Turkcell Iletisim Hizmetleri AS Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2026

Key Takeaways

  • Positive Sentiment: Operational momentum remained strong: Turkcell surpassed 40 million mobile subscribers, added 284,000 postpaid customers, improved monthly churn to 1.6%, and grew its fiber base by 31,000 subscribers.
  • Positive Sentiment: Growth businesses continued to scale, with Digital Business Services revenue up 33% to TRY 8.7 billion, Paycell revenue up 22%, and Superbox adding 64,000 subscribers; the system-integration backlog also increased to TRY 16 billion.
  • Positive Sentiment: Management maintained its full-year financial guidance despite raising its expected year-end inflation assumption to approximately 28% from 23%, citing disciplined pricing and expected benefits from recent price increases in the second half.
  • Negative Sentiment: Higher 5G-related depreciation, remaining 5G license installments, and currency exposure pressured earnings and finances; net debt reached TRY 44 billion, while the final two license payments of roughly $400 million each are due in December 2026 and May 2027.
  • Neutral Sentiment: Management expects the data-center and cloud business to become a major long-term growth platform, targeting 10%–15% of group revenue by 2030–31, although it currently represents only 2.3% of revenue and requires substantial investment.
AI Generated. May Contain Errors.
Earnings Conference Call
Turkcell Iletisim Hizmetleri AS Q2 2026
00:00 / 00:00

There are 9 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. I am Geli, your Chorus Call operator. Welcome, and thank you for joining the Turkcell's conference call and live webcast to present and discuss the Turkcell second quarter 2026 financial results. All participants will be in 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 Ms. Özlem Yardım, Investor Relations and Corporate Finance Director. Ms. Yardım, you may now proceed.

Speaker 1

Thank you, Geli. Good evening, everyone, and welcome to Turkcell's 2026 second quarter earnings call. 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. Our earnings release and today's presentation are available on our investor relations website. Our CEO, Mr. Ali Taha Koç, will begin with an overview of our business performance, followed by our CFO, Mr. Kamil Kalyon, who will take you through our financial results. After the presentations, we will open the line for your questions. It's now my pleasure to hand over to our CEO, Mr. Ali Taha Koç.

Speaker 2

Thank you very much, Özlem. Good evening, everyone. Welcome to Turkcell's second quarter 2026 results call. Today, I will take you through our operational and strategic performance for the quarter. After my remarks, Kamil will cover the financial results in more detail, and then we will be happy to take your questions. The key message this quarter is clear. We continue to deliver real growth in a challenging environment. Macro conditions remain demanding, with inflation still above 30%. We keep on delivering real revenue growth for the eighth consecutive quarter, supported by disciplined pricing, continued postpaid additions, and improved churn. Our strategic growth areas, Digital Business Services, Fixed Wireless Access, FWA, data centers, TV+, and Techfin took another step forward. Throughout all these slides, you will see one consistent story: disciplined, value-focused execution. Let's begin with the numbers.

Speaker 2

Group revenue reached TRY 71.8 billion, up 2.5% year-on-year. I want to underline this. With inflation at 32%, this is genuine real growth, driven by consistent pricing actions and healthy commercial momentum across our businesses. EBITDA was TRY 30 billion with a margin of 41.8%, and net income was TRY 5.2 billion. Our profitability continues to reflect the strength of our disciplined operations and balanced capital allocation approach. On the operational side, momentum was strong across the board. We added 284,000 postpaid subscribers in a single quarter. Turkcell fiber business added 31,000 net subscribers. Mobile ARPU was realized at TRY 448, while residential fiber ARPU reached TRY 570. Techfin revenue was up 7% to TRY 4.1 billion. Digital Business Services revenue grew 33% to TRY 8.7 billion.

