Turkcell Iletisim Hizmetleri A.S. Full Year 2010 Results
ISTANBUL, Turkey, February 23, 2011 /PRNewswire/ --
- Leading The New Mobile Internet Era With Superior Network
Turkcell (NYSE:TKC, ISE:TCELL), the leading communications and technology company in Turkey, today announced results for thefourth quarter and year ended December 31, 2010.All financial results in this press release are unaudited, prepared in accordance with International Financial ReportingStandards ("IFRS") and expressed in Turkish liras and dollars unless otherwise stated.
Please note that all financial data is consolidated and comprises Turkcell IletisimHizmetleri A.S., (the "Company", or "Turkcell") and its subsidiaries and associates (together referred to as the "Group"). All non-financial data is unconsolidated and comprises Turkcell only. The terms "we", "us", and "our" in this press release refer only to the Company, except in discussions of financial data, where such terms refer to the Group, and where context otherwise requires.
Highlights of the Fourth Quarter and Full Year 2010
Full Year 2010
- Group revenue slightly improved to TRY9.0 billion (TRY8.9
billion) mainly due to increasing mobile internet revenues and the
higher contribution of Group companies despite the negative impact of
regulatory decisions in Turkey.
- Turkcell Turkey's revenue wasTRY8.0 billion (TRY8.0
billion), which included highermobile internet revenues, up 74% to
TRY454 million (TRY261 million) and a higher postpaid subscriber
base,despite the negative impact of significant regulatory changes.
- The contribution of subsidiaries to Group
revenuessignificantly improved in 2010:
- Top line contribution increased to 11.1% in 2010
(10.2%)mainly due to strong revenue growth of 32.8% to TRY335.1 million
(TRY252.4 million)at Superonline.
- EBITDA contribution improved to 9% in 2010 from 5% in 2009
mainly as Superonline and Astelit significantly improved their
operational performance.
- Despite challenging market conditions and regulatory
changes, Group EBITDA margin was maintained at32.7% (33.3%) while the
Group EBITDA was at TRY2.9 billion (TRY3.0 billion).
- Group net income increased by 3.7% toTRY1.8 billion (TRY1.7
billion).
Fourth Quarter 2010
- Group revenue in the fourth quarter of 2010 was TRY2.19
billion (TRY2.26 billion), a declineof3.3% compared to a year agodue to
the negative impact of regulatory decisions in Turkey,which
was partially offset by the higher contribution of Group subsidiaries
driven by strong performance at Superonline and growth in mobile
internet and services revenues.
- The Group EBITDA margin was at 29.7% (30.2%) while the Group
EBITDA* was at TRY649.0 million (TRY681.9 million). Turkcell Turkey's
Rising general administrative and selling and marketing expenses, were
Largely offset bythe increasing contribution of subsidiaries',
particularly by Astelit,to Group EBITDA.
- Net income increased by 45.6% to TRY368.1 million (TRY252.8
million) in Q4 2010 mostly due to the absence of one off items recorded
in the fourth quarter of 2009(e.g. charges related to fixed asset
write-offs and legal developments) and decrease in goodwill impairment
costs,despite the increasing cost base in Turkey.
*EBITDA is a non-GAAPfinancial measure. See page 14-15for the reconciliation of EBITDA to net cash from operating activities.
**In this press release, a year on year comparison of our key indicators is provided and figures in parentheses following the operational and financial results for the year end 2010 refer to the same item in the year end of 2009 and figures in parentheses following the operational and financial results for the fourth quarter 2010 refer to the same item in the fourth quarter of 2009. For further details, please refer to our consolidated financial statements and notes as at and for the year ended December 31, 2010 which can be accessed via our web site in the investor relations section (http://www.turkcell.com.tr).
**Please note that the Information and Communication Technologies Authority in Turkey is referred to as "the Telecommunications Authority" herein.
Comments from the CEO, SureyyaCiliv
"In 2010, Turkcell recorded revenues of TRY9.0 billion, EBITDA of TRY2.9 billion and net income of TRY1.8 billion.
During 2010, the Turkish mobile market experienced the most radical regulatory changes of recent years. Interconnection rates and maximum price cap levels decreased significantly in Turkey, negatively affecting our revenues. However, throughout 2010 we offered even more affordable prices for our customers, thereby increasingboth usage and customer satisfaction.
During the year, we made major investments in our 3G and fiber network. Consequently, we have established one of the world's leading 3G networks. We believe that these investments position us very strongly against the competition and will ensure sustainable growth for us in Turkey.
We are also pleased with the performance of our Group Companies as the profitability of both Superonline in Turkey and Astelit in Ukraine significantly improved in 2010. We expect their contribution to continue to increase going forward.
In a strong macroeconomic environment in Turkey, we believe that we are very well positioned for the future as we have proactively driven the new 3G era. Our investments are well underway and we are very focused on ensuring growth through mobile internet, services and applications tailored to our customers' needs and expectations.
I would like to thank all our employees, customers, business partners and shareholders for their continued confidence in, and contribution to, Turkcell Group throughout the year. We look forward to a still better year overall in 2011."
OVERVIEW
In 2010, mobile line penetration decreased by 4pp to 84% mainly due to the continuing decline in multiple SIM card usage. In 2011, we expect the number of mobile lines to grow inparallel to population growth, and mobile line penetration to remain in-line with the year-end 2010 level.
Furthermore, the Turkish mobile market witnessed some radical changes in 2010. The significant decrease in interconnection rates and maximum prices negatively impacted the market and put further pressure on per minute revenue and profitability. Additionally, we have seen some regulatory changes such as the introduction of an upper limit for calls up to 60 seconds, transition to TRY from unit based pricing, and the change in the definition of active subscribers.
The competitive offers in the market remained aggressive. All operators focused on increasing their postpaid subscriber base by providing high minute incentive port-in offers,launchinglower priced voice packages andcontinuing to offer flat rate minute packages for all directions.The focus on segmented offers continued throughout the year while3G and terminal bundled offers gained pace towards the yearend.
