Turkcell Iletisim Hizmetleri AS Q1 2026 Earnings Call Transcript

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Provided by Quartr
May 11, 2026

Key Takeaways

  • Positive Sentiment: Turkcell launched nationwide 5G on March 31, secured ~40% of the 5G spectrum (about 25% more capacity than its closest competitor) and demonstrated live speeds >2 Gbps, reinforcing its network leadership and go-to-market momentum.
  • Positive Sentiment: Strong Q1 financials — revenues +9% YoY to TRY 68bn, Group EBITDA of TRY 28bn (41.4% margin) and net income +15% to TRY 4.6bn, driven by operational discipline and expanded non-telco contributions.
  • Positive Sentiment: Diversification gains from Digital Business Services and Paycell — DBS revenues +64% YoY, data center/cloud +21%, >TRY 10bn system-integration backlog, while Paycell revenues rose 15% and Pay Later users exceeded 3 million.
  • Negative Sentiment: Consumer/mobile ARPU was broadly flat with real-term contraction due to last year’s competitive pricing and contract lags, which could pressure revenue per user despite strong postpaid net additions (661k).
  • Neutral Sentiment: Heavy investment year — CapEx/sales 21.5% (85% to connectivity) and net debt rose to TRY 49bn, but liquidity appears adequate (TRY 96bn cash, $1bn Murabaha) with net leverage at 0.42x and an active FX hedging stance.
AI Generated. May Contain Errors.
Earnings Conference Call
Turkcell Iletisim Hizmetleri AS Q1 2026
00:00 / 00:00

There are 6 speakers on the call.

Speaker 4

Ladies and gentlemen, thank you for standing by. I'm Paulina, your chorus call operator. Welcome, and thank you for joining the Turkcell conference call and live webcast to present and discuss the Turkcell first quarter 2026 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. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mrs. Ozlem Yardim, Investor Relations and Corporate Finance Director. Mrs. Yardim, you may now proceed.

Speaker 5

Thank you, Paulina. Hello, everyone, and welcome to Turkcell's 2026 first quarter earnings call. On the call today we have our CEO, Ali Taha Koç and CFO Kamil Kalyon. They will provide an overview of our operational and financial results for the quarter, followed by a Q&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. With that, I will now turn the call over to Mr. Ali Taha.

Operator

Thank you very much, Ozlem. Good afternoon, everyone. We delivered a phenomenal quarter. We successfully launched 5G nationwide on March 31st. This landmark launch reinforced our clear leadership in mobile. We executed with precision at every stage of the 5G deployment, from spectrum acquisition to network rollout, from network rollout to marketing. In all aspects, Turkcell is the leader. Our spectrum acquisition was both strategic and efficient. We secured 25% more capacity than our closest competitor, creating a network of superior scale and positioning it for long-term demand. Our launch was supported by a powerful go-to-market strategy. To accelerate 5G adoption, we expanded data package allowances fivefold and introduced compelling smartphone campaigns. Our ads featuring global celebrity Shaquille O'Neal resonates strongly with customers. We proved the real-world power of our network through high-impact use cases.

Operator

We successfully tested remote driving of a TOGG T10F over 150 kilometers distance. At the same time, we conducted live speed tests across Turkey. Turkey has 81 different cities. At live from all the cities we have 5G, and with 5G speeds exceeding 2,000 megabit, 2,000 megabit per second. It means more than 2 gigabits. No one has that kind of capability. No one has that kind of speed other than Turkcell. We secured the best frequencies, delivered superior network quality, and executed the strongest launch campaign. Our market is now more solid and resilient than ever. Next page, please. We started the year with flawless execution across all our domains. We have been the leader in the mobile, we are the leader today, and we will continue to lead the future.

Operator

By securing 40% of the 5G spectrum in the tender, we further reinforce our long-term capacity dominance. On the fixed side, we are driving value-led growth by promoting multi-gigabit per second fiber offerings. Currently, 20% of our customers are on 1 gigabit per second, means 1,000 megabit per second and above plans. Digital Business Services delivered robust growth through corporate digitization, supported by sustained momentum in data center and cloud services. We further strengthened our balance sheet by securing $1 billion in Murabaha financing. This preserves our investment capacity while supporting a healthy leverage profile. Finally, we continue to expand our strategic partnership. We introduced up to 50% discounts on Samsung smartphones to support 5G penetration. We also secured a managed service collaboration with ASFAT in the defense industry and a strategic cooperation with HBO Max to strengthen our TV platform strategy.