Speaker 2

Data center and cloud revenue increased 10% to TRY 1.6 billion, and Superbox, our fixed FWA technology, added 64,000 subscribers. These businesses are becoming core engines of Turkcell's growth and reinforce our strategy of building a more diversified and resilient business model. Let me go deeper into each business, starting with mobile business. Our mobile business delivered an outstanding quarter. We crossed the 40 million mobile subscriber milestone for the first time in Turkcell's history. This is a testament to the strength of our network, our brand, and our commercial execution. Our postpaid base reached 32.5 million subscribers, driven by 284,000 net additions in the quarter, and 2.4 million over the last 12 months. Prepaid performance remained broadly stable this quarter, as we successfully continued the transition of our mix toward postpaid, which now accounts for 81% of our mobile base.

Speaker 2

This mix shift is significant, as postpaid customers deliver higher lifetime value through lower churn and multi-service adoption. Churn tells the same compelling story. Monthly average churn improved to 1.6%, down significantly from a year ago. Strong net additions combined with declining churn prove one thing: customers are choosing Turkcell with long-term loyalty. On pricing, mobile ARPU excluding M2M grew 27% year-on-year. Given the predominantly contractual nature of our postpaid base, pricing actions are gradually reflected in ARPU as contracts renew. Our strategy remains consistent. We take disciplined pricing actions to sustain real revenue growth, supported by our strong brand and superior service quality. One of the most dynamic drivers of our connectivity business today is fixed wireless access. Let me now turn to our FWA performance. Superbox is our fixed wireless access, FWA offering, which we view as the next way of growth in home internet.

Speaker 2

We are the undisputed market leader with a 74% share of FWA, fixed wireless access market. After a soft start to 2025, growth has escalated for four consecutive quarters. We added 64,000 subscribers this quarter alone, expanding our total Superbox base to 818,000. The strong momentum we are building here is particularly encouraging. Looking ahead, 5G will act as a catalyst. Superbox, our FWA offering, delivers fast, reliable plug-and-play home internet today, and 5G will elevate that experience to an entirely new level, further accelerating market demand. Superbox enable us to capture broadband demand quickly and efficiently while working hand-in-hand with our fiber strategy. Fiber remains the backbone of that strategy. Let's move to fixed broadband. Our fixed broadband strategy is straightforward. Grow on our own fiber, price with discipline, and deliver a premium service and experience.

Speaker 2

Turkcell fiber reached 2.6 million subscribers with 31,000 net additions in the quarter and 138,000 over the last 12 months. We continue to increase the share of customers served through our own fiber infrastructure, reaching 80%, up three percentage points year-on-year. The increase reflects our sharp focus on expanding the highest value part of our fiber business. The strength of our fiber business goes beyond scale, reflecting the quality of our subscriber base. 88% of our residential fiber subscribers are on 12 months contracts, while monthly churn improved to 1.1%. Together, these metrics provide exceptional revenue visibility and reinforce the resilience of our fiber business. On pricing, residential fiber ARPU grew 37% year-on-year, outpacing the inflation rate. Combined with continuous improvements in churn, these results demonstrate the strength of our fiber proposition and the value customers place on our service.

Speaker 2

At the same time, we continue to expand in Türkiye with strong discipline. We passed 194,000 new homes in this quarter, bringing total home passes to 6.7 million across 31 different cities with a take-up rate of 41%. Take-up rate is one of the metrics we track closely, as it demonstrates that we are expanding where demand is strongest. Connectivity also opens the door to our digital customer services, starting with TV+. TV+ now serves 2.7 million subscribers. Subscriber momentum continues to gather pace throughout the year. Net additions increased from 62,000 in the fourth quarter of last year to 106,000 in the first quarter of this year and accelerated further to 123,000 this quarter. Content is the key driver of the TV business. Our strategic partnership with HBO Max, launched in November, has significantly enriched our content offering and resonated well with customers.

