Turkcell Q3 net Profit Increases 29%; Revenues Rise 43.6%
Turkcell , the leading provider of mobile communications services in Turkey, today announced results for the third quarter, ended September 30, 2007. All financial results in this press release are unaudited, prepared in accordance with International Financial Reporting Standards ("IFRS") and expressed in US$ (1)
Highlights of the Third Quarter 2007
- Revenue increased by 44% to US$1.7 billion (US$1.2 billion)
- EBITDA* increased by 62% on an annual basis to US$771.5 million (US$ 477.1 million)
- Recorded net income of US$401.2 million (US$311.8 million)
- Turkcell's subscriber base grew by 13% on an annual basis to 34.8 million (30.8 million) as of September 30, 2007
- Average revenue per user ("ARPU") grew by 26% on an annual basis to US$15.3 (US$12.1)
- Turkcell recorded blended minutes of usage per subscriber ("MoU") of 83 minutes (82 minutes) in the the third quarter of 2007
- Astelit, Turkcell's Ukrainian subsidiary, recorded positive EBITDA* of US$2.9 million for the first time since it started its operations
*EBITDA is a non-GAAP financial measure. See pages 10-11 for the reconciliation of EBITDA to net cash from operating activities.
àIn 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 third quarter 2007 refer to the same item in the third quarter of 2006. For further details, please refer to our consolidated financial statements and notes as at and for the period ended September 30, 2007 which can be accessed via our web site in the investor relations section (http://www.turkcell.com.tr).
Comments from the CEO, Sureyya Ciliv
"We are happy to deliver another quarter of solid results as a consequence of our strong execution, as top line and EBITDA growth once again accelerated. Our revenue increased by 44%, EBITDA increased 62% on an annual basis and net income margin of 23% was achieved. We are also very pleased to report that our Ukrainian operation also achieved an important milestone by reporting positive EBITDA for the first time in the third quarter of 2007, ahead of plans.
In Turkey, we recorded strong subscriber growth as well as usage while successfully maintaining our overall leading position in our market, which we believe is a clear reflection as to how our customers value our brand name, quality infrastructure and better products and services. We continued to communicate our competitive advantages while introducing a number of initiatives to drive customer loyalty and satisfaction to ensure growth during the quarter, which resulted very positively for us. Our commitment for investments in communications and technology areas will continue while our intention to explore international markets remain as one of our key priority in 2008, in order to maximize value for our shareholders.
I thank again to all the Turkcell employees and business partners for their continued hard work during this period.''
OVERVIEW OF THE THIRD QUARTER
The third quarter of 2007 was marked by two local elections and turmoil in the global financial markets. Meanwhile, Turkey remained quite resilient and consumer sentiment in the Turkish market remained relatively positive.
Despite the active competitive environment during the period, we recorded strong growth in our subscriber base while solid usage levels were sustained and we maintained our leading position in the Turkish GSM market. We maintained our focus on customer satisfaction with a number of initatives which have been well received by our customers. These initiatives coupled with the effective communication of our value propositions, have paved the way to our continued leadership in the Turkish GSM market.
We face an increasingly dynamic operating environment where our competitors' aggressive subscriber acquisition initiatives and campaigns to manage price perception continue. During the period, in support of our value focus, we introduced offers to maintain high usage levels, higher ARPU's and attract and retain value customers. Furthermore, in line with our customer satisfaction focus, we launched a new pricing scheme in October to meet the expectations of our customers. We created five main tariff packages so subscribers can easily pick the plan that best suits their needs.
In addition to strengthening our pricing offering, we continued to focus on providing the best quality service and coverage in voice and data, investing US$267 million in our network in Turkey during the first nine months of 2007. We maintained our leadership in terms of breadth, usage and quality of services through our portfolio of Value Added Services and sustained a solid contribution to our top line with revenue from these services contributing 11% of our total net revenue in the third quarter of 2007.