Operator

Next page, please. In the first quarter of 2026, our revenues grew by 9% year-on-year, exceeding TRY 68 billion. This robust top-line performance was driven by combination of operational discipline and strategic execution. Key contributors included strong momentum in Digital Business Services, the scaling of our Techfin segment, and high-quality subscriber acquisition across both mobile and fixed segments. Group EBITDA increased to TRY 28 billion with a margin of 41.4%. Our bottom line performance strengthened further with net income increasing by 15% to TRY 4.6 billion with disciplined financial management. On the subscriber side, we have 661,000 postpaid net additions. We achieved a great quarter in the mobile number portability market driven by targeted and segment-based offers. We continue to prioritize subscriber quality and rich content packages to strengthen our leadership.

Operator

Our data center and cloud business maintains a strong trajectory with revenues increased by 20.8% as we continue to scale our digital infrastructure. Overall, these results once again proved our ability to monetize the broader digital ecosystem. Next page, please. Let's look at the operational drivers behind our performance this quarter. Market competition remained relatively stable. We have 661,000 postpaid net additions in this quarter, our strongest total mobile net additions in the past 14 quarters. This performance reflects the success of our targeted offers and our focus on high-value subscriber growth. The share of postpaid subscribers rose by 4.6 points year-on-year to 81%. Mobile ARPU remained broadly flat year-on-year. This reflects the lagged impact of last year's competitive pricing, our contract-based structure, as well as the rapid increase in inflation in the first quarter.

Operator

As we transition to 5G, we are taking a balanced approach. We are carefully managing pricing to protect our subscriber base while sustaining our clear leadership in the revenue market share. Our strategy is also reflected in lower churn rates supported by an effective churn policy. Next page, please. Moving on to our, the fixed broadband operations, we achieved a strong quarter in fixed broadband supported by solid subscriber growth. We recorded 36,000 net fiber subscriber additions, including 21,000 from Turkcell Fiber domain. Residential fiber ARPU increased by 9.7% year-on-year, supported by active upselling, pricing actions, and the growing contributions of our IPTV offering. We expanded our Turkcell Fiber home pass by 138,000 in the first quarter, reaching a total of 6.5 million home passes in 30 different cities.

Operator

Our take-up rate reached 41.8%, reflecting effective monetization of our infrastructure investments and the strength of our fiber growth strategy. Next page, please. Digital Business Services had a strong start to 2026, with revenues increased by 64% year-on-year. This performance was driven by higher hardware revenues from large-scale end-to-end corporate projects. We also delivered robust 21% growth in our data center and cloud business. Our system integration backlog remains strong, exceeding TRY 10 billion. Our cumulative data center investments have reached close to EUR 600 million. We are on track to finalize our fifth module in Ankara. Our Google Cloud Hyperscale partnership is on track as we planned. Next page, please. Paycell, the growth engine of this segment, in this quarter, Paycell revenues increased by 15%, fueled by strong momentum in our POS and Pay Later businesses.

Operator

Active users of Pay Later increased by 16%, exceeding 3 million. On the financial side, revenues declined primarily due to ongoing installment limitations. Looking ahead, we see 5G penetration as a natural growth catalyst. A more supportive regulatory environment for installments limits would unlock the full expansion potential of this business. Despite revenue pressure, Paycell's net interest margin expanded significantly by 3.6 percentage points to 8.3%, supported by lower funding costs. Balance sheet risk management remained disciplined with cost of risk is at 3.3%. I will now hand over to our CFO, Kamil Kalyon, to walk you through our financial highlights. Thank you.

