TBY talks to Cem Çelebiler, Managing Director of TurkNet, on innovation, the telecoms sector, and the future of alternative telecoms providers.
TBY TurkNet is the largest independent ADSL provider in Turkey, capitalized through foreign venture capital. How does this differentiate the company?
CEM ÇELEBİLER We have two foreign private equity backers, and we have been around since 1996. This gives us a definite edge. We are purely focused on the telecoms market, and invested at the right time and in the right way. For the customer base, communications can be a sensitive topic, and in that sense our corporate customers have peace of mind that there is no secondary agenda involved. Our history also gives us a certain level of credibility as a lot of conglomerates that have recently entered the market subsequently exited, having not being able to find exactly what they wanted. We have much experience in this sector, we are focused on our aims, and this means that we are here to stay. In terms of innovation, our focus has given us an edge in being able to roll out solutions faster than our competitors. ICT is a very rapidly changing sector, so this is important.
Can you tell us more about your track record of innovation?
We have been leading the sector in terms of many innovations. We were amongst the first alternative operators in Turkey to provide workshop private networks, allowing companies to carry out inter-office communication. We were also the first operator in Turkey to start local unbundling, which is a key benchmark in telecoms liberalization. We were one of the first operators to offer call-by-call services, whereby any telephone subscriber can dial a pre-fixed number to get around the incumbent operator to get a lower rate. On the billing front, we were the first operator to offer the solution of combining bills into a single package. These are services that are prevalent in Western Europe but were lacking in Turkey. We have brought a lot to the sector.
Where are you currently focusing your R&D resources?
The telecommunications market in Turkey is opening up very rapidly, and it is a very exciting time. This is all due to a new regulatory framework. At the end of 2008 a new telecoms law was passed. Some of the provisions were post-dated by six months into 2009, and then the regulator performed secondary consultations and began to bring everything in line. This process is now beginning to bear fruit, and this has yielded a lot of exciting developments. We now have fixed-number portability in Turkey, and the ability to make fiber investments as alternative operators. In this area TurkNet is investing a lot in metropolitan and international fiber. We believe that the market in Turkey will follow similar developments in Eastern and Western Europe, which means a move towards full unbundling. These are some of the areas we are investing a lot in. Turkey is developing rapidly, yet it is still emerging from a phase in which the incumbent operator retains a fairly significant market share, higher than in Western Europe mainly due to delays in regulatory change. Recently, ADSL operator migration and naked ADSL have become possible. These are very exciting developments. This is driving a lot of the opportunity in the market. Naked ADSL is a way by which you can get a broadband connection without the need to get a phone line as well. This is in high demand, especially amongst the younger population. Finally, the data center market in terms of B2B communications is another interesting area. In 2001 we were one of the first operators to a build fairly substantial, carrier-neutral data center, where any provider of fiber infrastructure is able to converge their network, and this market is growing quickly as more and more companies and international operators are looking to locate their equipment at a data center and access their data there in a secure manner.
You mentioned that independent providers are growing in the market quite rapidly. What is your current market share, and what are your goals?
According to the regulator, in the broadband and telephony spaces the alternative operators have a combined market share of 10%, with the incumbent retaining around 90%. EU averages for incumbents’ market share are generally between 25% and 50%, and so there is a long way to go in the convergence of the Turkish and European story. This is changing quickly, and we expect that in the next couple of years Turkey will resemble European markets more closely than it does currently. The drivers behind this will be some of the regulations that I have mentioned, including fixed-number portability and local unbundling.
What is your outlook for the Turkish economy and telecoms sector?
There are two drivers for our industry. The telecoms sector is very strongly linked to the success of the overall economy. In that respect, we are confident in the growth and development of the sector. Turkey is also still seeing good FDI levels, and this is driving a need for telecommunications services amongst incoming companies. The development of the economy is also driving the need for lower-cost services, and that helps us as an alternative provider. The second driver is the shift to a competitive space from a historically more monopolistic space. Consumers are increasingly aware that they have a choice. This revolution began on the corporate side, but residential consumers are increasingly becoming aware that they can get their telephony and internet services from an alternative provider.
You started this company in a transitional time for the sector in 1996. What is your ultimate vision for the future of the company?
We see our future on the stock market. Two incumbent companies, Turkcell and Türk Telekom, are listed already, but when you look at comparable stock markets in Eastern and Western Europe alternative telecoms operators are also listed. As the industry grows, a possible listing on the Istanbul Stock Exchange is envisioned. There will be to some extent a consolidation in the sector going forward, meaning perhaps an acquisition of our competitors or the other way around. At the moment in the fixed communications space there isn’t any major foreign investment. Going forward as regulatory infrastructure gains clarity for investors it is possible that foreign investors may look to invest into the fixed space. So, we will see. We are focusing on our fiber network and in a few more years that will take us to another level, and an IPO may make sense. We had 40% growth in 2010, and our budget for 2011 targets 75% growth. I think 2013 is a possible date for an IPO.
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