Financial and Operational Review of Third Quarter 2007
The following discussion focuses principally on the developments and trends in our business in the third quarter of 2007. Selected financial information for the third quarter of 2006, second quarter of 2007 and third quarter of 2007 is also included at the end of this press release.
Macro environment Information Q3 2006 Q2 Q3 Q3 2007 Q3 2007-Q2 -Q3 2006 2007 % Chg 2007 2007 % Chg TRY / US$ rate Closing Rate 1.4971 1.3046 1.2048 (19.5%) (7.6%) Average Rate 1.5045 1.3317 1.2932 (14.0%) (2.9%) INFLATION Consumer Price Index 1.69% 1.47% 0.31% - - Producer Price Index (0.12%) 1.09% 1.94% - - Post-election optimism in the Turkish financial markets was interrupted by the global economic turmoil in late July and early August. Change in the global risk appetite resulted in volatility in the exchange rate of TRY against US$ and some changes in the credit environments. However, Turkey proved quite resilient and consumer sentiment remained relatively positive. In line with current trends, we have further revised our TRY against US$ exchange rate expectations for the 2007 year end from a closing rate of 1.45 to 1.24.
Our results of operations and business and financial performance areaffected by the macro economic environment, developments in the geopoliticalenvironment, the competitive environment and the dynamics of consumerconfidence in Turkey. Therefore, we will continue to monitor the developmentsin these areas closely. Financial Review Profit & Loss Statement Q3 Q2 Q3 Q3 2007 Q3 -Q3 2006 2007-Q2 (million US$) 2006 2007 2007 2007 % Chg % Chg Total revenue 1,199.4 1,503.5 1,722.8 43.6% 14.6% Direct cost of revenue (651.5) (768.4) (799.9) 22.8% 4.1% Depreciation and (182.0) (197.9) (202.2) 11.1% 2.2% amortization Administrative expenses (40.2) (54.4) (56.9) 41.5% 4.6% Selling and marketing (212.7) (281.6) (296.9) 39.6% 5.4% expenses EBITDA 477.1 596.9 771.5 61.7% 29.3% EBITDA Margin 40% 40% 45% 5.0 p.p. 5.0 p.p. Net finance income / 83.3 (110.2) (147.2) (276.7%) 33.6% (expense) Finance expense 42.8 (163.5) (230.7) (639.0%) 41.1% Finance income 40.5 53.3 83.5 106.2% 56.7% Share of profit of 26.5 8.4 17.2 (35.1%) 104.8% equity accounted investees Income tax expense (108.9) (46.4) (50.2) (53.9%) 8.2% Net income 311.8 273.6 401.2 28.7% 46.6% Revenue: Our consolidated revenue grew by 43.6% to US$1,722.8 million in the third quarter of 2007 compared to the same period last year. This mainly stemmed from strong usage and subscriber growth, appreciation of TRY against US$ combined with the upward price adjustments of 11% on an annual basis and the impact of our consolidated subsidiaries.
In 2007, we expect revenue growth of nearly 30% on the back of growth in our subscriber base, usage trends and the revised TRY against US$ exchange rate expectations.
In 2008, we expect double digit revenue growth as measured in TRY on the back of continued growth in our subscriber base, and usage trends.
Direct cost of revenue: Although direct cost of revenue including depreciation and amortization increased year on year by 22.8% to US$799.9 million, the proportion of direct cost of revenue to total revenue improved to 46% from 54% compared to the same period in 2006. This improvement was mainly due to the decrease in the percentage of depreciation and amortization as a percentage revenue, lower treasury share payments and lower non-revenue based operational expenses such as network maintenance, radio and transmission costs, which did not increase paralel to the revenue.
Depreciation and amortization increased to US$202.2 million in the third quarter of 2007 compared to US$182.0 million in the third quarter of 2006 mainly due to the appreciation of TRY against US$.
Interconnection costs also increased year on year by 33.0% to US$108.0 million while the percentage of interconnection costs as a percentage of revenue improved slightly.