Speaker 2

Thank you very much, Ali Taha Koç. Let me walk you through our financial results. We are very pleased with our solid first quarter performance. With a 9% increase, our top line exceeded TRY 68 billion. This growth was primarily driven by Turkcell, which rose 8.6% year-over-year. Our non-telco revenues were instrumental in this performance, particularly Digital Business Services. Accounting for 12% of our revenue this quarter, Digital Business Services delivered strong momentum through managed services. Our expanded postpaid base and fixed broadband services also provided a robust foundation for expansion. Additionally, our other segments contributed half a billion TRY to the top line, fueled by the robust performance of call centers and Belarus subsidiaries. The EBITDA margin was 41.4%.

Speaker 2

The increasing share of hardware sales from large-scale integration projects made a significant contribution to top-line growth but weighed on the overall margin mix. This impact was partially mitigated by disciplined cost management, favorable energy prices, and reduced funding costs at Financell. Next slide, please. Net income rose 15% to TRY 4.6 billion, primarily supported by strong operational performance and robust EBITDA generation. Another key driver was the monetary gain, which benefited from the capitalization of the 5G license and contributed TRY 4.2 billion year-on-year. This year, we are scheduled to make several major payments. We have proactively positioned ourselves to manage them effectively. The payment of the first installment of the 5G license in January amounting to $653 million, together with the recognition of future installments and higher swap transactions, led to an increase in FX expenses.

Speaker 2

In addition, the redemption of $500 million Eurobond last October and the license payment in the first quarter resulted in a slight increase in net interest expense. EBITDA delivered a significantly stronger contribution compared to last year. This improvement was supported by effective cost management and pricing policies, while relatively stable Euro TL parity also helped constrain FX funding costs and the cost of goods sold. The effective tax rate increased this quarter. This was driven by a higher corporate tax expense and deferred tax impact stemming from the absence of inflation accounting in statutory financials. Next slide, please. Let's move on to CapEx management. In the first quarter of 2026, our CapEx to sales ratio stood at 21.5%. 85% of our operational CapEx was allocated to connectivity businesses, naturally reflecting our intensive preparations for the 5G rollout.

Speaker 2

On the fixed side, we continued our fiber expansion, adding 138,000 new homes passed this quarter. Our base station fiberization has now reached 47%, significantly enhancing our overall network quality at 5G readiness. Data center investments accounted for approximately 5% of our CapEx, with construction currently underway for the fifth module in Ankara data centers. Seasonally, we experience lower CapEx intensity in the first quarter. However, we expect higher figures in the upcoming quarters, driven by our ongoing investments in renewable energy and data center expansions for Google Cloud. Next slide, please. Moving to our well-positioned balance sheet. The first quarter ended with a cash position of TRY 96 billion. In January, we completed the first installment payment for the 5G license and paid TRY 3.2 billion Wireless Usage Fee.

Speaker 2

However, our cash position was significantly bolstered by the successful Murabaha syndication. Considering both cash and financial assets as part of our overall liquidity, we maintained a stable position quarter on quarter. Our current liquidity remains robust, providing full coverage for both the upcoming 5G payments and all debt maturities over the next four years. Driven by the new loan utilization and the impact of significant regulatory payments on our cash reserves, our net debt increased to TRY 49 billion. Consequently, and as expected, our net leverage ratio rose to 0.42 times. We expect leverage to remain below the 1 times threshold despite this being a high investment year. Next slide, next slide, please. Lastly, foreign currency risk management. We proactively balance hedging costs supported by our strong natural hedge position.

Speaker 2

Currently, 77% of our cash is held in hard currencies, while 88% of our total FX denominated debt is in hard currencies. To avoid excessive hedging costs during periods of relatively stable FX levels, we have strategically opted to maintain a higher short FX position. Supported by $2.8 billion in FX assets and a $1.3 billion derivatives portfolio against $4.4 billion in FX debt, our net short FX position has now risen to $1.2 billion. This position reflects cash outflows related to 5G license, FX denominated CapEx, and our optimized use of hedging instruments. Moving forward, we target an FX position of approximately $1.5 billion to support our ongoing investments and 5G obligations while maintaining the flexibility to adjust our strategy in line with market conditions.

Speaker 2

That concludes our presentation. We would now be happy to take your questions. Thank you very much.