During the year, we maintained our leadership in the Turkish market, continuing to grow our postpaid subscriber base and usage volumes in a healthy manner. We successfully differentiated ourselves through our unique mobile services and applications and marked a first in Turkcell's history, by introducing the Android-type Turkcell-branded smartphone, the T10.The number of smartphones on our network reached2 million;representing 6% of total subscribers compared to 3% a year ago. We continued to seeencouraging application and data usage trends by smartphone customers operating onour network.
Consequently, in 2010, mobile internet revenues rose by 74% and comprised 28.0% of overall mobile Internet and service revenues in Turkey, up from 20.4% a year ago. The share of mobile internet and service revenues in Turkcell Turkey revenues increased by 4.3pp to 20.3% (16.0%). The share of our consolidated mobile Internet and service revenues roseby 3.9pp to 19.4% (15.5%).
Particularly in the fourth quarter of 2010, aggressive port-in offers for postpaid subscribers continued with intense communication, tailor-made corporate offers, and increasing usage advantages for the youth segment. Terminal bundled offers, data bundled packages and roaming offers accelerated as part of the year end campaigns. We invested in our brand for positive long term returns and started to communicate our new "Get more out of life, with Turkcell" motto. We further strengthened our sales channel to ensure the growth and retention of our postpaid subscriber base in 2011 and beyond.
In 2011, we expect high single-digit top line growth and a similar EBITDA margin compared to 2010. This growth will mainly be driven by higher voice and mobile internet revenues, as well as growing contributions from our subsidiaries.
However, it is important to note that the reduction in termination rates by 52% and the maximum price cap by 38% imposed by the Authority negatively affected the pricing environment in our market starting from April 1, 2010. Consequently, since second quarter of 2010; we havelower MTR and price cap structure; which is expected to negatively impact our revenue and EBITDAin the first quarter of 2011 compared to a year ago.
Additionally, marketing initiatives by the competition, which focus on increasing market share at the expense of profitability seem to continue intothe first quarter of 2011. As a result, we are incurring higher operational expenses to further differentiate Turkcell in the intensely competitive Turkish market.
Accordingly, we expect first quarter of 2011 financial results to reflect the negative impact of such regulatory and competitive dynamics. However, we are confident that we will see a gradual improvement in our financials starting from the second quarter of 2011.
Overview of the Macroeconomic Environment
The foreign exchange rates which have been used in our financial reporting and certain macroeconomic indicators are set forth below.
Quarter Year
Q409 Q410 y/y % chg 2009 2010 y/y % chg
TRY / $ rate
Closing Rate 1.5057 1.5460 2.7% 1.5057 1.5460 2.7%
Average Rate 1.4863 1.4717 (1.0%) 1.5495 1.5050 (2.9%)
Consumer Price 4.3% 1.6% (2.7pp) 6.5% 6.4% (0.1pp)
Index
GDP Growth 6.0% n.a. n.a. (4.7%) n.a. n.a.
UAH/$
Closing Rate 7.99 7.96 (0.4%) 7.99 7.96 (0.4%)
Average Rate 7.99 7.93 (0.8%) 7.80 7.93 1.7%
Financial and Operational Review of the Fourth Quarter 2010 and Full Year 2010
The following discussion focuses principally on the developments and trends in our business in the fourth quarter of and full year 2010 in TRY terms. Selected financial information for the fourth quarter of 2009, third quarter of 2010 and full year 2009both in TRY and US$ prepared in accordance with IFRS, andin TRY prepared in accordance with the Capital Markets Board of Turkey's standards are also included at the end of this press release.
Financial Review of Turkcell Group
Profit & Loss Statement Quarter Year
(million TRY) Q409 Q410 y/y % 2009 2010 y/y %
chg
chg
Total Revenue 2,260.6 2,186.2 (3.3%) 8,936.4 9,003.6 0.8%
Direct cost of
revenues (1,321.2) (1,268.6) (4.0%) (4,769.3) (5,039.2) 5.7%
Depreciation and
amortization (281.3) (297.3) 5.7% (908.7) (1,139.7) 25.4%
Gross Margin 41.6% 42.0% 0.4pp 46.6% 44.0% (2.6pp)
Administrative
expenses (122.0) (139.3) 14.2% (421.2) (521.9) 23.9%
Selling and
marketing
expenses (416.8) (426.6) 2.4% (1,676.2) (1,633.9) (2.5%)
EBITDA 681.9 649.0 (4.8%) 2,978.4 2,948.3 (1.0%)
EBITDA Margin 30.2% 29.7% (0.5pp) 33.3% 32.7% (0.6pp)
Net finance income /
(expense) 108.4 87.7 (19.1%) 223.8 264.0 18.0%
Finance expense (21.5) (5.4) (74.9%) (287.1) (153.4) (46.6%)
Finance income 129.9 93.1 (28.3%) 510.9 417.4 (18.3%)
Share of profit of
associates 39.3 40.8 3.8% 118.8 184.7 55.5%
Income tax expense (117.0) (104.8) (10.4%) (529.1) (483.5) (8.6%)
Net Income 252.8 368.1 45.6% 1,701.6 1,764.3 3.7%
(*): including depreciation and amortization expenses.
(**): EBITDA is a non-GAAP financial measure. See page 14-15 for the reconciliation of EBITDA to net cash from operating activities.
Revenue: In Q4 2010, revenue contracted by 3.3% year-on-year to TRY2,186.2million (TRY2,260.6 million). This decline resulted mainly from the decrease in Turkcell Turkey's mobile voice revenues as a result of thesharp decline in interconnect rates which was partially compensated by the 23.7%growth in mobile internet & services revenues of Turkcell Turkey and 3.1% growth in contribution from subsidiaries.
