TBY talks to Serpil Timuray, CEO of Vodafone Turkey, on Vodafone's investments, its success in the country, and targets in the sector.

Serpil Timuray
Serpil Timuray began her career in 1991 at Procter&Gamble, where she pursued several marketing positions until 1999, when she was appointed to the executive committee of the company in Turkey. In June 1999 she joined Groupe Danone, where she worked until the end of 2008, occupying the position of General Manager for six years. In January 2009 she became the CEO of Vodafone Turkey. She has been honored as the “Professional of the Year” for 2010 by the Turkish Ekonomist Magazine, and as “Young Global Leader” for 2009 by the World Economic Forum. Timuray is currently the Vice-Chairperson of the International Investors Association of Turkey Board (YASED).

How much was spent on upgrading Telsim's network, and is there a need for more investment to level the network up to international standards?

Vodafone's entrance into Turkey represents the second largest FDI in the country's history and the initial acquisition spending was only the beginning of broader long-term investment in the country. The cumulative investment made until this day, including the acquisition price, has already exceeded TL10 billion. Our intensive investment plan has been centered around one single objective: to deliver the best customer experience to our subscribers.

Right after the acquisition, we prioritized our investments to upgrade our technology infrastructure. In the last three years, we have expanded our network coverage extensively by tripling the total number of our base stations, including expansion made after the 3G launch as of mid-2009. Meanwhile, together with our trade business partners, we have also invested in an expansion of our sales and distribution capabilities, enlarging our distribution network to over 1,000 exclusive shops across Turkey and to 90% numeric distribution in the telecoms retail channel. Notably, we also made significant investments to build our brand as a trustmark in the hearts and minds of our customers.

Since your appointment as CEO in 2009, Vodafone's market share has increased from 18.6% to 26.4%, with 16.7 million subscribers. What is behind this success?

Back at the beginning of 2009, with strong confidence in the potential of the Turkish market, we decided to develop a new long-term strategic plan for Vodafone Turkey. This business plan was developed with a “bottom-up" approach involving the ideas and inputs of a larger group of managers in the company. The approach was instrumental in empowering our team to contribute to the strategies of the company and installing confidence to execute successful plans. We selected “customer centricity" as the primary focus of our business plan. Customer satisfaction and moreover the customer recommendation rate became the key performance indicators embraced by the whole organization.

We are pleased with our progress so far and think that our business performance is a solid indicator of the robustness of our strategic plan. Our revenue has been growing at around the 30% level over the last few quarters, making Vodafone Turkey the fastest growing operating company in the Vodafone Europe region. Our business plan has been focused on three key strategic segments where we demonstrated remarkable growth rates in 4Q 2010. Firstly, the post-paid customer base has grown by 78% on a year-on-year basis. Secondly, in enterprise segment, our revenue has grown by 49% year-on-year. Thirdly, in data, we have also registered a record growth rate of 155%. As a result, over the last eight quarters, we have increased our revenue market share by nearly 8 percentage points to a level of 26.4%. Surpassing the 25% revenue market share has been an important milestone for us.

Was Vodafone able to take advantage in the post-mobile number portability environment?

The introduction of mobile number portability in November 2008 marked one of the most important milestones in increasing the fairness and competitiveness in the mobile telecommunications industry. Initially, Vodafone Turkey was not off to a very good start. Our revenue trend line was actually declining. After the launch of our new customer-centric business plan, we went into a recovery period of reversing the losses. With our turnaround plan, we were able to re-gain our subscribers and consequently the revenues. Two years down the line I can say that we have successfully achieved our goal. Today, Vodafone Turkey is the undisputed leader in number portability with a net 2 million number additions since the November 2008 launch to date.

Vodafone Turkey was among the best performing members of the entire Vodafone group during the financial crisis. What can this be attributed to?

The Turkish economy during the global crisis did relatively better than most of the developed countries. This is partially due to the soundness of the Turkish banking sector, which has gone through a substantial reform process following the 2001 crisis, and partly also due to the adaptability and agility of the Turkish business environment. As a result of the resilience of the Turkish economy and an ambitious turnaround plan, Vodafone Turkey has succeeded in achieving remarkable growth despite the global downturn.

What has the significance of 3G been for Vodafone?

The 3G launch has marked another important milestone in the Turkish telecoms sector. Turkey launched 3G services later than Europe. This provided Turkey with several advantages; namely to learn from the experiences of the European operators, and benefit from the advanced network technologies in line with the advancement of mobile devices. These factors have accelerated the growth in the mobile data market post-3G launch. Turkey has a very high potential in data adoption due to its young population. Turkey ranks third in terms of Facebook usage around the world. However, PC penetration still remains low. As mobile phones transform into mini-computers, mobile internet offers a great opportunity for the future.

Vodafone Turkey has taken the launch of 3G as a strategic program to reposition itself strongly in the data space and showcase its technological and innovative capabilities. Likewise, our customers have shown great interest in our 3G products and services. Consequently, we demonstrated the fastest data growth rate, last quarter data revenue growth was at 155% year-on-year. The 3G subscription ratio in our total base has reached the 35% level, the highest ratio in the market.

What is your Average Revenue Per User (ARPU) and how does it compare to your competitors?

Vodafone Turkey's blended ARPU reached TL17.80 in the last quarter, increasing by 24% on a year-on-year basis. Notably, we have managed to increase our ARPU in an environment in which the market average revenue per minute (ARPM) has decreased around by 30%. Our ARPU increase has largely been achieved through our “value for money" strategy, which has been an important driver of our growth. We have revamped our tariffs and focused on offering better value to our customers. Our ARPU increase is also attributable to us consolidating the usage of our subscribers at Vodafone. In other words, we have focused on increasing the activity ratio of our customers as an important indicator to leverage our ARPU in the context of declining market pricing.

Turkey has some of the highest mobile rates in the world due to high taxation and charges. Has this held back the development of the sector?

In terms of taxation and regulatory fees imposed on the telecoms sector, Turkey, by far, has the highest taxes and fees in the world. It is essential that these fees are reduced in order for the mobile telecoms sector to fuel the development of the economy. There is concrete evidence that the growth of mobile telecoms and mobile data usage promotes GDP growth.

In order for the telecoms industry to contribute fully to Turkey's economic growth, governmental bodies need to build on the earlier efforts where they made some reductions in mobile internet taxes. As the tax base broadens and revenues increase, the government's fiscal budget could possibly provide room for a reform and reduction in telecoms taxation and make the system fairer, simpler, and easier to administer. Reformed telecoms taxation will increase Turkey's global competitiveness and better serve Turkish consumers' mobile telecoms needs. Today, 84% of telecoms traffic comes from mobile telephony. This is an impressive ratio as there are still many countries where this ratio is below 50%. In order for us to seize the future potentials and make services available to all industries, improvements in telecoms taxation are necessary and crucial.