Selling and marketing expenses: The share of selling and marketing expenses as a percentage of total revenue in the third quarter of 2007 decreased slightly to 17% compared to same period in 2006. Selling and marketing expenses increased in nominal terms by 39.6% year on year, reaching US$296.9 million in the third quarter of 2007 mainly due to increased advertising and acquisition expenses as well as retention related campaign costs in an active competitive environment. The appreciation of TRY against US$ also contributed to the increase in expenses during the quarter
Administrative expenses: During the third quarter of 2007, administrative expenses as a proportion of revenue remained stable at 3% while administrative expenses increased to US$56.9 million.
Share of profit of equity accounted investees: In the third quarter of 2007, our equity in net income of unconsolidated investees that consisted of the net income/(expense) impact of Fintur and A-Tel decreased to US$17.2 million compared to US$26.5 million in the third quarter of 2006.
Our 50% owned subsidiary A-Tel, impact two items in our financial statements. A-Tel's revenue that are generated from Turkcell are netted from the selling and marketing expenses in our consolidated financial statements. The difference between the total net impact of A-Tel and the amount netted from selling and marketing expenses is recorded in the share of profit of equity accounted investees line of our financial statements.
Net finance income/(expense): In the third quarter of 2007, as a result of our increasing cash balance, finance income increased compared to the same quarter of last year to US$83.5 million. On the other hand, our finance expenses increased to US$230.7 million mainly due to foreign exchange losses of US$205.1 million resulting from the appreciation of TRY against US$ during the third quarter of 2007.
Foreign exchange losses can be classified into two main categories; first being realized losses incurred on structured forward contracts that matured in the third quarter of 2007 amounting to US$39 million, and the second being accrued losses; mainly related to translation losses on foreign currency long position, and transaction losses accrued from structured forward contracts that may be realized in the rest of 2007, depending on currency fluctuation, amounting to US$100 million, and US$66 million respectively.
Overall, our net finance expense was US$147.2 million in the third quarter of 2007 compared to US$83.3 million net finance income in the corresponding period last year.
Income tax expense: The total taxation charge in the third quarter of 2007 decreased from US$108.9 million in the third quarter of 2006 to US$50.2 million.
Out of the total tax charge during the third quarter of 2007, US$104.2million was related to current tax charges and a deferred tax income ofUS$54.0 million was realized during the quarter. The increase in the deferredtax income was mainly due to the differences between our Turkish statutoryfinancial statements and our financial statements prepared in accordance withIFRS. Income tax expense Q3 Q2 Q3 Q3 2007 Q3 2007- (million US$) 2006 2007 2007 -Q3 2006 Q2 2007 % Chg % Chg Current Tax expense (92.2) (79.4) (104.2) 13.0% 31.2% Deferred Tax income (16.7) 33.0 54.0 (423.4%) 63.6% /(expense) Income Tax expense (108.9) (46.4) (50.2) (53.9%) 8.2% EBITDA: In the third quarter of 2007, EBITDA increased by 61.7% year on year to US$771.5 million mainly due to the increase in revenue with costs decreasing as a percentage of revenue. Accordingly, EBITDA margin during the same period improved to 45% from 40% in the third quarter of 2006. Given current trends and assumptions, we believe an EBITDA margin of 40% is achievable for the full year 2007.
In 2008, we expect EBITDA margin to be a few points lower than 2007.
Net income: We recorded net income of US$401.2 million in the third quarter of 2007. The year on year increase of 28.7% was mainly due to our improving operational performance and decrease in taxation charge despite the foreign exchange losses due to the appreciation of TRY against US$ in the third quarter of 2007.
Total Debt: Our consolidated debt amounted to US$739.9 million as of September 30, 2007. US$527.6 million of this was related to our Ukrainian operations.
