1 Investor Presentation Presentation Turkcell Investor February 2020
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Investor Presentation
Presentation
Turkcell Investor
February 2020
Investor Presentation
STRATEGIC FOCUS AREAS& 3-YEAR PLAN
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Investor Presentation
CORE COMPETENCIES
STRATEGIC FOCUS AREAS
Digital Business Solutions Techfin ServicesDigital Services
Strong Bond With Customers
State-of-the-art Infrastructure
Advanced Analytics & Technology
Strong & Agile Team
Telecom Services
Well-Positioned to Create More Value
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Investor Presentation
Enlarge subscriber base with dedicated focus on postpaid segment
Grow in fixed broadband through fiber and FWA
Utilize the digital channel for acquisition, device sales and growth
Leverage continued demand
Ensure standalone growth
Expand globally
Boost overall corporate business with multiplay focus
Provide end-to-endIT solutions for corporates
Trusted partner of corporates through their digital transformation
Reach wider customer base with complete portfolio of solutions
Reach out to long tail of 1.6Mn+merchants in Turkey
Launch new consumerfinance solutions
GROW IN TELECOM SERVICES
MONETIZEDIGITAL SERVICES
LEVERAGEDIGITAL BUSINESS SOLUTIONS
LEAD TECHFIN SERVICES
+1 Million Subscribers/year
in Turkey
2.5x Standalone revenue
growth in 3 years
#1 Solution Provider
in 3 years
17 Million Active Paycell users
by 2022
Strategic Focus Areas
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Investor Presentation
MPOS
PSD2
E-money
Micro Lending
Potential regulatory changes in the definition of loan facilitations
Benefit: Potential to give micro loans to consumers
The potential adaptation of PSD2 Payment Services Directive of EU in Turkey
Benefit: Ability to reach banking system, becoming single interface for customers
Using smartphone or tablet to perform the functions of a cash register
Benefit: Increased penetration of longtail merchants
Potential legislative measure to remove the requirement to keep e-money funds in escrow account
Benefit: Potential to attract more users offering return on e-money accounts
Techfin: Regulation Becoming More Supportive
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Investor Presentation
Turkish Techfin Ecosystem
DCB Wallet
Bill Payment
Payment Facilitators
Money Transfer
Paycell App Strategy
E-Money
VISION: Being an enabler on financial inclusion with the combination of technology and financial services
Paycell: Super App for All Techfin Solutions
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Investor Presentation
Merchants
Go-to Market Strategy
(MPOS & QR)
Go-to Market Strategy
(App)
Customers
6,000Turkcell Stores
37 MnCustomers
4,000Direct Sales Force
TurkcellTechnology
Paycell: Go to Market Strategy
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Investor Presentation
1 Bn
2.5 Bn
2019 2022E
Paid Subscriptions
Platform Licensing
Discovery Services
Traffic Monetization
Data Monetization
Operator Co-operations
Standalone Revenue (TRY)
DSS: The Dynamics of New Standalone Strategy
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Investor Presentation
Telco market figures consist of mobile and fixed voice & data figures and exclude hardware sales. Mobile figures are based on Futurebright 2018Q4 Field Research. Fixed figures are based on ICTA Report 2018Q4 and Turkcell Estimation. ICT, Hardware & Software figures are based on IDC Blackbook 2019.
TELCO BUSINESS / EXISTING BUSINESS
41%
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DIGITAL & ICT BUSINESS / GROWTH ENGINE
5%
HARDWARE & SOFTWARE BUSINESS / OPPORTUNISTIC APPROACH
• Superior network perception• Net add, increase in ARPU• Opportunity of multiplay, new services• High margin
• Fragmented market• Lack of strong system integrator• Increase in demand for digitilization
• Profitable growth with integrated solutions
TelcoMarket Share
ICTMarket Share
Billion TRY
DBS: Market & Turkcell Positioning
1010
Investor Presentation
Inflationary Pricing
Effective Balance Sheet
Risk Management
Strong Free Cash Flow
Generation
Efficient Capital Allocation
• Key to sustainable growth and profitability
• Assurance for required return on investment
• Above-market ARPU growth
• Liquidity management• Net fx position
• Sustainable revenue growth• Continued operational
profitability• Controlled capex
• Review of investment requirement in conventional services
• Investment in high growth businesses
• Ensure returns above WACC
Turkcell Finance: Key Priorities
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Investor Presentation
Reduce funding needsin capex heavy traditional business
Invest in new high growth areas
Global Telco Industry Challenges
Flow of funds
Turkcell’sResponses
Digital services (TV, music, etc.)