Speaker 2

As a result, viewing time increased by 14% quarter-on-quarter and 64% year-on-year. TV+ is about more than just the numbers of subscribers. It strengthens engagement across our ecosystem. Users that actively use TV+ interact with Turkcell more frequently, adopt more of our services, and build deeper, longer-lasting relationships with us. Now let's move to fastest-growing part of the group, Digital Business Services. Digital Business Services delivered an outstanding quarter, with revenue up 33% year-on-year to 8.7 billion TRY. This strong performance reflects the depth, scalability, and market strength of the digital infrastructure platform we have built over the years. Today, our data center footprint spans four different locations: Kocaeli, Ankara, Tekirdağ, and Izmir. Following the activation of a new module during the quarter, our active IT capacity reached 54 megawatts. We are now taking this platform to the next level.

Speaker 2

Construction of hyperscale data center facilities dedicated to Google Cloud's Türkiye region in Ankara is underway. A partnership of this caliber is a strong endorsement of the quality of our infrastructure and further strengthens Turkcell's position at the center of Türkiye's digital transformation. Including our hyperscale data center investments, our total investment amount reached €612 million. As of Q2, data center and cloud represent 2.3% of our group revenues. While still a developing revenue stream today, we see this business as one of Turkcell's most promising long-term growth platforms. Growth in system integration was supported by both hardware and services. More importantly, we entered the second half of the year with more than 1,500 new contracts and a system integration backlog of 16 billion TRY. This contracted backlog provides exceptional revenue visibility and reinforces our confidence in the sustainability of future growth.

Speaker 2

Finally, let me turn to our Techfin businesses, another critical pillar of the Turkcell ecosystem. Our Techfin businesses contribute 6% of the group revenue this quarter and continue to strengthen the diversity of our earnings base. Paycell delivered another strong quarter, with revenue increasing 22% year-on-year to 2.4 billion TRY. Paycell transaction volumes surged 84%, while POS transaction volume grew 67%. Consequently, total payment volume across the Paycell ecosystem reached 39 billion TRY during this quarter. Paycell now serves 6.8 million active users across a broad range of everyday payment services, while the ongoing expansion of our POS solution is further strengthening our merchant ecosystem. Together, these customer and merchant capabilities continue to reinforce the scale and the resilience of our payment platform. At Financell, our focus remained firmly on profitability and portfolio quality.

Speaker 2

This approach resulted in a significant improvement in net interest margin, which increased from 4.5% to 7.8%. The cost of risks remained well under control at 3.4%. Revenue was 12% lower year-on-year, reflecting our disciplined approach to portfolio management. Financell continues to lead the customer finance market with a 43% market share by number of loans. Our 16.1 million pre-approved credit customers provide significant potential for future growth. As we close the quarter, one key message stands out. Our core connectivity business continues to perform with resilience. The businesses we have been investing in are becoming increasingly important drivers of our growth and profitability. We remain committed to executing our strategy with discipline, investing in high return, long-term growth while continuously enhancing operating margins. Before I conclude, let me briefly touch on our outlook.

Speaker 2

Since the beginning of the year, the macroeconomic environment has evolved, and we now anticipate year-end inflation to settle around 28%, compared with our previous assumptions of 23%. Even with this revised inflation assumption, our financial guidance remains unchanged. Finally, I want to express my sincere gratitude to the entire Turkcell team. Their dedication and commitment are behind every achievement we have shared today. With that, I will hand it over to Kamil for a more detailed review of our financial results.

Speaker 3

Thank you, Ali Sabancı. Let me now take you through our financial results. During the second quarter, inflation proved more persistent than anticipated, with regional geopolitical tensions adding further pressure to the macro outlook. Despite these headwinds, delivering positive real growth clearly underscores the inherent stability of our business model. This performance is a direct result of our strong brand acuity, disciplined pricing strategy, and solid commercial momentum across every segment. Simply put, these results give us full confidence in the quality and long-term sustainability of our growth trajectory. Turning to our financial performance in this environment, we generated TRY 71.8 billion in revenues, marking an impressive 2.5 year-on-year growth. Turkcell Turkey continued to drive group expansion, delivering TRY 1 billion in incremental revenue with accelerated momentum across the corporate segment played a pivotal role in supporting this performance.