For the full year, consolidated revenueslightly improved to TRY9,003.6million (TRY8,936.4 million),mainly due to the 26.4% increase in mobile internet and services revenues of Turkcell Turkey to TRY1,619.1 million (TRY1,280.6 million), as well as the11.1% higher contribution from subsidiariesyear-on-year(particularly, through Superonline, which increased revenues by 32.8% to TRY335.1 million from TRY252.4 million) despite the adverse effects of MTR and price cap cuts.
At the same time, Turkcell Turkey's revenues remained almost flat in FY10, ataround TRY7,991.2 million (TRY8,025.0 million),despite the regulatory decisions which were partially offset by the 26.4% growth in mobile internet and services revenues, as well as the increasing postpaid subscriber base.
In FY10, Turkcell Turkey's interconnect revenues decreased to TRY638.4 million (TRY808.1 million) mainly due to the MTR cuts, which led to a decline in the share of interconnection revenues in Turkcell Turkey's revenues from 10.1% in FY09 to 8.0% in FY10.
Direct cost of revenues: Direct cost of revenues including depreciation and amortization decreased by 4.0% to TRY1,268.6 million in Q4 2010 (TRY1,321.2 million). Meanwhile, direct cost of revenues as a percentage of total revenues decreased to 58.0% (58.4%) in Q4 2010. This mainly arose from the lower interconnect costs (down 3.1 pp), which were partially offset by the increase in depreciation and amortization expenses (up 1.2pp), wages and salaries (up 0.8 pp), network-related expenses (up 0.2pp) and other items (up 0.5pp).
In FY10, direct cost of revenues including depreciation and amortization increased by 5.7% to TRY5,039.2 million (TRY4,769.3 million). As a percentage of revenue, direct costs increased from 53.4% to 56.0%, mainly due to increases in depreciation and amortization (up 2.5pp), network-related expenses (up 0.4pp), and other items (up 0.7pp); which were partially offset by the decrease in interconnect costs (down 1.0pp).
For the full year, Turkcell Turkey's interconnect costs decreased to TRY690.8 million (TRY699.7 million) which resulted in a decline in Turkcell Turkey's interconnect costs as a percentage of revenues to 8.6% (8.7%). At the same time, Turkcell Group's interconnect costs declined to TRY802.6million (TRY881.7 million), while as a percentage of consolidated group revenues they decreased to 8.9% (9.9%).
Administrative expenses: General and administrative expenses as a percentage of revenue increased by 1.0pp to 6.4% in Q4 2010 (5.4%) and by 1.1 pp to 5.8% in FY10 (4.7%). This was mainly due to higher bad debt expenses arising from the increase in the postpaid subscriber base together with higher wages and salaries.
Selling and marketing expenses:Selling and marketing expenses as a percentage of revenue increased by 1.1pp to 19.5% in Q4 2010 (18.4%), resulting mainly from intensified marketing campaigns.
For the full year, selling and marketing expenses as a percentage of revenue decreased by 0.7ppto 18.1% (18.8%) mainly due to lower selling expensesand frequency usage fees paid for prepaid subscribers as a result of the decline in the prepaid subscriber base, which were partially offset by the higher wages and salaries.
EBITDA[1]: In Q4 2010,EBITDA in nominal terms was atTRY649.0 million (TRY681.9 million), while the EBITDA margin was at 29.7% (30.2%).1.1pp higher selling and marketing expenses and 1.0pp higher general and administrative expenses were largelyoffset by the 1.6pp decrease in the direct cost of revenues (excluding depreciation and amortization).
In FY10, nominal EBITDA was at TRY2,948.3 million (TRY2,978.4 million), while the EBITDA margin was at 32.7% (33.3%). 1.1 pphigher general and administrative expenses together with 0.2pp higher direct cost of revenues were partially compensated by the 0.7pp lower selling and marketing expenses.
Net finance income/(expense): In Q4 2010, we recorded net finance income of TRY87.7 million (TRY108.4 million). The decrease in net finance income mainly stems fromthe decline in translation gain to TRY24.2 million in Q4 2010 (TRY63.5 million) as a result of a translation loss recognized by the Group companies, particularly Astelit and Superonline, due to their long position partially netted off by the translation gain of Turkcell Turkey arising from TRY/US$ depreciation of 6.5% in Q4 2010, despite higher net interest income to TRY63.5 million in Q4 2010 (TRY44.9 million).
For the full year, we recorded net finance income of TRY264.0 million (TRY223.8 million) mainly due to an increase in interest income in FY10 arising from the absence of legal provisions in FY09, partially netted off by the decrease in interest income on deposits due to lower interest rates and the increase in interest expense on loans as a result of the increase in outstanding debt balance.
Share of profit of equity accounted investees:Our share in the net income of unconsolidated investees, consisting of the net income/(expense ) impact of Fintur and A-Tel, increased by 3.8% to TRY40.8 million (TRY39.3 million) in Q4 2010and by 55.5% to TRY184.7 million (118.8 million) for the full year, mainly due to the higher net income contribution from Fintur (particularly from the operations in Kazakhstan).
The results of our 50%-owned subsidiary A-Tel impacted two items in our financial statements:
- A-Tel's revenue generated from Turkcell, amounting to
TRY11.4 million in Q4 2010 and TRY47.1 million for FY10, is netted out
from the selling and marketing expenses in our consolidated financial
statements in proportion to our ownership.
- The difference between the total net impact of A-Tel and the
amount netted out from selling and marketing expenses amounted to
TRY11.6 million in Q4 2010 and TRY39.5 million in FY10 and is recorded
in the 'share of profit of equity accounted investees' line of our
financial statements.
Income tax expense: The total taxation charge in Q4 2010 decreased to TRY104.8 million (TRY117.0 million).The total tax charge of TRY141.5million was related to current tax charges, while deferred tax income of TRY36.7 million was recorded.
For FY10, the total taxation charge decreased by 8.6% to TRY483.5million as a result of a decrease in profit before tax. Of the total tax charge for FY10, TRY508.1 million is related to current tax charges while the deferred tax income totaled TRY24.6 million.
