The Turkish ICT sector made up 4% of GDP in 2009 and was estimated to have registered growth of 6.5% in 2010, surpassing the $26 billion mark. According to the Export Promotion Center of Turkey (IGEME) the share of IT was around $7 billion in 2009, with the communication technologies sector valued at around $18.5 billion.
The Ministry of Transport and Communication is working to align legislation with EU standards and encourage the development of R&D centers, with a law providing tax incentives and support without sub-sector discrimination until 2024, so as to transform Turkey into a developer of new technology.
The Turkish telecommunications sector was liberalized in 2004. Aria (now renamed as Avea) was the first to challenge the incumbent mobile operators Turkcell and Telsim, with the latter purchased and rebranded by Vodafone in 2006. Unbundling laws targeting the incumbent fixed-line and internet provider Türk Telekom are also set to open up the market further to investors, while a secondary public offering (SPO) of Türk Telekom stock is expected in 2011.
Mobile telecoms is the main driver of the sector, with an approximate 66 million GSM subscribers at the end of 2010. Since a sharp increase following 2004, this number has increased gradually over the last three years. There were 16.4 million fixed-line subscribers at the end of 2010, and this is a continuation of a downward trend in overall subscriber numbers. There are also around 7 million internet subscribers, and this number is growing following the launch of 3G in 2009 and the introduction of more internet-capable devices compensating for the low PC penetration rate.
Despite an opening up of the sector in 2004, Türk Telekom still represented 91% of total revenue generated in the fixed telephony industry in 2010, with only 9% shared by alternative operators. “About 2-2.5% of the fixed telecoms market is available to alternative operator’s activities,” said Burak Gökmen, Managing Director of Borusan Telekom. Steps are being taken to allow the development of smaller operators, and a law has been approved for fixed-line number portability; however, its implementation has been slower than mobile number portability. Another key regulation change in the form of an unbundling law is expected soon, which will allow operators to take advantage of the incumbent’s network. Competition is much needed in the sector, with the number of fixed-line subscribers having been in decline in recent years. In 2005 there were close to 19 million subscribers, and at the end of 2010 this had decreased by around 2.5 million. Another challenge the industry faces is in wholesale line rental, with alternative telecoms users still being billed by Türk Telekom for line rental. Şevki Kuyulu, CEO of Millenicom, told TBY that this was one of the main reasons why alternative operators could not be true alternatives in the sector still.
Türk Telekom looks set to launch an SPO in 2011 following an IPO of 15% of its shares in 2008, which raised $1.9 billion. The government is expected to sell part of its remaining 30% stake, with 55% of the company owned by Oger Telecom, a Dubai-based company owned by Saudi Oger Ltd., which has also expressed its interest in upping its share in a further offering.
With over 60 million GSM subscribers in Turkey, 29% of which are post-paid, the penetration rate stands at around 85%. Driven by a growing population, the subscriber growth rate doesn’t look set to slow down and is being boosted further by mobile broadband. Close to 80% of telecoms traffic comes from mobile telephony, and Turkcell currently holds 54% of the sector. Having entered the market in 2006 through the purchase of Telsim, the second-biggest player is Vodafone, which increased its share to near 27% in 2010 from 18.6% in 2009. It was the second largest FDI into the country in history and “cumulative investment today has exceeded TL10 billion”, Serpil Timuray, General Manager of Vodafone Turkey, told TBY. Türk Telekom’s mobile wing, Avea, occupies the remaining 19% of the sector, and all three operators have rolled out their 3G services over the last two years. There are an estimated 1.55 million subscribers to mobile broadband already, and this has been helping to drive average revenue per user (ARPU) rates. Vodafone’s post-paid ARPU was TL38.7 in 2010, slightly behind Turkcell at TL41. Vodafone came in at number one in pre-paid ARPU with TL13.4. Blended ARPU rates have come in higher across the board despite a drop in the average price per minute (PPM) due to a drop in multi-SIM usage in the market.
Turkey has some of the highest mobile rates in the world due to high taxation levels, and this has been cited by industry leaders as an area that needs to change in order to accelerate the development of the economy. The government has responded with a reduction in the taxation of mobile internet from 25% to 5% and a reduction in the rates that can be charged to connect calls between operators. In 4Q 2010 Vodafone’s revenues increased 29.5%. Serpil Timuray told TBY that without this regulation the result would have been closer to 43%.
According to TurkStat, 41.6% of the 16-74 age group uses the internet with 6.7 million subscribers in 2010, 4.48 million of which are individuals, and 352,000 corporate or institutional. These numbers have risen sharply over recent years, and growth can be attributable to increasing computer and mobile broadband usage after 3G networks were launched in 2009.
TTNET, a subsidiary of Türk Telekom, is the main internet provider in the country with a 95% market share. A handful of alternative ISPs ply their trade, including Millenicom, TurkNet, SmileADSL, and Biri. Superonline is also offering fiber broadband in eight cities. The current infrastructure is mostly based on copper lines, and more widespread fiber-optic solutions will likely be required in five years according to increasing data demands. Unbundling laws set to strengthen alternative fixed-line telephony providers will also boost internet subscriptions, fostering a more competitive environment. This will be crucial in the government’s aims to increase the use of broadband internet in the workplace, which now stands at 90.9%, with 57.8% of enterprises owning a web site.
IT & ME
The Turkish Minister of State for Foreign Trade Zafer Çağlayan told TBY that high-tech industries are going to be the driver for Turkish exports over coming years, and the IT sector has been increasing its sophistication in both hardware and software, and exporting extensively. According to IGEME, although software sector exports came in at $12.9 million in 2009, this does not reflect the true figure, as a majority of software products are often included in other products and services. Hardware constitutes 40% of the total IT sector, and PC sales increased steadily between 2002 and 2009, reaching around 2 million units. The main players in the hardware sector include Vestel, which aims to gain a significant share of the European laptop market, Beko Elektronik, Casper, and Escort.
Turkey is also a leader in retail banking innovations and the use of technology in the commercial arena. Mete Güney of MasterCard Turkey told TBY that institutions are turning more and more to technology as a means to strengthen brands and attract customers, and they are increasingly investing in innovation. There are currently 3 million contactless cards in the country, with close to 40,000 readers. There are also several projects underway to roll out mobile payments, and extensive mobile payment tools are expected to emerge across the country from 2012 onwards.
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