Speaker 4

Ladies and gentlemen, at this time we will begin the question and answer session. The first question is from the line of Madhvendra Singh with HSBC. Please go ahead.

Speaker 3

Yes, hi, thanks a lot for taking my question. My first question is on the consumer segment. I think your release rates, consumer revenue growth was about 3%. If you could talk about that, you know, what is the context there? Because your overall revenue growth is high single digit in line with your guidance, but consumer growth is much lower. If you could talk, you know, about the drivers. Secondly, if you could talk about the pricing action within the mobile segment. How many have you revised the prices year to date? How much was the price hikes? What periods? Your future plans around the price hike as well. That's the second question.

Speaker 3

Finally, have you seen any impact on your operating costs from the higher fuel prices, energy costs, and so on? Any potential impact there, if you could talk about that. Thank you.

Operator

Let me start with the price adjustments. In 2026 segment-based dynamic pricing and offer strategy will be maintained. We're gonna closely follow up the competition and act upon it. We utilize actually AI power tools to provide dynamic and customer-specific offers. We cannot have a mass change in the pricing, but from a segment level, we are doing the change, price differentiation. On mobile side, this year, we applied a 26% price adjustment in January and 16% in April to restore pricing into the expected baseline. This year this did happen. On the fixed side as well, we applied price adjustments broadly in line with the incumbents pricing actions. Accordingly, we implemented approximately 12% price increase on the shared infrastructure and around 18% on our fiber products in February.

Operator

Regarding the first question, this quarter, we have lots of great news with the Digital Business Services. Our Digital Business Services and Paycell has a huge growth. Currently we are the biggest digital integrator in Turkey, and we are working very closely with the defense industry and another public sector. We gain lots of momentum on that perspective, so that's the reason that our growth is higher. Secondly, data center and cloud businesses grew around 21% year-over-year, so that's also helping us our growth. The Paycell also remain a strong contributor, to say the truth that it's our main growth engine. It grew 15%. We have a balance sheet right now, so we have multiple options so we can grow.

Operator

Consumer segment is still the biggest one, but we have other options that we can have a higher growth.

Speaker 2

For the third question, we are closely monitoring the volatility in the global energy market, especially the fuel prices. While high fuel prices put upward pressure on costs, the actual impact will depend on the conflict duration and the intensity. Currently, it's a little bit early to say estimation for the future, but it depends on the duration of the conflict.

Speaker 3

Okay. Thank you.

Speaker 4

The next question is from the line of Cemal Demirtaş with Ata Invest. Please go ahead.

Speaker 1

Thank you for the presentation. My first question is about the ARPU side. We see a real term contraction Q over Q and year-over-year. Could you further elaborate that, how should this trend go in the following quarters? The other question is about the cost side, the participation. We see that, it turned to positive net income around TRY 305 million contribution to your side. What do you expect for the following quarters at least? The last question is about the tax rate, effective taxes. How should we assume for the rest of the year? Thank you.

Operator

Thank you, Cemal. Thank you very much for the question. I'm gonna answer the first one and the top part and the tax part, the accountable is gonna answer that. Let me start with our primary objective is actually maintain a healthy ARPU growth that aligns with macroeconomic indicators. The mobile market currently was characterized by intense competition throughout the 2025, as you may know. Consecutively, our strategic churn management and pricing actions taken last year have had a temporary restrictive impact on our current ARPU growth because we already did this strategic churn management systems last year, so we can see the impact this year. For the full year 2026, our target is to achieve ARPU growth that closely tracks the inflation cycle.

Operator

However, we must remain mindful that any unexpected shifts in inflation dynamics, as we can see that nowadays, will create some influence on our real growth trajectory. Our dynamic pricing model will manage this and continue to migration to higher value segments remain our key strategy to ensure ARPU resilience. We implement a strategy that will enable us to maintain a healthy growth. In 2025 has also affected this year's growth as our ARPU growth is coming with a lag. We need to always know that there's a lag between the inflation and on our ARPU growth because we are doing our contracts, 12-month contracts. That's the reason that increasing trend in inflation is also putting a pressure on current year's growth.