Consolidated Cash Flow Q3 Q2 Q3 (million US$) 2006 2007 2007 EBITDA 477.1 596.9 771.5 LESS: Capex and License (176.2) (190.7) (188.1) Turkcell (139.1) (94.6) (130.3) Ukraine (27.3) (53.0) (26.1) Investment & Marketable (189.9) - 10.4 Securities Net Interest Income 30.6 29.6 57.9 Other 244.3 (282.5) 151.9 Net Change in Debt (30.3) 68.4 38.4 Turkcell (27.4) - - Ukraine - - 21.3* Dividend paid by Turkcell - (411.9) - Cash Generated 355.6 (190.2) 842.0 Cash Balance 985.1 1,672.5 2,514.5 (*)This financing has been drawn down by Financell B.V., a wholly owned subsidiary of Turkcell,
in July and has been provided to Astelit.
Cash Flow Analysis: Capital expenditures in the third quarter of 2007 amounted to US$188.1 million of which US$26.1 million was related to our Ukrainian operations.
In 2008, we expect to spend approximately US$800 million in operational capital expenditure in Turkey, which includes some 3G and broadband capital expenditures but excludes any potential 3G license fee. In addition, our consolidated subsidiary Astelit expects to spend approximately US$250 million in capital expenditure in Ukraine.
Operational Review Summary of Q3 Q2 Q3 Q3 2007 Q3 2007 -Q2 2007 Operational Data 2006 2007 2007 -Q3 2006 % Chg % Chg Number of total 30.8 33.8 34.8 13.0% 3.0% subscribers (million) Number of postpaid 5.7 6.1 6.3 10.5% 3.3% subscribers (million) Number of prepaid 25.1 27.7 28.5 13.5% 2.9% subscribers (million) ARPU (Average Monthly 12.1 14.1 15.3 26.4% 8.5% Revenue per User), blended (US$) ARPU, postpaid (US$) 30.3 38.2 39.5 30.4% 3.4% ARPU, prepaid (US$) 8.0 8.8 10.0 25.0% 13.6% ARPU, blended (TRY) 18.3 18.8 19.8 8.2% 5.3% ARPU, postpaid (TRY) 45.7 50.9 51.1 11.8% 0.4% ARPU, prepaid (TRY) 12.0 11.7 13.0 8.3% 11.1% Churn (%) 4.1 4.7 5.7 1.6 p.p. 1.0 p.p. MOU (Average Monthly 81.8 89.4 83.0 1.5% (7.2%) Minutes of usage per subscriber), blended Subscribers: Our strong growth in our subscriber base continued and we added one million net new subscribers in the third quarter of 2007. The subscriber base grew by 13% on an annual basis and reached 34.8 million as of September 30, 2007 as a result of our focus on the distribution channel network and our well perceived offers and campaigns. Our value focus continued and we recorded a favorable growth in our subscriber base supported by our postpaid customer focus. Of the new gross subscribers in the quarter, 89% were prepaid and 11% were postpaid.
The net additions decreased from 1.5 million in the second quarter of 2007 to 1 million in the third quarter of 2007. This was in line with our value focus and mainly due to the involuntary churn of low ARPU generating prepaid subscribers gained through acquisition campaigns in previous quarters.
We expect penetration in Turkish GSM market to reach near 85% by the end of 2007 and we expect our subscriber base to grow approximately 12% on annual basis in 2007.
During 2008, we anticipate growth in the Turkish GSM market to continue and expect penetration to near 95% by the end of the year. We also expect our subscriber base to continue to grow although at a slower pace compared to 2007.
Churn Rate: Churn refers to voluntarily and involuntarily disconnected subscribers. In the third quarter of 2007, we recorded a churn rate of 5.7%, an increase of 1.6 percentage points compared to the same period in 2006, mainly due to prepaid involuntary churn triggered by high subscriber acquisitions in previous quarters. The churners were mainly low ARPU generating prepaid subscribers, with relatively less churn in higher ARPU segments.
In 2008, we expect churn rate to be a few percentage points higher than 2007 under the assumption that Mobile Number Portability ("MNP") will be implemented during the second half of 2008.