(million TRY) Quarter Year
Q409 Q410 y/y % chg 2009 2010 y/y % chg
Current tax expense (133.5) (141.5) 6.0% (544.9) (508.1) (6.8%)
Deferred Tax income / 16.5 36.7 122.4% 15.8 24.6 55.7%
(expense)
Income Tax expense (117.0) (104.8) (10.4%) (529.1) (483.5) (8.6%)
Net income: In Q4 2010, net income increased by 45.6% year-on-year to TRY368.1 million (TRY252.8 million), mainly due to the weak base year effect.
In Q4 2009, charges related to goodwill impairment, fixed asset write-offs, and legal developmentstotaling TRY256 million resulted in a decline in our net income. On the other hand, in Q4 2010 we recorded a goodwill impairment of TRY36 million for Belarusian operation which led to a net income decrease.
For the full year, net income increased by 3.7% to TRY1,764.3 million (TRY1,701.6 million).
Total Debt: Consolidated debt amounted to TRY2,841 million as of December 31, 2010. TRY941 million of this was related to Turkcell's Ukrainian operations. TRY1,878million of our consolidated debt is at a floating rate and TRY665 million will mature in less than a year. During FY10, our debt/annual EBITDA ratio increased to 96.4%.
Consolidated Cash Flow Quarter Year
(million TRY) Q409 Q410 2009 2010
EBITDA* 681.9 649.0 2,978.4 2,948.3
LESS:
Capex and License (637.2) (630.3) (2,664.0) (1,667.5)
Turkcell (268.8) (234.9) (1,823.1) (782.4)
Ukraine** (163.4) (37.3) (325.2) (102.7)
Investment & Marketable (154.0) (64.3)
Securities (150.5) (232.1)
Net Interest Income/Expense 44.9 63.4 223.5 283.8
Other 287.5 492.2 (595.7) (662.6)
Net Change in Debt 518.4 62.4 1,119.0 465.9
Dividends paid 0.0 0.0 (1,098.0) (859.3)
Cash Generated 745.0 482.7 (268.9) 444.3
Cash Balance 4,660.9 5,105.1 4,660.9 5,105.1
(*) EBITDA is a non-GAAP financial measure. See page 14-15for the reconciliation of EBITDA to net cash from operating activities.
(**)The appreciation of reporting currency (TRY) against USD is included in this line.
Cash Flow Analysis:Capital expenditures in Q4 2010 amounted to TRY630.3 million, of which TRY234.9 millionwas related to Turkcell Turkey, TRY37.3million to our Ukrainian operations, TRY227.7million to Superonline and TRY74.2 million to our Belarusian operations.
In 2010, major cash outflows included capital expenditures and the dividend payment. In FY10, our capital expenditures totaled TRY1,667.5million, of which TRY782.4 million was related to Turkcell Turkey, TRY102.7million to our Ukrainian operations, TRY480.3million to Superonline and TRY185.4 million to our Belarusian operations. In FY10 we also paid a cash dividend of TRY859.3 million to our shareholders.
Group capex for FY11 is expected to be in line with FY10 (TRY1.7 billion).
Operational Review in Turkey
Summary of Quarter Year
Operational Data
(Turkcell Turkey) Q409 Q410 y/y % chg 2009 2010 y/y % chg
Number of total
subscribers
(million) 35.4 33.5 (5.4%) 35.4 33.5 (5.4%)
Number of postpaid
subscribers
(million) 9.4 10.1 7.4% 9.4 10.1 7.4%
Number of prepaid
subscribers
(million) 26.0 23.3 (10.4%) 26.0 23.3 (10.4%)
ARPU (Average
Monthly Revenue per
User), blended (US$) 12.5 12.9 3.2% 12.0 13.0 8.3%
ARPU, postpaid (US$) 26.3 26.0 (1.1%) 26.6 26.6 0.0%
ARPU, prepaid (US$) 7.7 7.3 (5.2%) 7.5 7.6 1.3%
ARPU, blended (TRY) 18.6 18.9 1.6% 18.5 19.5 5.4%
ARPU, postpaid (TRY) 39.0 38.2 (2.1%) 41.0 40.0 (2.4%)
ARPU, prepaid (TRY) 11.5 10.8 (6.1%) 11.6 11.4 (1.7%)
Churn (%) 9.7% 9.4% (0.3pp) 32.6% 33.9% 1.3pp
MOU (Average Monthly
Minutes of usage per
subscriber), blended 153.6 194.9 26.9% 134.3 179.1 33.4%
Subscribers: Our subscriber base in Turkey totaled 33.5 million as of December 31, 2010, down by 5.4% year-on-year. In 2010, we maintained our focus on the postpaid segment with newly launched campaigns and offers, increased data lines and promoted switches from the prepaid to the postpaid segment. This resulted in a 7.4% increase in our postpaid subscriber base to 10.1 million, from 9.4 million a year earlier. Demonstrating the success of our value focused subscriber acquisition approach; in 2010 we registered 734,000 net new postpaid subscribers, of which 264,000 were added in the fourth quarter. Accordingly, the postpaidsubscriber base made up 30.1% of our overall subscriber base, up from 26.6% in the same period of last year. At the same time, we saw a slowdown in the contraction of the prepaid subscriber base which declined by 10.4% to 23.3 million, from 26.0 million a year earlier.
In FY11, we expect to maintain ourhigh value subscriber base with a focus on growing our postpaid subscriber base further.
Churn Rate: Churn refers to voluntarily and involuntarily disconnected subscribers. In Q4 2010, our churn rate slightly improved to 9.4%, down from 9.7% a year ago. Our annual churn rate increased by 1.3pp to 33.9% (32.6%)mainly due to declining multiple SIM card usage. The majority of the churners comprised of the low ARPU generating prepaid subscribers.
MoU: MoUdeclined slightly by 1.1% compared to Q3 2010 to 194.9 minutes in Q4 2010, mainly due to seasonal trends.
MoU increased by 33.4% to 179.1 minutes in FY10, up from 134.3 minutes in FY09,driven by attractive tariffs and campaign offers.
