Turkcell posts strong 2004 results

7 Apr 2005

Turkcell, the largest cellco in Turkey by subscribers, has announced a 44% increase in revenues to USD3.2 billion for 2004, while net income more than doubled to USD512 million. The impressive figures come on the back of strong operational results, with the number of subscribers reaching 23.4 million at 31 December 2004, up 23% from twelve months previously. Blended average revenue per user (ARPU) and monthly minutes of use per subscriber (MOU) climbed to USD12.3 from USD10.6 in 2003 and 64.9 respectively (58.5).

2004 was a year of change in the Turkish cellular market, with one GSM operator (Telsim) being seized by the government after allegations of financial irregularities involving the then owners, the Uzan family, while another two (Is-TIM and Aycell) merged to create TT&TIM. Turkcell continues, however, to largely dominate the market; according to figures from the Telecommunications Authority – the regulatory body – the cellco’s end-2004 customer base made it the clear leader with a market share of 67%.

Things are less than clear-cut, however, at a management level, with 2004 getting off to a slightly inauspicious start after a director of Turkcell was arrested over allegations of judicial corruption. Additionally, squabbles over board representation that started in 2003 between TeliaSonera (owner of a then 37% stake in Turkcell) and the Cukorova Group (42%) rumbled on into the new year. TeliaSonera has long sought to buy the Cukorova-owned stake in the cellco, but its hopes suffered a blow in July 2004 after the Turkish government and Cukorova agreed a deal that saw the group remain the majority shareholder. The matter now looks like being resolved once and for all, though, after TeliaSonera struck a deal with Cukorova to acquire an additional 27% stake for USD3.1 billion last month; Cukorova will retain a minority share. Despite rumours a few days later that Alfa – a Russian holding company with stakes in VimpelCom and MegaFon, Russia’s second and third largest cellcos – was set to make a higher bid, Turkcell appeared to put the matter to rest by declaring that it expects the transaction with TeliaSonera to be completed in the second quarter of 2005.

Turkcell did not stand still while the ownership issues were being played out. In March 2005 it launched EDGE services via handsets and laptops, and it has also set up a trial W-CDMA network. Details of the 3G licensing process in Turkey remain as yet unknown, but Turkcell has stated that it intends to ‘play a leading role in this area’.

Outside of its domestic market, the cellco owns 41.45% of Fintur International, a holding company with stakes in operators in Azerbaijan, Kazakhstan, Georgia and Moldova. Collectively these added approximately 407,000 net new subscribers in 2004, giving a total of 3.9 million. Turkcell last year bought a 51% stake in Astelit, a wireless operator in Ukraine that had previously garnered less than 100,000 subscribers in nearly six years of operation. Since acquiring Astelit in the second quarter of 2004, the cellco has targeted capital expenditures of USD250-300 million over the next two years, much of which will go on increasing coverage to approximately 70% of the population living in cities with more than 5,000 inhabitants by the end of 2005. Despite winning a GSM licence in Iran in February 2004, Turkcell has been tied up in red tape and not yet launched services in the country. In September 2004 a change in legislation threw the legitimacy of Turkcell’s licence into question. The controversy continued in March 2005 after a political ruling said that the Iranian armed forces should be consulted over the ‘security aspects’ of granting a mobile phone licence to a Turkish company. Turkcell has said only that its interest in the Iranian market remains and that it will monitor the situation.