Speaker 3

On the profitability side, I want to highlight our deliberate strategy around 5G. As the clear leader at every stage of the 5G transition, we intentionally stepped up our marketing investments this quarter to further solidify customer adoption and translate our 5G leadership into long-term commercial value. Even when measured against an exceptionally strong comparable base, we delivered a healthy EBITDA margin of 41.8%, which sits fully in line with our full-year expectations. Next slide, please. Moving on to net income, I would like to briefly outline the key dynamics shaping our financial performance this quarter. Following the commercial launch of 5G, depreciation of the associated assets commenced this quarter. Roughly half of the year-on-year increase in depreciation is attributable to these 5G licenses. As expected, the resulting increase in depreciation impacted the bottom line while marking an important transition as our 5G investments move into active deployment and monetization.

Speaker 3

This impact was partially offset by higher monetary gains associated with the capitalization of the 5G license compared with the same period last year. Despite the year-on-year increase in our net debt position, our active treasury management continued to deliver tangible benefits. Excluding FX effects, we generated higher financial income while reducing financial expenses, with both contributing positively to our bottom line year on year. Moving to our equity accounted investments. GOGG, in which we are proud to be a founding shareholder, continued to scale its operations during the quarter. As the business matures, the heavy startup losses of its early years have now largely normalized, delivering a more favorable contribution to the group year on year.

Speaker 3

On the tax side, our tax expense was significantly lower year on year, supported by the fixed asset reevaluation effect and tax incentives tied to our growing data center business, leading to a meaningful improvement in our effective tax rate. Bringing all these factors together, we delivered a strong bottom-line performance, translating into a net income of TRY 5.2 billion. Next, I'd like to walk you through the main drivers behind our net FX loss. Before discussing this quarter's FX impact, let me first emphasize that we continue to manage both FX and interest rate risk proactively with a disciplined approach that balances risk, hedging costs, and financial returns. On the borrowing side, the $1 billion Murabaha facility we secured last quarter increased the FX component of our debt portfolio.

Speaker 3

This exposure is largely balanced by our sizable FX-denominated cash and financial assets, which provide a natural offset against all our FX liabilities. At the same time, we actively manage these assets under our treasury strategy to optimize returns while maintaining a disciplined approach to FX risk. Another factor contributing to the FX impact this quarter was our remaining 5G license installments. With two payments still outstanding, these obligations remain subject to FX revaluation. Furthermore, the accelerated pace of TL depreciation compared to previous periods has naturally added to our reported FX expenses. We constantly evaluate alternative hedging strategies. However, under current market dynamics, the cost of fully hedging our FX exposure remains elevated. We believe our current approach strikes an effective balance between managing FX risk and maintaining cost efficiency. Finally, it is essential to evaluate our finance expenses holistically rather than focusing solely on reported FX loss.

Speaker 3

As part of our proactive liquidity management, we utilize FX swaps to convert hard currency liquidity into Turkish lira and deploy the resulting funds into high-yielding money market instruments and deposits. While the cost of these transactions is recognized as FX losses for accounting purposes, the resulting Turkish lira liquidity generates meaningful interest income, which is recorded separately and therefore is not captured in the FX loss line. Therefore, the reported FX loss should not be viewed in isolation, as it captures only one component of the broader economic outcome of our treasury strategy. Next slide, please. Turning to our investments. Our operational CapEx to sales ratio stood at 25% in the second quarter, bringing our first half ratio to 23.2%. We allocated 81% of our operational CapEx directly to our core business, primarily supporting 5G network rollout and the continuous expansion of our fiber infrastructure.

Speaker 3

During the quarter, we added 194,000 new fiber home passes, expanding our total footprint to 6.7 million. Meanwhile, the fiberization rate of our base stations reached 47.5%, further strengthening the quality and the resilience of our integrated network. Beyond our core telecom infrastructure, we continued to expand our renewable energy portfolio. In April, we acquired a 12.1 megawatt solar power plant in Mersin, bringing our active solar generation capacity to 74.4 megawatts. We expect this capacity increase further over the coming quarters as projects currently under the development become operational. We also made further progress in our data center investments. We activated the final module of our Ankara data center and broke ground on the data center infrastructure supporting the Google Cloud region in Turkey. With these investment milestones covered, let me now turn to our balance sheet position.