In FY11, we expect healthy growth in usage as our successful incentives and loyalty programs continue.
ARPU: In Q42010 and in FY10 as a whole, blended average revenue per user ("ARPU") in TRY terms increased by 1.6% and 5.4% to TRY18.9 and TRY19.5, respectively, despite decreasing interconnection rates. The increase was mainly attributable to rising mobile internet revenues and postpaid subscriber base.
Postpaid ARPU in TRY terms fell by 2.1% to TRY38.2 in Q4 2010 and by 2.4% to TRY40.0 in FY10, while prepaid ARPU decreased by 6.1% to TRY10.8 in Q4 2010 and slightly by 1.7% to TRY11.4 in FY10 year-on-year. This wasmainly due to the negative impact of declining MTRs and the reduction of the maximum price cap, as well as the dilutive impact of prepaid to postpaid switches.
In FY11, we expect higher TRY ARPU than in 2010.
Other Domestic and International Operations
Superonline
Superonline, our wholly owned subsidiary, is providing fixed broadband services by investing in the build up of a fiber-optic network.
Summary data for Superonline Quarter Year
Q409 Q410 y/y % 2009 2010 y/y % chg
chg
Revenue (TRY million) 74.9 92.0 22.8% 252.4 335.1 32.8%
EBITDA(1) (TRY million) 5.7 5.4 (5.3%) 3.6 32.9 813.9%
EBITDA margin 7.6% 5.8% (1.8pp) 1.4% 9.8% 8.4pp
Capex (TRY million) 125.6 227.7 81.3% 259.5 480.3 85.1%
1 EBITDA is a non-GAAP financial measure. See page 14-15 for the reconciliation of Superonline's EBITDA to net cash from operating activities.
- In Q4 2010, Superonline's fiber-optic network reached580,000
home passes (HP) and 22,400 km.
- Superonline's share in Turkcell's transmission costsreached
46% in Q4 2010, while the share of non-group revenues was 62%.
- Superonline recorded 22.8% year-on-year revenue growth in Q4
2010 which mainly arose from the increasing share in Turkcell's
transmission coststogether with the 104.5% growth in residential and
27.1% in corporate segments. In the meantime, EBITDA decreased by 5.3%
year-on-year,mainly due to increasing marketing activities in Q4 2010.
- For the full year,Superonline's contribution to Turkcell's
financialscontinued to improve with32.8% revenue growth and anEBITDA
margin of 9.8% (1.4%).
- In FY10, focus on the higher-margin residential segment increased
resulting inyear-on-year top line growth of 70%. Corporate segment
revenues grew by 30%, leveraging the strengths of the Turkcell Group,
while wholesale revenues grew by 26% in line with increasing Group
synergies.
- Topline growth in FY11 is expected to be at a higher rate
compared to FY10, while EBITDA margin is expected to improve compared
to 2010.
Astelit
Astelit, in which we hold a 55% stake through Euroasia, has operated in Ukraine since February 2005 under the brand "life:)".
Summary Data for Quarter Year
Astelit
Q409 Q410 y/y % chg 2009 2010 y/y % chg
Number of
subscribers
(million)
Total 12.2 9.1 (25.4%) 12.2 9.1 (25.4%)
Active (3 months)(1) 7.8 6.1 (21.8%) 7.8 6.1 (21.8%)
MoU (minutes) 158.2 206.8 30.7% 158.7 171.9 8.3%
Average Revenue per
User
(ARPU) in US$
Total 2.6 2.9 11.5% 2.5 2.6 4.0%
Active (3 months) 4.0 4.4 10.0% 3.7 3.9 5.4%
Revenue (UAH) 741.7 648.3 (12.6%) 2,740.0 2,691.0 (1.8%)
Revenue (US$
million) 92.8 81.8 (11.9%) 351.1 339.3 (3.4%)
EBITDA(2)(US$ million)6.9 16.9 144.9% 20.2 64.5 219.3%
EBITDA margin 7.4% 20.6% 13.2pp 5.7% 19.0% 13.3pp
Net Loss (US$
million) (25.2) (30.9) 22.6% (111.8) (101.0) (9.7%)
Capex (US$ million) 106.8 21.4 (80.0%) 216.0 66.5 (69.2%)
1 Active subscribers are those who in the past three months made a transaction which brought revenue to the Company.
2 EBITDA is a non-GAAP financial measure. See page14-15for the reconciliation of Euroasia's EBITDA to net cash from operating activities. Euroasia holds 100% stake in Astelit.
- In Q4 2010, revenues decreased by 11.9% to $81.8 million
compared to a year ago mainly due to theclose-down of our
non-profitable carrier business line and the reductions in interconnect
rates during the year.Meanwhile, in Q4 2010 Astelit continued to
improve its operational profitability, which was up by 13.2pp to 20.6%
(7.4%).
- For the full year, Astelit's EBITDA tripled compared to
FY09within the context of the turnaround strategy and effective cost
control initiatives. Astelit's EBITDA margin increased to 19.0% in FY10
from 5.7% in FY09. The main drivers of this increase were the tariff
redesigns resulting in a decrease in interconnection costs together
with the cost cutting measures.
- In FY10, Astelit's number of registered and three-month
active subscriber stood at 9.1 million and 6.1 millon, respectively.
Astelit recorded 724,000 net subscriber loss in Q4 2010. This was
mainly due to the change in subscriber definition and churn in 2010,
aimed at monitoring value adding subscribers and their behavior more
closely.
- The 3-month active ARPU increased by 10.0% in Q4 2010 and
5.4% in FY10 mainly due to a decline in the number of active
subscribers along with the change in the active subscriber definition.
- MoU increased by 30.7% in Q4 2010 and 8.3% in FY10
year-on-year.
- In FY11, revenue is expected to grow around 20% in US$
terms. In the meantime, EBITDA margin is expected to increase compared
to FY10.
Fintur
Turkcell holds a 41.45% stake in Fintur and through Fintur has interests in mobile operations in Kazakhstan, Azerbaijan, Moldova, and Georgia.