MoU: In the third quarter of 2007, we recorded strong blended minutes of usage per subscriber ("MoU") of 83.0 minutes. Strong usage behavior continued in the third quarter of 2007 despite the major reduction of incentives in the Pomegranade Campaign introduced in the second quarter of 2007 and lower usage during the Ramadan period. Our initiatives are aimed at creating a win-win situation by incentivising usage through bundled free service offers while maintaining a value generation focus
In 2008, we expect usage to increase as our incentives and loyalty programmes will continue.
ARPU: Our blended average revenue per user ("ARPU") grew by 26.4% to US$15.3 compared to the third quarter in 2006. This change was mainly due to the 14% appreciation of TRY against US$ combined with the average price increase of 11% on an annual basis despite the dilutive impact of growing prepaid subscriber base during this period.
Our ARPU in TRY terms grew by 8.2% to TRY19.8 in the third quarter of 2007 from TRY18.3 in the third quarter of 2006.
In 2008, we expect to see increase in ARPU in TRY terms despite the dilutive impact of prepaid subscribers.
Regulatory Environment
During the quarter, the tender for granting the 3G licenses in Turkey that took place on September 7, 2007 was cancelled. Although there has been no official declaration regarding the timing of any new tender for granting the 3G licenses, we expect the 3G licensing in Turkey to take place in 2008. We look forward to the implementation of 3G in Turkey. The progress on the MNP continues and our base assumption for the implementation of MNP is that it will take place in the second half of 2008.
Furthermore on the regulation front, the Telecommunications Authority ("TA") notified us about certain new measures to set minimum and maximum pricing. The TA's intention with these new measures is to set minimum rates for on-net and maximum rates for off-net calling prices. Currently, we believe we are generally in compliance with regulatory requirements. However, we are in the process of evaluating the TA's new measures and if we determine that we are required to take any steps to revise our pricing policy on some of our tariff plans in order to comply with the TA's new measures, such steps may have an adverse effect on our results of operations.
International Operations
Fintur
We hold a 41.45% stake in Fintur and through Fintur we hold interests in GSM operations in Kazakhstan, Azerbaijan, Moldova, and Georgia.
FINTUR Subscriber Revenue as of September 30, 2007 (million) (US$ million) Kazakhstan 5.4 225 Azerbaijan 2.8 124 Moldova 0.5 14 Georgia 1.2 47 TOTAL 9.9 410*(*) Combined revenue
Strong revenue growth in Fintur's operations continued and Fintur's consolidated revenue reached US$411.3 million in the third quarter of 2007, recording 28.3% growth on an annual basis. Fintur added approximately 1.2 million net new subscribers in the third quarter of 2007 and its total subscriber base grew to 9.9 million.
We account for our investment in Fintur using the equity method. Fintur's contribution to income was US$32.0 million (US$27.2 million) in the third quarter of 2007.
Astelit
During the third quarter of 2007, Astelit; our 55% owned subsidiary in Ukraine, recorded promisingly positive results.
- Astelit grew its revenue by 267.4% on annual basis
- Astelit recorded positive EBITDA of US$2.9 million for the first time
- Astelit's operational indicators have remained very strong with subscribers reaching 7.6 million by growing 65.2% on an annual basis
- 3 month active subscriber base grew 147.4% on annual basis
- 3 month active ARPU increased by 48.7% on annual basis
The encouraging trends in Astelit's financial and operational performance continued and it achieved an important milestone by reporting positive EBITDA for the first time in the third quarter of 2007, which was ahead of our plans. We expect to see this positive trend continuing in the coming quarters.