Techfin services
ICT solutions (datacenter, cloud etc.)
IPO/M&A activities
Infrastructure sharing
Sell & leaseback transactions
Heavyinvestment
need
Slowrevenuegrowth
Improve returns over WACC11
Efficient Capital Allocation
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Investor Presentation
3-Year Outlook
*Excluding license
2020 - 2022
REVENUE GROWTH (CAGR) 13%-16%
EBIT MARGIN 18%-21%
OP.CAPEX/SALES* 16%-18%
EBITDA MARGIN 39%-42%
Investor Presentation
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Q4 & FY 2019 Results
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Investor Presentation
2019: Cementing Our Leadership
LEADER IN INTEGRATED TELECOM SECTOR REVENUES
TOP-LINE
+6.3%
25.1Bn TLRevenue
vs. closest competitor
GROWTH
+2pp
18.1% YoY
vs. closest competitor
NET INCOME
+34.9%
3.2Bn TLNet Income
vs. closest competitor
ARPU GROWTH
~2x
17.7% YoYMobile Blended
Sectoraverage
FWA
323K
First & mostwide-spread
Superboxsubscriber
NPS
+10p
Best-insector
vs. closestcompetitor
POSTPAID
1.5Mn
Record of the decade
Net add
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Investor Presentation
Good Execution: Guidance Delivered
REVENUE GROWTH 18.1%
EBITDA MARGIN 41.5%
OP.CAPEX/SALES* 18.0%
EBIT MARGIN 21.4%
*Excluding license
Actual
~18%
41%-42%
~18%
Guidance
20%-21%
2019
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Investor Presentation
Q4 2019: Solid Performance
Robust RevenueGrowth18.8% YoY
Record PostpaidNet Add984Thousand
Strong EBITDA Margin41.2%
Postpaid shareup 6pp YoY62%
Solid Net Income756Mn TL
Record Mobile ARPU (excl.M2M)22.7% YoY
Strong FCF Generation1Bn TL
Record ResidentialFiber ARPU21.0% YoY~
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Investor Presentation
Q4 2019 YoY % 2019 YoY %
6,684 18.8% Revenue 25,137 18.1%
2,754 23.0% EBITDA 10,426 18.6%
41.2% 1.4pp EBITDA Margin 41.5% 0.2pp
1,349 41.7% EBIT 5,380 19.6%
20.2% 3.3pp EBIT Margin 21.4% 0.3pp
756 (12.5%) Net Income 3,246 60.6%
25.4% (0.3pp) Opr. Capex/Sales1 18.0% (0.5pp)
Note: TRY figures are based on IFRS. 1Excluding license fees
Turkcell Group Financials
Full Year Highlights
• Financial performance in line with the guidance
• Strong operational profitability and bottom line
Quarter Highlights
• Strong quarterly revenue growth
• Net income impacted by one-off tax settlement
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Investor Presentation
Revenue Development
* Turkcell Consumer Finance Company (Financell)
5,626
6,684
993
139 (46) (29)
RevenueQ418
Δ TurkcellTurkey
Δ TurkcellInternational
ΔTCF* Δ OtherSubsidiaries
RevenueQ419
18.8%
QUARTER MILLION TL
• Yearly revenue generation of 1.1 bn TL in Q419; 3.8 bn TL in 2019
• In 2019, top-line impacted by slow down in TCF and exit from İnteltek & Azerinteltek
FULL YEAR MILLION TL
21,292
25,137
3,395
546 (45) (51)
RevenueFY18
Δ Turkcell Turkey
Δ Turkcell International
Δ TCF* Δ Other Subsidiaries
RevenueFY19
18.1%
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Investor Presentation
58.2
70.4
2.4%2.9%
4.5%
1.9% 2.4% 2.1%
Q4 17 Q4 18 Q4 19
TURKEY SUBSCRIBERS ARPU
MONTHLY AVERAGE MOBILE CHURN RATE
20.4
12.4
Postpaid Prepaid
QoQ 1.0M↑ 2.7M↓ 29K↑ 36K↑Net add
62%of total mobile
Operational Highlights
40K↓
1.5
0.7
49K
Fixed subscribers
0.7
IPTVfiber ADSL
fiber
cable
ADSL
excluding the impact of regulatory change &
involuntary deactivated lines
2.3
YoY 1.5M↑ 99K↑ 106K↑187K↓2.6M↓
37.4
45.9
Mobile blended (excl.M2M)Q4 18 Q4 19
22.7% YoY
Fiber ResidentialQ4 18 Q4 19
What has changed? The ICTA introduced a regulation requiring the
deactivation of prepaid lines which lack residency documents by the
6th month of subscription. Turkcell deactived 1.9Mn prepaid lines.