FINTUR Quarter Year
Q409 Q410 y/y % chg 2009 2010 y/y % chg
Subscriber (million)
Kazakhstan 7.2 8.9 23.6% 7.2 8.9 23.6%
Azerbaijan 3.8 4.0 5.3% 3.8 4.0 5.3%
Moldova 0.7 0.9 28.6% 0.7 0.9 28.6%
Georgia 1.9 2.0 5.3% 1.9 2.0 5.3%
TOTAL 13.6 15.9 16.9% 13.6 15.9 16.9%
Revenue (US$ million)
Kazakhstan 231 283 22.5% 863 1,013 17.4%
Azerbaijan 127 131 3.1% 501 504 0.6%
Moldova 17 19 11.8% 63 67 6.3%
Georgia 45 34 (24.4%) 175 152 (13.1%)
Other* - 2 - 3 1 (66.7%)
TOTAL 420 470 11.9% 1,605 1,737 8.2%
(*)Includes intersegment eliminations
Quarter Year
(US$ million) Q409 Q410 y/y % chg 2009 2010 y/y % chg
Fintur's contribution 32.6 36.7 12.6% 119.6 153.0 27.9%
to Turkcell Group's net
income
Fintur's subscriber base continued to grow in Q4 2010. The total number of subscribers increased by 16.9% to 15.9 million (13.6 million), mainly as a result of the strong growth in Kazakhstan.
Fintur's consolidated revenue increased by 11.9%year-on-year to US$470 million in Q4 2010 while revenues grew by 8.2% to US$1,737 million in FY10 mainly driven by a 17.4% increase in revenues of our operation in Kazakhstan along with strong subscriber acquisitions and an improved macroeconomic environment.
We account for our investment in Fintur using the equity method. Fintur's contribution to net income increased to TRY53.9million ($36.7 million) in Q4 2010, from TRY48.0 million ($32.6 million) a year ago.Fintur's contribution to income was $153.0 millionin 2010 ($119.6 million).
Reconciliation of Non-GAAP Financial Measures
We believe that EBITDA is a measure commonly used by companies, analysts and investors in the telecommunications industry, which enhances the understanding of our cash generation ability and liquidity position and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool and, accordingly, we believe that the presentation of EBITDA provides useful and relevant information to analysts and investors.
Our EBITDA definition includes Revenue, Direct Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses and Administrative expenses, but excludes translation gain/(loss), finance income, share of profit of equity accounted investees, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense).
EBITDA is not a measure of financial performance under IFRS and should not be construed as a substitute for net earnings (loss) as a measure of performance or cash flow from operations as a measure of liquidity.
The following table provides a reconciliation of EBITDA, which is a non-GAAP financial measure, to net cash from operating activities, which we believe is the most directly comparable financial measure calculated and presented in accordance with IFRS.
TURKCELL* Q409 Q410 y/y % 2009 2010 y/y %
chg chg
US$ million
EBITDA 459.1 441.9 (3.7%) 1,925.4 1,957.4 1.7%
Income tax expense (78.7) (71.3) (9.4%) (340.1) (320.8) (5.7%)
Other operating
income/(expense) (119.6) (17.4) (85.5%) (85.2) (49.4) (42.0%)
Financial income 91.3 1.5 (98.4%) 1.0 0.5 (50.0%)
Financial expense (61.1) (35.9) (41.2%) (188.3) (100.4) (46.7%)
Net increase/(decrease)
in assets and
liabilities 130.6 227.0 73.8% (84.2) (205.1) 143.6%
Net cash from operating
activities 421.6 545.8 29.5% 1,228.6 1,282.2 4.4%
Superonline Q409 Q410 y/y % 2009 2010 y/y %
chg chg
TRY million
EBITDA 5.7 5.4 (5.3%) 3.6 32.9 813.9%
Other operating
income/(expense) (1.4) 0.2 (114.3%) (1.5) 0.4 (126.7%)
Finance income 8.6 (28.1) (426.7%) 5.5 (9.5) (272.7%)
Finance expense (8.2) 22.1 (369.5%) (9.7) (18.5) 90.7%
Net increase/(decrease)
in assets and
liabilities - 26.6 - (21.7) (2.6) (88.0%)
Net cash from operating
activities 4.7 26.2 457.4% (23.8) 2.7 (111.3%)
(*):Translation reserve amounting to $66,325 in 2009 and ($344,346) in 2008 is now disclosed under the "Effects of the foreign Exchange rate fluctuations on statement of financial position items" instead of under "Cash Flows from Operating Activities" starting from 2010. Therefore, the presentation of cash flow in the 2010 audit report for prior years has been revised to reflect this change.
EUROASIA (Astelit) Q409 Q410 y/y % 2009 2010 y/y %
chg chg
US$ million
EBITDA 6.9 16.9 144.9% 20.2 64.5 219.3%
Other operating (0.4) (1.6) 300.0% 1.7 (1.3) (176.5%)
income/(expense)
Financial income 0.8 0.1 (87.5%) 2.0 0.8 (60.0%)
Financial expense (13.9) (13.7) (1.4%) (32.7) (45.6) 39.4%
Net increase/(decrease) 18.6 33.2 78.5% 75.1 48.3 (35.7%)
in assets and
liabilities
Net cash from operating 12.0 34.9 190.8% 66.3 66.7 0.6%
activities
Turkcell Group Subscribers
We had approximately 60.4million subscribers as of December 31, 2010. This figure is calculated by taking the number of subscribers in Turkcell and each of our subsidiaries and unconsolidated investees. It includes the total number of mobile subscribers in Astelit, BeST, as well as in our operations in the Turkish Republic of Northern Cyprus ("Northern Cyprus") and Fintur. In the past, when presenting our total group subscribers, we have given this figure on a proportional basis, adjusted to reflect our ownership interest in each subsidiary. We believe that presenting total subscribers is a good indicator of our Group's reach, and intend to use this new calculation method going forward.
