THE NEXT CONNECTION

Turkey 2013 | TELECOMS & IT | REVIEW: ICT

The telecoms sector is continuing its strong growth pattern, while the internet component is seeing a rapid uptake, with social media use proving especially popular.

With Turkey's young population, high standard of technical education, and growing consumer base, the country's ICT sector continues to grow as a key component of the economy overall. In 2012, the ICT sector reached a volume of almost $40 billion according to consultancy McBDC, up from $34 billion in 2011 and $27 billion in 2010. Now, as part of Vision 2023, the country aims for the sector to reach a volume of $160 billion.

INTERNET

As the share of households with internet access in Turkey continues to rise, the internet segment continues to grow as a key component of Turkey's ICT sector. According to TurkStat, almost 47.2% of Turkish households have access to the internet at home, giving Turkey the fifth largest internet population in Europe. As of March 2013, Turkey had 20.5 million internet subscribers and more than 36 million internet users, representing 45.7% of the Turkish population. Internet usage has seen an exponential rise in Turkey over the past decade. In 2003, the country had fewer than 1 million internet subscribers. This number grew to 8 million by 2010 and 14 million by 2011.

Even with internet penetration not yet at its peak, Turkey is still one of the most active countries on the internet. According to the European Travel Commission, Turkey's internet users rank third in Europe for user engagement, spending an average of 32.7 hours per month online and first for page consumption, visiting 3,706 pages per month.

Turkey also ranks high in terms of social media usage. Facebook accounts for almost 30% of time spent online in Turkey, making it the top website in the country, followed by Microsoft and Google sites. In addition, Turkey is the fourth largest country on Facebook as measured by the number of users. Turkey has almost 10 million Twitter users, with 16.6% of Turks over the age of 15 members.

TTNET, part of the Türk Telekom Group, remains the largest player among Turkish internet service providers (ISPs), with 84% of the internet market. Superonline, a subsidiary of Turkcell, comes in second, with a 6.5% share of the ISP market, followed by Doğan Telekom, Vodafone Net, and Turknet.

TELECOMMUNICATIONS

As in many countries around the world, mobile telephony has rapidly overtaken fixed-line telephony in Turkey, and as a result, telecommunications remains the largest segment in Turkey's ICT sector. After seeing decades of steady growth, the number of fixed-line telephone subscribers in Turkey began to decrease in 2004, falling from a peak of just over 19 million at the end of 2004 to just over 13.5 million subscribers in 1Q2013. Turkey now has a fixed-line penetration rate of around 18%. Türk Telekom reported that its fixed-line subscribers had fallen from 13.2 million in 1Q2013 to 13 million in 2Q2013, demonstrating the slow stagnation of the market.

While the number of fixed-line telephone subscribers has decreased, the number of mobile phone users has continued to increase rapidly, dwarfing even Turkey's peak levels of fixed-line penetration. As of 1Q2013, Turkey had 67.9 million mobile phone subscribers. Of these, 40 million are users of 3G mobile technology. Now, as mobile penetration approaches 100%, growth in subscriber numbers has begun to decelerate. The year 2012 saw a growth of 2.4 million subscribers, down from 3.6 million in 2011.

The growth in mobile phone penetration has also fuelled growth in the handset market, particularly for smartphones. Turks spent TL7.2 billion on smartphones in 1Q2013 alone, up 23.1% from the previous year. This has made Turkey the most rapidly growing smartphone market in Europe. Smartphone sales have driven continued growth in the telecommunication sector overall, which reached TL2.4 billion in 1Q2013. Smartphones now account for 88% of the smart/mobile phone market in Turkey. Furthermore, Euromonitor International predicts that the market penetration of smartphones will increase by 124% by 2017.

There is intense competition between Turkey's three mobile phone operators; Turkcell, Vodafone, and Avea. Turkcell is the market leader, with 34.5 million subscribers and a market share of 52%. Vodafone comes in second with a market share of 28%, and Avea is the third-largest mobile provider with a 20% market share.

E-COMMERCE

Turkey's booming e-commerce sector has attracted a great deal of international attention in recent years, as both internet penetration and the country's consumer base continue to grow. The sector has seen a number of high-profile acquisitions and investments from e-commerce giants such as Amazon, eBay, and South Africa's Naspers. In 2012, the sector showed a phenomenal 60% growth. According to İlker Baydar, the General Manager of Hepsiburada, Turkey's leading e-commerce website, “I predict that there will be a huge jump in online retail soon. There are about 37 million connected people in Turkey, with about 9 million people who regularly shop online." The sector is predicted to see annual growth of 15.8% over the next four years, reaching a value of $6.6 billion, according to Euromonitor International.

One of Turkey's leading e-commerce websites is Markafoni, which is the second-most visited, members-only shopping network in the world. The company was partially acquired by South African media giant Naspers in 2011, and is now expanding into other emerging markets, such as Eastern Europe. As Sina Afra, Chairman and CEO of Markafoni explained to TBY “Markafoni was the first Turkish internet company to open branches abroad. Currently, we are one of the largest e-commerce companies in Turkey according to revenue."

One of the major factors in Turkey's booming e-commerce sector is its strength in card payments. As Mete Guney, General Manager of MasterCard Southeast Europe explained to TBY, “Turkey has always been a very advanced country in terms of the payment card industry. Since the late 1990s, Turkish banks have been adept at building very advanced solutions that meet the needs of customers." According to Guney, Turkey has more than 55 million credit cards and 90 million debit cards, equaling around three cards per adult. Markofoni's Afra expressed similar a similar sentiment, telling TBY, “Turkey has an incredibly good credit-content ratio; it is ranked number two after the UK." This, he says is “another structural reason why Turkey is so interesting for e-commerce and why these companies grow so fast."

Despite the strength of the sector, most e-commerce executives agree that it still has significant room for growth. As Hepsiburada's Baydar explained to TBY, “There is... a huge number of young internet users who are not shopping online yet. The bulk of online shoppers today are aged between 25 and 44 years of age." Similarly, Sina Afra from Markofoni told TBY that the e-commerce sector is “still underdeveloped because there are 10 million e-commerce users and 36 million internet users. The penetration rate in Turkey is 47%, compared to 63% in the EU. There is still the potential to grow and this is why the Turkish internet segment is receiving so much attention from private equity and investment; everyone is looking toward the future."

SOFTWARE

Turkey's software market reached $933 million in 2012, and is forecast to reach $1.5 billion by 2013, according to the US Department of Commerce. The country's software exports have grown 75% over the past four years, reaching TL3.1 billion in exports at the end of 2012. According to the Ministry of Science, Industry, and Technology, Turkey has 2,316 software companies, of which 1,060 operate in the country's teknoparks. According to the Turkish Software Industrialists Association (YASAD), Turkey ranks second in Europe in terms of engineering power.

Ali Faramawy, President of Microsoft Middle East and Africa explained that, for Microsoft, Turkey serves as an example for Microsoft operations in many other regions. “There is a large enterprise market you have to look at... There are SMEs that we do not necessarily reach directly, but we reach them through different channels. You look for a meaningful consumer market and a vibrant channel or IT ecosystem. Turkey has all of these elements."