Summary Data for Astelit Q3 Q2 Q3 2006 2007 2007 Number of subscribers (million) Total 4.6 6.3 7.6 Active (3 months)(2) 1.9 4.0 4.7 Average Revenue per User (ARPU) in US$ Total 1.7 3.0 3.6 Active (3 months) 3.9 5.0 5.8 Revenue 20.7 54.8 76.0 EBITDA(3) (21.9) (9.6) 2.9 Net Loss (57.9) (46.1) (42.0) Capex 27.3 53.0 26.1 In the context of the financing of Astelit's operations in line with previously indicated plans, depending on the market conditions and its financial performance, Astelit aims to arrange a loan within the next 12-18 months through a new financing package. However, based on capital requirements of Astelit, we may need to contribute to the financing of Astelit's operations in the form of equity in 2008.
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.
Beginning from the 2006 fiscal year, we have revised the definition of EBITDA which we use and we report EBITDA using this new definition starting from the first quarter of 2006 results announcement to provide a new measure to reflect solely cash flow from operations.
The EBITDA definition used in our previous press releases and announcements had included Revenue, Direct Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses, Administrative expenses, translation gain/(loss), financial income, share of profit of equity accounted investees, gain on sale of investments, income/(loss) from related parties, minority interest and other income/(expense). Our new EBITDA definition includes Revenue,Direct Cost of Revenue excluding depreciation and amortization, Selling and Marketing expenses and Administrative expenses, but excludes translation gain/(loss), financial 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 Q3 Q2 Q3 Q3 2007- Q3 2007-Q2 2007 US$ million 2006 2007 2007 Q3 2006 % Chg % Chg EBITDA 477.1 596.9 771.5 61.7% 29.3% Other operating (1.4) 3.1 2.4 (271.4%) (22.6%) income/(expense) Financial income 40.5 53.3 83.5 106.2% 56.7% Financial expense 42.8 (163.5) (230.7) (639.0%) 41.1% Net 35.7 (177.2) 316.0 785.1% 278.3% increase/(decrease) in assets and liabilities Net cash from 594.7 312.6 942.7 58.5% 201.6% operating activities EUROASIA (Astelit) Q3 Q2 Q3 Q3 2007-Q3 Q3 2007-Q2 2006 2007 US$ million 2006 2007 2007 % Chg % Chg EBITDA (21.9) (9.6) 2.9 113.2% 130.2% Other operating (0.1) - 0.2 300.0% - income/(expense) Financial income 0.4 0.4 0.7 75.0% 75.0% Financial expense (10.8) (17.2) (21.5) 99.1% 25.0% Net (10.1) (11.0) 31.8 414.9% 389.1% increase/(decrease) in assets and liabilities Net cash from (42.5) (37.4) 14.1 133.2% 137.7% operating activities Turkcell Group Subscribers
We have approximately 45.0 million proportionate GSM subscribers as of September 30, 2007. This is calculated by taking the number of GSM subscribers in Turkcell and each of our subsidiaries and multiplying the number of unconsolidated investees by our percentage ownership interest in each subsidiary. This figure includes the proportionate rather than total number of Fintur's GSM subscribers, but includes the total number of GSM subscribers in Ukraine and in our operations in Turkish Republic of Northern Cyprus ("Northern Cyprus") because the financial statements of our subsidiaries in Ukraine and Northern Cyprus are consolidated within our financial statements.
Turkcell Group Q3 Q2 Q3 Q3 2007- Q3 2007-Q2 Subscribers 2007 2006 2007 2007 Q3 2006 (million) % Chg % Chg Turkcell 30.8 33.8 34.8 13.0% 2.9% Ukraine 4.6 6.3 7.6 65.2% 20.6% Fintur (pro rata) 1.7 2.1 2.3 35.3% 9.5% Northern Cyprus 0.2 0.3 0.3 50.0% - TURKCELL GROUP* 37.3 42.5 45.0 5.9% 20.6%Forward-Looking Statements
This press release may include 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, "may," "will," "expect," "intend," "plan," "estimate," "anticipate," "believe" or "continue."
Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time,we can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All written and oral forward-looking statements attributable to us in this release are expressly qualified in their entirety by reference to these cautionary statements.
Hiç yorum yok:
Yorum Gönder