During 2010, there have beenchanges in subscriber definition at Astelit in Ukraine and BeST in Belarus. For further information please refer to the press release for the period of third quarter 2010.
Turkcell Group subscribers declined by 2.3 million compared to the previous year, mainly due to the subscriber declines in Astelit and Turkcell Turkey.
Turkcell GroupSubscribers Year
(million) 2009 2010 y/y % chg
Turkcell 35.4 33.5 (5.4%)
Ukraine/ Astelit 12.2 9.1 (25.4%)
Fintur 13.6 15.9 16.9%
Northern Cyprus 0.3 0.4 33.3%
Belarus/ BeST 1.2 1.5 25.0%
TURKCELL GROUP 62.7 60.4 (3.7%)
Forward-Looking Statements
This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as, among others, "will," "expect," "intend," "estimate," "believe" or "continue."
Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.
For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2009 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein.
We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
ABOUT TURKCELL
Turkcell is the leading communications and technology company in Turkey with 33.5 million subscribers and a market share of approximately 54% as of 2010 (Source: Operator's announcements). Turkcell is a leading regional player, with market leadership in five of the nine countries in which it operates with its approximately 60.4 million subscribers as of 2010. Turkcell reported TRY9.0 billion ($6.0 billion) net revenue and its total assets reached TRY15.1 billion ($9.8 billion) as of 2010. Turkcell covers 82% of the Turkish population through its 3G and covers 99.07% of the Turkish population through its 2G technology supported network. Turkcell has become one of the first operators among the global operators to have implemented HSDPA+ and to reach to 42.2 Mbps speed with HSPA multi carrier solution. Turkcell has been listed on the NYSE and the ISE since July 2000 and is the only NYSE-listed company in Turkey. 51.00% of Turkcell's share capital is held by Turkcell Holding, 0.05% by Cukurova Holding, 13.07% by Sonera Holding and 1.19% by others while the remaining 34.69% is free float.Read more at http://www.turkcell.com.tr/en
TURKCELL ILETISIM HIZMETLERI A.S.
CMB SELECTED FINANCIALS (TRY Million)
Quarter Quarter Quarter 12 Months 12 Months
Ended Ended Ended Ended Ended
December September December December December
31, 30, 31, 31, 31,
2009 2010 2010 2009 2010
Consolidated Statement of
Operations Data
Revenues
Communication fees 2,164.2 2,210.3 2,042.6 8,575.7 8,535.3
Commission fees on
betting business 23.0 10.3 15.9 66.1 46.7
Monthly fixed fees 16.1 34.8 31.0 66.0 113.5
Simcard sales 6.9 6.1 6.3 35.3 34.4
Call center
revenues and other
revenues 50.4 65.9 90.4 193.3 273.7
Total revenues 2,260.6 2,327.4 2,186.2 8,936.4 9,003.6
Direct cost of
revenues (1,316.1) (1,269.0) (1,268.8) (4,752.6) (5,030.2)
Gross profit 944.5 1,058.4 917.4 4,183.8 3,973.4
Administrative
expenses (122.0) (120.6) (139.3) (421.2) (521.9)
Selling &
marketing expenses (416.8) (379.3) (426.6) (1,676.2) (1,633.9)
Other Operating
Income / (Expense) (170.3) (2.8) (24.3) (162.3) (74.2)
Operating profit
before financing
costs 235.4 555.7 327.2 1,924.1 1,743.4
Finance costs (21.5) (29.7) (5.4) (287.1) (153.4)
Finance income 129.9 101.8 93.1 510.9 417.4
Share of profit of
equity accounted
investees 39.3 52.6 40.8 118.8 184.7
Income before
taxes and minority
interest 383.1 680.4 455.7 2,266.7 2,192.1
Income tax expense (118.4) (140.1) (105.0) (533.0) (485.4)
Income before
minority interest 264.7 540.3 350.7 1,733.7 1,706.7
Non-controlling
interests (5.9) 17.3 18.4 (17.0) 64.9
Net income 258.8 557.6 369.1 1,716.7 1,771.6
Net income per
share 0.117634 0.253450 0.167773 0.780325 0.805271
Other Financial
Data
Gross margin 42% 45% 42.0% 47% 44.1%
EBITDA(*) 681.9 863.6 649.0 2,978.9 2,948.3
Capital 637.2 310.1 630.3 2,664.0 1,667.5
expenditures
Consolidated Balance Sheet Data (at
period end)
Cash and cash
equivalents 4,660.9 4,622.5 5,105.1 4,660.9 5,105.1
Total assets 13,978.9 14,449.0 15,096.0 13,978.9 15,096.0
Long term debt 1,236.4 2,003.9 2,175.7 1,236.4 2,175.7
Total debt 2,276.6 2,609.0 2,840.8 2,276.6 2,840.8
Total liabilities 5,146.7 5,166.3 5,497.4 5,146.7 5,497.4
Total
shareholders'
equity / Net
Assets 8,832.2 9,282.7 9,598.6 8,832.2 9,598.6
** For further details, please refer to our consolidated
financial statements and notes as at 31 December 2010 on our web
site.
TURKCELL ILETISIM HIZMETLERI A.S.