21.0% YoY
MILLION TL
%
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Investor Presentation
14.9 15.0 15.0 15.012.4
0.06
1.9
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
MOBILE SUBSCRIBERS
Shifting to a More Valuable Portfolio
18.8 18.718.9
19.4
20.4
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
Deactivatedlines due toregulatory
decision
Po
stp
aid
Pre
pai
d
-204 -155
215
503
984
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
POSTPAID: NET ADD & ARPU GROWTH
~1 MillionRecord high
net addin Q4 19
13.7%11.5%
15.1%
19.3% 20.0%
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
Postpaid (excl.M2M) YoY Growth
SUSTAINABLE GROWTH
ARPU↑NET
ADD↑
CHURN↓
MILLION THOUSAND
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Investor Presentation
Superbox: The Brand for FWA
3356
130
217
323
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
SUPERBOX SUBSCRIBER TREND
14 23 73 88 106QoQ (K)Net add
2xthe ARPU of
fixed broadband
THOUSAND
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Investor Presentation
3.44.2 4.4
7.6
10.010.8
5.9
8.19.0
Q4 18 Q3 19 Q4 19
Non 4.5G Users 4.5G Users Total Users
MOBILE DATA USAGE 4.5G SUBSCRIPTION
Growth Engine: Mobile Data
94% are 4.5G
subscribers
19 million with
4.5G compatible SPs87% are 4.5G
compatible SPs
Monthly data consumption of a 4.5G user reached to 11.5 GB on December
76% smartphone
penetration
30.8 30.7
18.0 19.2
Q4 18 Q3 19 Q4 19
4.5G subscribers 4.5G compatible smartphone
↑53%YoY data
usage growth
Regulatory decision impact:
~1 million decrease
AV. GB/USER MILLION
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Investor Presentation
Leadership in Quality & Experience
+13+10
+23+26
Q4 18 Q4 19
Points over next best Points over third best
CUSTOMER EXPERIENCECONSUMER NET PROMOTER SCORE (POINTS)
CUSTOMER FOCUS
Source: Future Bright
Regional play
Innovative offers
Data-driven marketing
Segmented approach
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Investor Presentation
• Launched for consumers
• Launched multicloud
• Ad integration in apps
• Personalisation with AI
Strategic Focus Areas: 2019 Highlights
MONETIZEDIGITAL SERVICES
LEVERAGEDIGITAL BUSINESS SOLUTIONS
LEAD TECHFIN SERVICES
1 Billion TLStandalone revenue in 2019
44%Revenue growth in 2019
3xActive Paycell Card users YoY
• Became Top 3 IT solution provider
• Largest DC operator in Turkey
• ~1.3 bn TL backlog of contract value
• Bursa city hospital inauguration (5 in total)
• 4x higher volume in Paycell Card
• 2x higher bill payment volume
• 24% rise in payments for digital content
• QR Code scheme in restaurants & markets
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Investor Presentation
Q4 18 Q4 19 YoY %
Revenues 247.4 201.2 (18.7%)
EBITDA 124.8 128.4 2.9%
EBITDA Margin 50.4% 63.8% 13.4pp
Net Income1 (54.1) 101.4 n.m
CONSUMER FINANCE
Techfin: Financial & Operational Performance
HANDSET FINANCING
0.4 0.4
4.22.4
Q4 18 Q4 19
Financell Consumer Loans
Turkcell ContractedReceivables
4.5
Q4 18 Q4 19 YoY %
Revenues 43.4 77.1 77.8%
EBITDA 27.8 32.4 16.4%
EBITDA Margin 64.0% 41.9% (22.1pp)
PAYMENT SERVICES
1 including the 40 mn TL dividend from Paycell in Q418 and Q419
2.8
3-Month Active User
Volume
Revenue
4.5 Million
5.7 Billion TL
252 Million TL
2019MILLION TL
MILLION TL BILLION TL
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Investor Presentation
18%
1 Figures are based on IFRS
Turkcell International
SUBSIDIARIES AT A GLANCE
Note: Remaining 5% comprises lifecell Germany, other international operations and intra-company eliminations. Ukraine, Belarus and TRNC local currency growth figures are based on stand-alone financials.