Speaker 3

Turning to our balance sheet, our financial position remains strong, with cash and cash equivalents reaching 89 billion TRY at quarter end. Our cash position remained resilient compared to year-end 2025, despite significant planned cash outflows, including the first 5G license installment, the annual wireless usage fee, and bonus payments. The Murabaha financing completed during the period further strengthened our liquidity position and provided additional financial flexibility. We remain focused on proactive liquidity management, balancing efficient funding with the preservation of a strong balance sheet. As anticipated, these planned cash outflows resulted in net debt of 44 billion TRY. Importantly, our leverage ratio remained very low at just 0.4 times, well within our comfort zone and among the strongest levels in our peer group. Looking ahead, our robust liquidity fully covers all remaining 5G license obligations and debt maturities over the next four years.

Speaker 3

Next, let's take a closer look at our FX exposure. Finally, let me touch upon our foreign currency risk management. As part of our proactive treasury strategy, we selectively used FX swaps to optimize returns on our cash balances, converting a portion of our hard currency liquidity into Turkish lira to benefit from attractive TRY yields. At the same time, we maintain a substantial portion of our cash in hard currencies, providing a natural hedge against our FX liabilities. At quarter end, 60% of our cash was held in hard currencies, while 87% of our financial debt was denominated in hard currencies. At the end of second quarter, we had $4.3 billion US equivalent of FX-denominated financial liabilities balanced by $2.6 billion US equivalent of FX-denominated financial assets and effective hedging portfolio of $1.2 billion US.

Speaker 3

The year-on-year increase in FX liabilities primarily reflects our 5G license obligations and related investments, the expansion of our data center capacity, and the BOTAŞ tender, all directly linked to the execution of our long-term investment strategy. As a result, our net short FX position remained comfortably within our medium-term target range of plus or minus $1.5 billion US. With that, I will hand the call back to the operator, and we would be happy to take your questions. Thank you very much.

Operator

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by 1 on their telephone. If you wish to remove yourself from the question queue, then you may press star and 2. Please use your handset when asking your question for better quality. Anyone who has a question may press star and 1 at this time. One moment for the first question, please. The first question is from the line of Suzat Deron with Bank of America. Please go ahead.

Speaker 4

Hi. Good evening, everyone. Thanks for the call and the opportunity to ask questions, and congratulations on the results. I have three questions. Sorry about that. The first one is very easy. Just wanted to understand what would be the drivers that would help you re-accelerate growth in the second part of the year so that it is more in line with the guidance you provided. I am talking about revenue growth. The second question, I would like to understand a little bit better why the margins at Paycell and Financell are so volatile. For example, if I look at the Paycell margins, there was a 5.5% decrease this quarter versus last year. To the opposite, the Financell margins increased by almost 20 percentage points. So I would like to understand that a little bit better. The third question is on the CapEx.

Speaker 4

We have seen, I think, your key competitor increasing slightly CapEx guidance in light with the FX volatility and that high inflation. Are you still comfortable with your current CapEx guidance? Thank you so much.

Speaker 3

Thank you very much. I will start from the third question. Yes, we are still confident about to reach our guidance in the CapEx side, even if there would be, how can I say, FX increases. As you know, coming from history, we are very disciplined about the CapEx spending side. Therefore, we will be carefully spending our money, and we think that we do not expect more deviation in the CapEx guidance side. In the second question, Paycell side, for, I think, last 2 years period in Paycell, we are focusing on the POS solutions in physical PA solutions and the other side. Therefore, the profitability of these transactions a little bit eroding the Paycell EBITDA margin. While we have a very important amount of growth in the Paycell side, but sometimes these post transactions can be a little bit erosive, EBITDA.