IFRS SELECTED FINANCIALS (TRY Million)
Quarter Quarter Quarter 12 Months 12 Months
Ended Ended Ended Ended Ended
December September December December December
31, 30, 31, 31, 31,
2009 2010 2010 2009 2010
Consolidated Statement of
Operations Data
Revenues
Communication fees 2,164.2 2,210.3 2,042.6 8,575.7 8,535.3
Commission fees on 23.0 10.3 15.9 66.1 46.7
betting business
Monthly fixed fees 16.1 34.8 31.0 66.0 113.5
Simcard sales 6.9 6.1 6.3 35.3 34.4
Call center
revenues and other
revenues 50.4 65.9 90.4 193.3 273.7
Total revenues 2,260.6 2,327.4 2,186.2 8,936.4 9,003.6
Direct cost of
revenues (1,321.2) (1,272.5) (1,268.6) (4,769.3) (5,039.2)
Gross profit 939.4 1,054.9 917.6 4,167.1 3,964.4
Administrative)
expenses (122.0) (120.6) (139.3) (421.2) (521.9
Selling &
marketing expenses (416.8) (379.3) (426.6) (1,676.2) (1,633.9)
Other Operating
Income / (Expense) (172.5) (2.0) (25.7) (164.6) (74.4)
Operating profit
before financing
costs 228.1 553.0 326.0 1,905.1 1,734.2
Finance costs (21.5) (29.7) (5.4) (287.1) (153.4)
Finance income 129.9 101.8 93.1 510.9 417.4
Share of profit of
equity accounted
investees 39.3 52.6 40.8 118.8 184.7
Income before
taxes and minority
interest 375.8 677.7 454.5 2,247.7 2,182.9
Income tax expense (117.0) (138.6) (104.8) (529.1) (483.5)
Income before
minority interest 258.8 539.1 349.7 1,718.6 1,699.4
Non-controlling
interests (6.0) 17.2 18.4 (17.0) 64.9
Net income 252.8 556.3 368.1 1,701.6 1,764.3
Net income per
share 0.114911 0.252870 0.167318 0.773472 0.801958
Other Financial
Data
Gross margin 42% 45% 42% 47% 44%
EBITDA(*) 681.9 863.6 649.0 2,978.4 2,948.3
Capital 637.2 310.1 630.3 2,664.0 1,667.5
expenditures
Consolidated Balance Sheet Data (at
period end)
Cash and cash
equivalents 4,660.9 4,622.5 5,105.1 4,660.9 5,105.1
Total assets 14,034.3 14,496.4 15,142.4 14,034.3 15,142.4
Long term debt 1,236.4 2,003.9 2,175.7 1,236.4 2,175.7
Total debt 2,276.6 2,609.0 2,840.8 2,276.6 2,840.8
Total liabilities 5,156.4 5,174.4 5,505.3 5,156.4 5,505.3
Total 8,877.9 9,322.0 9,637.1 8,877.9 9,637.1
shareholders'
equity / Net
Assets
** For further details, please refer to our consolidated
financial statements and notes as at 31 December 2010 on our web
site.
TURKCELL ILETISIM HIZMETLERI A.S.
IFRS SELECTED FINANCIALS (US$ MILLION)
Quarter Quarter Ended Quarter 12 Months 12 Months
Ended Ended Ended Ended
December September 30, December December December
31, 31, 31, 31,
2009 2010 2010 2009 2010
Consolidated Statement of Operations
Data
Revenues
Communication
fees 1,456.1 1,462.0 1,388.9 5,557.3 5,670.2
Commission fees on
betting business 15.6 6.8 10.8 42.7 31.2
Monthly fixed
fees 10.8 23.0 21.1 42.5 75.4
Simcard sales 4.7 4.0 4.3 22.9 22.9
Call center revenues
and other revenues 33.9 43.8 61.5 124.6 182.4
Total revenues 1,521.1 1,539.6 1,486.6 5,790.0 5,982.1
Direct cost of
revenues (888.7) (842.9) (861.9) (3,097.1) (3,349.0)
Gross profit 632.4 696.7 624.7 2,692.9 2,633.1
Administrative
expenses (82.0) (79.8) (95.2) (273.1) (347.3)
Selling & marketing
expenses (280.4) (251.0) (289.5) (1,085.1) (1,085.8)
Other Operating Income
/ (Expense) (115.6) (1.3) (17.4) (110.3) (49.5)
Operating profit before
financing costs 154.4 364.6 222.6 1,224.4 1,150.5
Finance costs (14.4) (20.0) (4.5) (187.5) (102.6)
Finance income 87.4 67.3 63.0 329.6 277.1
Share of profit of
equity accounted
investees 26.4 35.0 27.8 78.4 122.8
Income before taxes and
minority interest 253.8 446.9 308.9 1,444.9 1,447.8
Income tax
expense (78.7) (91.4) (71.3) (340.1) (320.8)
Income before
minority
interest 175.1 355.5 237.6 1,104.8 1,127.0
Non-controlling (4.0) 11.5 12.4 (10.8) 43.2
interests
Net income 171.1 367.0 250.0 1,094.0 1,170.2
Net income per
share 0.077754 0.166817 0.113636 0.497269 0.531909
Other Financial
Data
Gross margin 42% 45% 42% 47% 44%
EBITDA(*) 459.1 570.7 441.9 1,925.4 1,957.4
Capital 401.7 253.0 363.9 1,769.3 1,078.6
expenditures
Consolidated Balance Sheet Data (at
period end)
Cash and cash
equivalents 3,095.5 3,185.3 3,302.2 3,095.5 3,302.2
Total assets 9,320.8 9,989.3 9,794.6 9,320.8 9,794.6
Long term debt 821.2 1,380.8 1,407.3 821.2 1,407.3
Total debt 1,512.0 1,797.8 1,837.5 1,512.0 1,837.5
Total
liabilities 3,424.6 3,565.6 3,561.0 3,424.6 3,561.0
Total equity 5,896.2 6,423.7 6,233.6 5,896.2 6,233.6
* Please refer to the notes on reconciliation of Non-GAAP
Financial measures on page 11
** For further details, please refer to our consolidated financial
statements and notes as at 31 December 2010 on our web site.
For further information please contact Turkcell
Corporate Affairs
KorayOztuerkler, Chief Corporate Affairs Officer
Tel: +90-212-313-1500
Email: [email protected]
Investors:
NihatNarin, Investor and International
Media Relations
Tel: +90-212-313-1244
Email: [email protected]
[email protected]
Media:
FilizKaragulTuzun,
Corporate Communications
Email: [email protected]
---------------------------------
(1): EBITDA is a non-GAAP financial measure. See page 14-15 for the reconciliation of EBITDA to net cash from operating activities
SOURCE Turkcell
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