• 14% yoy revenue growth in local currency in 2019
• 4G user data usage: 10GB/month in Q4
• 8% yoy revenue growth in local currency in 2019
• 4G user data usage: 10GB/month in Q4
Lifecell Ukraine
Life :) Belarus
Like-for-like EBITDA margin improvement is 1.7 pp in Q4 19 and 2.2 pp in 2019.
Q4 19 YoY % 2019 YoY %
561 33.0% Revenue 2,003 37.5%
244 (1.3%) EBITDA 904 47.5%
43.5% (15.0pp) EBITDA Margin 45.1% 3.0pp
FINANCIAL HIGHLIGHTS
11%
66%
KKTCell TRNC
• 23% yoy revenue growth in 2019
• Increasing contribution of fixed & corporate business
2019 Revenue ShareMILLION
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Investor Presentation
Sustainability Initiatives
The UN Sustainable Development Goalsto which we have contributed
ESG GRADE A
Contribution to AI ethics with «Turkcell AI principles»
Member of CFO Task Force for SDGs
«Recycle Into Education» campaign for electronic waste
Appointment of Turkcell Data Protection Officer
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Investor Presentation
Free Cash Flow GenerationBILLION TL
(0.1)
(2.5)(2.2)
(0.7)
0.0
2.4
2014 2015 2016 2017 2018 2019
• Following the 4.5G investment period, free cash flow* generation turned positive in 2018
• We registered further 2.4 billion TL in 2019 (exc. Fintur sale proceeds)
• We aim to continue to generate positive FCF following years
*Free cash flow calculation includes EBITDA and the following items as per cash flow statement of IFRS reports: acquisition of property, plant and equipment, acquisition of intangible assets, change in operating assets/liabilities, payment of lease liabilities and income tax paid
4.5G Investment period
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Investor Presentation
Solid Balance Sheet
NET DEBT/ EBITDA
1 Excludes Turkcell Consumer Finance Company’s loan portfolio
TCF loan portfolio
Net Debt1
Q2 2019 Q3 2019 Q4 2019
Total Cash 10,687 10,975 10,239
Total Assets 45,608 45,515 45,715
Total Debt 22,062 20,675 20,306
Lease Obligations 1,577 1,544 1,533
Total Equity 17,331 17,431 18,083
Net Debt 11,375 9,700 10,067
Net Debt1 8,160 6,975 7,658
SUMMARY
8,1606,975
7,658
3,215
2,7242,409
1.2x
1.0x 1.0x
0.9x
0.7x0.8x
Q2 19 Q3 19 Q4 19
Net Debt/EBITDA Net Debt/EBITDA1
Postdividend
MILLION TL
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Investor Presentation
FX Position Management
• We improved our FX position to long level over the years
• Our net FX gain** was 17.7Mn TL in Q419, thanks to our long position of 115Mn USD
• We aim to keep our FX position neutral in the coming periods
Net FX Position*:
Dec 15 Dec 16 Dec 18 Dec 19
Short FX Position Limited Short FX Position Neutral FX Position
-1,979Mn USD -125Mn USD -224Mn USD +115Mn USD
Dec 17
-144Mn USD
*Including advance payments, derivative transactions for hedging purposes and excluding FX swap transactions.**Excluding the impact of swap interest income/expense
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Investor Presentation
Notice
This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities ExchangeAct of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. This includes, in particular, our targets for revenue, EBITDA,EBIT and capex in 2020 or for the medium term 2020 to 2022. More generally, all statements other than statements of historical facts included in thispresentation, including, without limitation, certain statements regarding the launch of new businesses, our operations, financial position and business strategymay constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the written or oral use of forward-lookingterminology such as, among others, "will," "expect," "intend," "estimate," "believe", "continue" and “guidance”.
Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that suchexpectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety byreference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our AnnualReport on Form 20-F for 2018 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty toupdate or revise any forward looking statements, whether as a result of new information, future events or otherwise.
The Company makes no representation as to the accuracy or completeness of the information contained in this presentation, which remains subject toverification, completion and change. No responsibility or liability is or will be accepted by the Company or any of its subsidiaries, board members, officers,employees or agents as to or in relation to the accuracy or completeness of the information contained in this presentation or any other written or oralinformation made available to any interested party or its advisers.
Please note that all financial data are consolidated whereas non-financial data are unconsolidated unless otherwise specified. In the charts or tables used in thispresentation totals may not foot due to rounding differences. The figures used in this presentation are rounded while percentage changes are calculated based onthe figures disclosed in the press release.
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Investor Presentation
THANK YOUFor further information please e-mail
[email protected] call Turkcell Investor Relations at
(+90 212 313 1888)
Turkcell IR Website
THANK YOU