TBY talks to Süreyya Ciliv, CEO of Turkcell, on the mobile market and his company’s outlook for international expansion.
TBY What is your outlook for the Turkish economy, and what does this signal for Turkcell?
SÜREYYA CİLİV The Turkish economy continues to distinguish itself from Europe with its strong growth recovery, healthy financial sector, and robust public debt dynamics. It has maintained its very strong performance trend, as evidenced by its growth level at 8.9% in 2010. This, coupled with improving consumer confidence, the strengthening financial position of the corporate sector, and the increasing availability of smartphones in the Turkish market, will drive growth in the mobile business in Turkey. We believe the stable macroeconomic environment and the young, tech-savvy population will also be a main driver of growth for the telecommunications sector—particularly for Turkcell. Turkcell will continue to enjoy its leading position as it covers approximately 83% of the Turkish population through its 3G and 99.07% through its 2G technology supported network. Turkcell has become one of the first among the global operators to have implemented HSDPA+ and achieved a 42.2 Mbps speed using the HSPA multi-carrier solution. Turkcell has a premium loyal customer base—31.4% of which is post-paid—and an outstanding portfolio of products and services with more than 3,000 applications in the Application Store including 24 unique Turkcell-branded applications, as well as Turkcell-branded terminal bundled offers, which all lead to increasing mobile internet revenues. We will continue to strengthen our regional leadership through our growing mobile internet business, rising group synergy, in particular through our wholly-owned subsidiary Turkcell Superonline, which provides fixed broadband services by investing in the build-up of a fiber-optic network, and the contribution of our other consolidated subsidiaries.
How would you assess the growth potential of the mobile communications market in Turkey, and what is unique to this market relative to others in Europe?
Turkey has the fifth largest labor force among EU countries thanks to its young population, and is the sixth largest economy in Europe. The country has a very young and dynamic market with a population of 73 million, and a low average age. People under the age of 35 represent 60% of the population, which compares well relative to European averages. With this young population, Turkey has the potential to become one of the best performing markets as consumer confidence increases. The young population is eager to use new technologies and is a key driver for the telecoms market. The Turkish telecoms market has three players, and the penetration rate is at 84% based on the authorities’ 1Q 2011 report, well below the European average. The average revenue per user (ARPU) level is also quite low. One reason for this is the high tax rates present in Turkey, and there is clearly an upside to growing revenues with lower tax rates. With mobile spending as a proportion of GDP at 1.3%, similar to Europe, there is clearly potential to expand penetration rates with lower tax rates. Subscriber composition also differs from EU trends. Based on the authorities’ 1Q 2011 report, in Turkey, the share of post-paid subscribers is 33%, while the EU average is 47%. As for Turkcell, the share of post-paid subscribers is around 31.4%. Unlike our peers, we do not give unlimited voice and data packages and put caps on any kinds of usage incentives that enable us to utilize our network capacity efficiently and secure our profitability levels.
With more than 33 million subscribers, Turkcell is the leading operator in Turkey and the third biggest GSM operator in Europe. What strengths have allowed Turkcell to grow and succeed over the last 17 years?
Including our 33.1 million Turkish subscribers, Turkcell has 60.4 million subscribers as of March 31, 2011. As a regional leader, Turkcell has operations in eight countries other than Turkey: Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, Northern Cyprus, Ukraine, and Germany, and is the market leader in five. Turkcell is the number three mobile operator in Europe and number 16 in the world in terms of the number of subscribers. Turkcell has been listed on the NYSE and the ISE since 2000, and is the only NYSE-listed company in Turkey. In 2010, we maintained our market leadership in Turkey in terms of the subscriber base, share of traffic, and revenue. Revenues reached TL9 billion, yielding a net profit of TL1.8 billion and TL15.1 billion in assets. By the end of 1Q 2011, Turkcell Group had invested TL18.1 billion in its network, including 2G and 3G licenses. We are delivering total telecom solutions to our loyal customer base with a user experience of the highest level. We have differentiating value propositions, which include superior technologies, more advantages, and outstanding service quality throughout our extensive network. We are also a leader in social responsibility, setting us apart from the competition. Our commitment to the internet business through continuing investments in 3G and the fiber optic network and innovative products, services, and applications are also at the heart of our success.
You have significant investments in several foreign countries in the region. What role do these investments play in Turkcell’s overall business strategy?
The majority of our revenues come from the Turkish market, where we are leading with a 54% subscriber market share. While we focus on our Turkish mobile business of providing voice services, data offers, and total telecoms solutions, expanding into international markets and adjacent businesses has always been an important goal for us to sustain our growth. Additionally, through our international subsidiaries, we secure the diversification of our investments.
With the recent launch of our Mobile Virtual Network Operator (MVNO) in Germany, we now operate in nine different countries. Globally, customer demand for converged and differentiated services as well as devices is growing. As part of our growth strategy, we now focus more on efficiency in our delivery of services to sustain our operating margins and grow the contribution of our international subsidiaries to Turkcell Group’s consolidated financials.
We will continue to ease and enrich the lives of our customers with leading communication and technology solutions and strive to build value for our customers, stakeholders, and employees in line with our vision.
Turkcell has been very active in European R&D funding programs since 2005 and has made clear its strategy to be a technology and innovation-orientated company. What role does R&D play in your vision for the future of Turkcell?
As the leading R&D and innovation center in Turkey, the technology that we’ve developed is transforming and facilitating the lives of more than 80 million users across 14 countries. Since inception, we have applied for 74 patents in total: 56 national and 18 international. We succeed because we are able to manage innovation by gathering the right people, turning their ideas into assets, and bringing them to market quickly and efficiently. We collaborate with global business partners, universities, and research centers and support institutions such as Eureka. Our aim is to encourage a “reverse brain drain” effect through our collaboration with international partners, ensuring that our employees see Turkey and Turkcell Technology as great places to work. We aim to develop our global footprint beyond our current geographical position. In areas such as North Africa, Eastern Europe, and the Middle East we believe that the key areas of growth will be mobile marketing and SIM-based services such as services fuelled by Near Field Communication (NFC).
What new products, services, and technologies do you feel are most significant at the moment, both for Turkcell and the industry in general?
New technology platforms such as application stores for the iPhone, Palm, Nokia, Blackberry, and Android will continue to drive the market going forward—particularly in the areas of multimedia, location-based services, and augmented reality. The projects in progress that are particularly exciting include our NFC framework, and our new multimedia and location-based services. We also see an encouraging trend in the area of mobile marketing, where Turkcell has taken the lead in the mobile products and services market with its tailor-made solutions. In 2010, 1,600 mobile marketing projects were completed in 50 different sectors with 353 brands—50 of which are global. In terms of customer penetration, more than 20 million subscribers have participated in mobile marketing activities via their mobile phones since 2008. As a founding member of the Global Mobile Marketing Association, Turkcell continues to assume an active role on the association’s board and its committees, supporting the efforts to increase the marketing sector‘s awareness of mobile marketing.
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