Operator

If you look at the numbers, we have a healthy ARPU for the users. Also, we don't do any strange operations with the machine-to-machine communication. Our ARPUs are always stable. Growth is there.

Speaker 2

From the Togg side, Togg's net loss initially is starting from the third quarter of 2025, Cemal. Mainly supported by change in special consumption tax base, which led to higher vehicle prices in the company. The new model T10F also supported the sales momentum in Q4 2025 and Q1 2026. Within the light of these facts in Q1, Togg registered a net income of TRY 306 million. There are various reasons of this profit in the Togg side. This improvement was mainly driven by the increased benefit of current incentive mechanisms, mechanism with higher vehicle sales. This is the first one. The other one, financial expenses also improved due to relative stability of Euro TRY parity in Q1.

Speaker 2

Additionally, Togg continues to record monetary gains under the inflation accounting due to its significant fixed asset base. When you combine these three effects, the company declared a good result in Q1. We also expect the momentum in the coming periods. For the last question, as you know, from the tax side, the termination, as you know, you might aware, the termination of inflation accounting in accordance with the Turkish Tax Procedure Law led to tax impacts of the indexation effects of accounts under capital items is no longer taken into account. With another saying, the inflation accounting in the local side is canceled or postponed for three years period. There are some negative effects of this issue in the deferred tax side.

Speaker 2

Therefore, since the taxable nature of the monetary loss calculated on capital items has been eliminated, the effective tax rate has increased, naturally. Therefore, higher fixed asset revaluation effects are included at the end of year. Termination of inflation accounting impact had been limited from this side. In addition to this, for the account, inflation accounting, the profit of the term is also increased in this 1st quarter. Therefore, this is the 2nd reason which we have a tax expense in our financials in Q1.

Speaker 1

Okay. Do you expect any upward revision to your revenue growth after around 9% growth in 1st quarter? You have like five to seven.

Speaker 2

It is really early to say something about the guidance revisions, revise because we should, first of all, we should see the economical conditions in Turkey. The other one, the most important one is the conflict, duration of the conflict. If the conflict, for example, duration will, for example, extended for many months, therefore it will, how can I say? Influence the inflation rate in Turkey. We, we will look at the position of the inflation in the coming future. It's really early to say something about this one. I think we should see the Q2 results. Maybe in the Q3 side it would be more feasible or more rational to say a revise in the guidance side, in negatively or positively. It's really too early to say, to talk about this one.

Speaker 1

Thank you. One, one last thing about your, you know, promotion camera. It was very, I think effective, at least from a consumer perspective like me. Whenever I look at, you know, see it make me smile. I think from my side, it was very effective. From your side, do you think it reached to crowds in Turkey? Any reaction on that? It really, it's one of the best commercial I have experienced during the last several years. I just want to, you know, appreciate it from the consumer perspective. Do you have any measure that, you know, it had any positive effect on your activities in all around Turkey? Thank you.

Operator

First of all, thank you very much for your comment. It's very, you're making us happy when you say with these comments. Also our marketing team is also very happy about the impact. Overall, what happened is, you know, we missed that kind of great ads in Turkey. Turkcell has in its DNAs to publish a great ad. I think it is go back to the future or whatever you can say that, long time before we didn't have that kind of big, great ads. Still true that everybody knows the, especially the story is very nice. It's explaining the 5G technology with a very funny and Turkish style way, I can say that.

Operator

That's the reason that there's a huge interest on that, you know. Everybody's 5G speed is just very well aligned with the Turkcell terminology, so it helps a lot. We are seeing that and we continue on the campaigns, especially on the consumer side, we have a huge campaign about the 5-fold. We are waiting for that to be over. This month and the next month we are gonna see the real impact. On top of it, we just bought a new market, which is called fixed wireless access. It means that we are gonna give Superbox, 5G Superbox, and then we have a new ad about it as well.

Operator

Overall, we are expecting a positive impact, both the campaign and how we deploy our 5G technology in Turkey.

Speaker 1

Thank you very much, Ali Abi.

Operator

Thank you.

Speaker 4

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.

Operator

Thank you very much joining. Hopefully we're just gonna see each other in the second quarter results. Thank you.

Speaker 4

Thank you for joining us. 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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