus on the innovation and new technology. Turkcell currently doesn't possess actually a mobile network infrastructure. They're always a satellite company and a fixed cable company. It is clear that building and operating a large scale mobile network requires significant capital and advanced technological capabilities. And I think this is not a process that can be accomplished easily or in the short term.

Speaker 2

So as the market leader in mobile services, we believe that our solid financial structure and as well as our loyal customer base position us well to remain competitive and lead the mobile market in the near future and far ahead.

Speaker 6

Thank you.

Operator

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Turkcell management for any closing comments. Thank you.

Speaker 2

Thank you very much for listening, and see you next time in the third quarter results. Thank you very much.

Speaker 1

Thank you.

Operator

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.

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