Speaker 3

But in total, we are very happy to see the performance of the Paycell side. Regarding the financial side, due to the economical conditions in Turkey, there are, how can I say? Tightening policy. Therefore, the demand for the terminal or the equipment side is a little bit, how can I say? Poor this year. Therefore, this directly affects the financials, credit lines, and activities. But since the cost of financing is reducing in this way, therefore, you can see higher EBITDA margins in the financial side. Therefore, the volatility is coming from this one. But we are still very happy to the contribution of the Techfin side into our overall picture.

Speaker 2

For the first part, we are expecting the growth in the second half. Why? Because currently in the telecom market, the competition is naturalizing, and it is becoming a more realistic competition in the market right now compared to mobile number portability if you compare to last year. This year is a little bit better. And we have a dynamic pricing actions that we put in the first half of the year. So the impact of that price change is going to support our second half growth. And I am pretty sure that the DBS and Fintech continues to support our growth in the second half of the year.

Speaker 4

Thank you so much. That was very clear. Thank you.

Operator

The next question is from the line of Mandy Sai with HSBC. Please go ahead.

Speaker 5

Yes. Hi. Thanks a lot for taking my question. My question is a follow-up on the growth outlook. Just wondering, when do you see the impact of recent price hikes to become fully visible in the growth and it goes towards your guidance of high single digit level? If you could give some color around that will be very helpful. The second question is on your FWA offering. Very interesting to see the growth in that segment. If you could help understand, of your current customer base of around 800,000, if I remember correctly, are they all on 4G devices or those devices they have are capable of using 5G as well? Do they need to upgrade their device basically to benefit from the 5G transition? That will be helpful to understand.

Speaker 5

In terms of the pricing of FWA, what kind of discount or parity it has versus the fiber product? If you could talk about the offering itself, what speed customers are getting now and what speeds they're likely to get at 5G. If you could give some dynamics around the product, that will be very helpful.

Speaker 2

Thank you very much for the question. First of all, the first part, the growth impact. Because of the lag effect of our price change and also development contracts, beginning from the end of the Q4, you're going to see the impact and the growth much clearer. For the FWA part, FWA is currently, as you may know, we got the highest frequency band, and we had the biggest investment in the 5G. So we have a higher capacity, and our 5G offerings are with supporting Wi-Fi 7 as well. What we are doing right now is we are just offering this product to all of the customers in Turkey who has an old-fashioned technologies using DSL. On top of it is a very portable and plug-and-play easy-to-use device. There's a huge appetite from the market. They want to buy it.

Speaker 2

At the beginning, we just, for our own 4G users, 4G Superbox users, we started to swap them with our 5G devices because currently 4G Superbox only support 4G technology, but we deploy 5G all around Turkey. That's the reason in order to utilize that kind of capacity, they need to have a 5G equipment. If you compare the pricing of our Superbox compared to fiber, Superbox pricing is a little bit above fiber prices, but there is a huge impact of the usability. It's very easy. You can go and grab that device, and then you can plug and play, and then you can use it very easily.

Speaker 5

Did I hear that correctly? The Superbox is more expensive than fiber?

Speaker 2

Comparable prices. Just a little bit. They are close because we put some limits on the Superbox tariffs. It is 250 gigabytes or 500 or 1 terabyte. Depending on the limits that you have, the price can change, but it is comparable prices.

Speaker 5

Understood. In terms of any response from competition on that side, have you seen anything?

Speaker 2

74% market share, I think answers your questions.

Speaker 5

Okay. Thank you.

Operator

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

Speaker 6

Thank you for the presentation, and congratulations for good results. My first question is about the strategic perspectives on the 5G. I remember that when you were appointed as the CEO, in your minds, you were maybe expecting or you were foreseeing to have two Turkcell out of one Turkcell in the future. You have your ambitious targets at that time, and you are progressing the company in years. But I would like to ask a strategy perspective question. You are more diversified now, but you are getting more than the mobile operator. When do you think we will see the other areas, like the digital platforms, data center, to have more significant contribution in your revenues? Could we expect any three-year plan that at least gives us a direction, maybe in the following quarters?

