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Turkey 2014 | ICT | REVIEW: ICT

Turkey is attempting to boost its ICT sector by increasing access to broadband infrastructure, as more and more of the younger generation demand online services.

Turkey's fast-growing ICT sector has become an important source of growth for the local economy, driven by a young population eager to adopt new technologies related to mobile telephony and the internet. As of the end of 2013, the annual growth rate for internet subscribers reached 18%, with 4Q2013 subscriber numbers rising 5% from the previous quarter, and the total number of broadband subscribers at 32.6 million, according to Turkey's Information and Communications Technologies Authority (ICTA).

The Authority estimates that the ICT sector in Turkey grew by about 12% in 2013, employs around 154,000 people and, with sector activity totaling some TL78 billion, accounts for approximately 3% of GDP. As of February 2014, the ICTA recorded 521 operators providing services in the Turkish market, with 841 authorizations.

E-commerce is growing fast and totaled about TL35 billion in 2013. While R&D expenditure in the sector in Turkey accounts for a lower percentage of total GDP than in fellow OECD countries—0.85%, versus an OECD average of 2.7%—the government has ambitious plans for the ICT sector. The nation has set a centennial goal, to mark the 100th anniversary of the Republic's founding, by 2023 to see ICT account to 8% of GDP. According to the Prime Ministry,Turkey by 2023 will have increased R&D spending in the ICT sector to 3% of GDP.

The Ministry of Transportation and Communications is the overall regulator of most activity in the ICT sector in Turkey, enjoying direct authority over mobile network operators, internet service providers, and landline operators. The main reform desired by both industry and consumers is to see taxes lowered on mobile and landline telephony, as Turkey currently imposes among the highest taxes in the world on both categories, with 48.2% total taxes on mobile and 33% on fixed-line telephony.

FIXED-LINE SERVICES

Since 2005, former state landline monopoly Türk Telekom has been majority owned by Oger Telecom. As of 2013, Turkey has 13.6 million fixed telephony subscribers with a penetration rate of 17.68%. The ICTA notes, however, that with a high average household size of around 3.69, the figure indicates that a significant share of the population enjoys fixed telephony services.

Since Turkey opened up fixed-line services to competition in 2011, alternative operators have won a 13% market share for local calls, while Türk Telekom still commands the remaining 87% of the market. Alternative operators record their highest market shares in international calls, with a 45% share of international call origination and a 68% share for international calls terminated on a fixed network.

The fixed-line sector in Turkey has seen a steady decline in the number of subscribers as well as penetration rate since 2008, with subscribers dropping by some 4 million, from 17.5 million in 2008 to 13.55 million in 2013. In the same period, the penetration rate declined from 24.5% to 17.68%, indicative of the trend toward mobile telephony. Despite these trends, as of 4Q2013, Türk Telekom had an average revenue per user (ARPU) of TL22.53, over TL1 better than the mobile operators.

Türk Telekom, over the past couple of years, has also been experiencing a decline in minutes of usage (MOU), which dropped from 200 in 1Q2012 to 155 in 4Q2013. There has also been a rise in mobile's share of total traffic, which increased by nearly one-third, from 472 million minutes in 1Q2013 to 638 million in 4Q2013.

MOBILE

The mobile market in Turkey is split among three operators: Avea, Turkcell, and Vodafone, and is marked by stiff price competition. Vodafone is the only wholly-owned foreign operator, while Avea and Turkcell have different levels of Turkish ownership. The Turkish Treasury holds 30% of Avea shares, Oger Telecom 55%, and the remainder is free float. The precise control of Turkcell has been in dispute for years, but the main shareholder is Sonera Holding, in turn owned by TeliaSonera, Turkish conglomerate Çukurova Holding, and MV Holding.

As of the end of 2013, these operators had more than 69 million mobile subscribers among them, which translates into a mobile penetration rate of 90.9%, though the ICTA says the penetration rate exceeds 100% when excluding the country's child population under 9 years of age. At the same time, Turkey had 49.3 million 3G subscribers.

Turkcell commands just over half the market with a 50.53% share of subscribers, while Vodafone has 28.61%, and Avea a 20.86% market share. But Turkcell has been struggling of late, often losing hundreds of thousands of subscribers per quarter in the past two years—more than a million overall in 2013.

Avea has been the consistent winner in the subscription race in the same period—in 4Q2013 Avea gained 304,000 subscribers, while Vodafone lost 112,000, and Turkcell dropped a further 192,000 subscribers. In terms of share of revenue, Turkcell holds a 47.86% market share, while Vodafone has 31.98% and Avea 20.16%. Despite losing subscribers, Turkcell posted the lowest churn rate of all mobile operators in 4Q2013, of 2.70% as compared to 3.18% for Vodafone and 3.02% for Avea.

Corporate subscribers make up some 9% of total mobile subscribers and the rest are individual accounts. The three mobile network operators have varying revenue from voice, data, and messaging. Turkcell depends on voice traffic for 63.5% of its revenue, Vodafone for 65.91%, and Avea for 62.5%. SMS and MMS account for 8.42% of Turkcell's revenue, while at Avea the figure is 9.14% and at Vodafone 12.44%. Data streaming comprises 19.14% of Vodafone revenue, 20.37% for Turkcell, and 25.08% for Avea.

Nearly 60% of mobile subscribers use pre-paid cards. An interesting difference is seen in the minutes of usage (MoU) for the operators. As of December 2013, Avea posted an MoU of 400, versus only 275 at Turkcell, while Vodafone had 386. The average MoU rate for Turkey was 330 as of the end of 2013.

IT

On the communications side, Turkey over the years has kept up a strong level of investment in infrastructure and backbone capacity. The Turkish government has promoted software development through the establishment of special IT and entrepreneurial centers at universities, while also providing start-up funds and tax incentives for both software and hardware developers.

The International Investors Association of Turkey (YASED) published an ICT report that listed main threats to the IT sector as being high tax rates, predictability of regulations, price-oriented tender policies, insufficiency of venture capital, violations on intellectual property rights, and slow bureaucracy. The government points to its efforts to focus on the sector with new initiatives and a special R&D law for investors. As far as national capacity, new cables, and routes to expand capacity are concerned, Türk Telekom has installed 181,973 kilometers of fiber optic infrastructure, about four times the combined 45,440 kilometers of alternative operators. More than half of this infrastructure is used for backbone and the remainder for access. Demand for the latest technologies, whether 4G or LTE, is rising. In Turkey today, according to the ICTA, about 81% of mobile internet connections via computer have a data usage of 100 MB and above. As with the rest of the world, multimedia convergence will make devices multi-functional and blur, or even erase, the boundaries between PCs, laptops, tablets, and mobile phones. The Turkish authorities aim to maximize that evolution's benefit for the country.