Speaker 6

Maybe it is not very clear now, but at least that kind of thing will get us your position as a digital platform more than helping operator. At least it will be very good to point out, because currently, Turkcell is very undervalued in our view. We have difficulty understanding the application, but we understand that the market is focusing on the weak ARPU, at least at this moment. So I think any clarification on that or any long-term perspective, as you did in the past in data center, it could be very helpful. Maybe, sorry for this long question. The second one is about the short-term perspective. In your earnings release, you mentioned that ARPU improvement could come in the fourth quarter. If we assume that in the fourth quarter, are we going to see some improvements, or you mean it will be in 2027? Thank you.

Speaker 6

Thank you very much.

Speaker 2

Thank you very much for the question. When I started this role, I have a dream. I have still that dream, but I'm going to execute it firmly and with a disciplined approach. What happened in 2016, Turkcell started its journey in the DC provider. It built its first DC in 2016, and then it started a DC business as a colocation provider. Colocation business is very good, profitable, a very good business. But in order to come up with a dream of becoming another Turkcell, you need to add the service business on top of it. That's the reason that we have a huge agreement with Google Cloud, like $3 billion of investment to reach that dream, because with a colocation business, it is limited because what happens, it affects very deeply about all these political issues.

Speaker 2

If no one can buy servers, they don't need colocation services as well. Currently, you can see that the price of the servers are going high, and then because of the processor and the RAM crisis, the price of each server is getting higher and higher. On top of it, everyone's looking for the services, cloud services. That's the reason that we have a huge agreement with the Google Cloud. Currently, this year, our revenue of the DC and cloud revenue reached 2.3% of overall revenues. It was 1% or something a couple of quarters back. It went up to 2.3%, but we are constantly improving that percentage and revenue. We started the construction of our Google Cloud data centers, and in 18 months, hopefully we're going to start on 2 years, we're going to start selling services.

Speaker 2

The service business is going to bring more revenue. I'm pretty sure that in 5 to 6 years, you're going to see more revenues coming out of that. We are expecting that 2030/31, 10%-15% of the revenue is going to come from our data center business. But that is a long-term story. Also with the AI, I'm pretty sure that this investment value is going to be more recognized because in order to have AI capability, you definitely need a data center. Guess what? Currently, we have 54 megawatts of capacity for AI usage, and if anybody can bring their servers or the AI chips, we have the location for them. That's the reason that I'm very optimistic about the revenue, and it's going to come. Any other question? Cemal, can you repeat the second question, please?

Speaker 6

Second question. I'm sorry, I forgot the second question, Cemal. About the ARPU size. In your earnings release, you expect a recovery in the ARPU in fourth quarters and onwards. Do you mean after fourth quarter in 2027, or we are going to see it in the fourth quarter? Thank you.

Speaker 2

We just put the dip in the ARPU levels, and then I'm pretty sure that it's going to slowly increase, but we are going to see the real impact in 2027.

Speaker 3

Yeah. But you will get the signals, the positive signals, because we are investing a lot of things to make our ARPU high, starting from this year. Therefore, you will be seeing the signals in the third quarter of 2026, most probably in fourth quarter, but the exact results will be taken in 2027.

Speaker 6

And one follow-up related to your backlog from system integration projects. We see that TRY 16 billion versus TRY 10 billion in the previous quarter. Should we expect gradual increase in the following quarters, or should we expect more significant improvements maybe late 2027 or 2028 on that front? Thank you.

Speaker 3

Yes. When you look at our Q1 results and Q2 results, we had very important significant projects coming from the governmental bodies and the other side. Therefore, we see the valuable effects of these projects this year. Most probably, they will come because when you start a big project in a company or in the governmental side, there are a lot of followings projects coming from this project. Therefore, our expectation in 2027, these projects will be continuing in 2027. Because, as we explained previously, the most important or strong muscles of our company, we are not only focusing on the individual side only. We are also very strong in the enterprise side in the market. Therefore, that is why Google or the other big companies are choosing us as a partnership.

Speaker 3

Yes, we have a very good technical expertise, but our sales force regarding this enterprise side is very strong. Therefore, we invested this service nine, six years ago or seven years ago. But we are now harvesting these investments in these years. And most probably it will continue in the coming years.

Speaker 6

Thank you. Thank you for the answers. Okay.

Operator

The next question is from the line of Evgeniya Bystrova with Barclays. Please go ahead.

Speaker 7

Hello, good evening, and thank you for the presentation. I have just one quick question, and apologies if you covered it in the past. I wanted to understand better, or maybe you could break down for me the expected payments for the 5G tender. I know there was a payment in Q1 including the VAT, but correct me if I am wrong. So what was the specifically 5G payment in Q1, and what are the expected payments in the next quarter, and what is the timing for that? Thank you.

Speaker 2

Okay. It is 3 installments. The first installment also included the VAT. It happened at January of this year. The second installment is going to be in December this year. It is around $400 million. The third and the last installment is going to be next year, 2027 May, and it is again around $400 million.

Speaker 3

Yeah. The first installment amount is $625 million. Yeah.

Speaker 2

Because it includes the VAT as well. So we paid the VAT upfront.

Speaker 7

Okay. Thank you. That is very clear. Thank you.

Operator

As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from the line of Yasin Sarihan with Yapı Kredi Yatırım. Please go ahead.

Speaker 8

Thank you so much for the presentation. I have two questions. Do you expect any changes to the credit limits? As far as I know, there is a limit to installment on new devices. This is so important for the 5G penetration and also for Financell. My second question is that have you started to see the contribution from the 5G on ARPU growth? My last question will be related to data centers. How much EBITDA did data center generate in the second quarter of this year? If you have any, could you share us details about the data center or any other segment for Digital Business Services? Thank you so much.

Speaker 2

Thank you very much for the question. The first part is very important for us, especially with the 5G penetration. It is around 35% right now of all of our users. 30% to 35% of them has the 5G phones. In order to support that, we are supporting the local production also. Late last year, we had an agreement with Samsung to produce in Turkey which is going to be included. That production is going to be A series phone, and it is going to be below 20,000 Turkish liras. With the latest developments, especially on the ramp crisis and also supply chain issues, we are seeing that the production of the phones are getting more expensive. That is the reason that we are doing lots of lobbying in order to increase that limit. In our planning, we always keep that limit amount 20,000 Turkish liras fixed.

Speaker 2

If it change, I'm pretty sure that it's going to positively affect our outlook, especially for the Financell. I'm pretty sure that last 18 months ago, they changed that limit. I'm pretty sure that soon, because we are not going to be able to find any phone which is smaller than TRY 20,000, so we cannot do any installments. On top of it, you can do three installments. Besides 12 installments, you can do three installments. Overall, I'm pretty sure that for the penetration, that limit needs to be changed. The second thing that the 5G, we can see that the amount of the usage and then the data usage is increased. On top of it, the 5G is going to improve our ARPU slowly. I'm pretty sure that the user who are using 5G, they have higher ARPUs.

Speaker 2

When we move them all to our customers from the 4G to 5G with the 5G capable phones, I'm pretty sure that our ARPU is going to have a positive impact on that.

Speaker 3

Regarding the EBITDA margins of the DC operation, we are not expecting any erosion in our EBITDA margins. When we look at our business plans, we see that the EBITDA margins that will come from this DC operation will not erode our EBITDA margins.

Speaker 2

With the 5G ARPU levels, we are bringing a new concept called FWA, fixed wireless access. We are double using our 5G spectrum for the cell phones as well as the home internet. We are going to see a growth and a revenue growth from the FWA part as well.

Speaker 8

Thank you so much.

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, and see you in the Turkcell quarter call.

Speaker 3

Thank you very much for sparing time.

Speaker 1

Thank you for joining us. Bye.

Operator

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

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