21% GROWTH IN 2018

Turkey 2020 | TELECOMS & IT | VIP INTERVIEW

TBY talks to Kaan Terzioğlu, CEO of Turkcell, on a successful year, shifting trends in international investment, and improving the telecommunications experience in Turkey.

What are the main reasons behind Turkcell's success over the past year?

2018 was a remarkable year for Turkcell, during which we exceeded all the targets we had set for ourselves and communicated to the market. These results are not just about one year, but are the result of the combination of hard work over the last four years and of our journey from being a traditional network-oriented telco to a telco that is experience oriented – what we call a digital operator. A traditional telco-customer relationship is around 32 minutes a day. If we look at the trillions of dollars generated by the digital economy in the last 10 years, very little of that trickled down to telcos, which is a missed opportunity. That is why four years ago, we made a bold move in our strategy and said we will not be satisfied with the 32-minute relationship and want to take that to all 1,440 minutes in a day. To do that, we had to focus on the things that customers loved consuming—music, TV, instant messaging, search engines, and all types of magazines and newspapers. As we built our capabilities on those digital services, our relationship with customers expanded and got deeper, and this allowed us to create more value. All those efforts to date translated to Turkcell being the fastest-growing telco in the world. In 2018, we grew 20.8% and reached TL 21.3 billion, while the 24-month growth rate was 49%. What we see is not only a high-performing telco but one that has adapted a new business model. Our vision in Turkcell is simple and is represented by two letters: DO or “digital operator." Our strategy is also simple and is represented by the number of minutes in a day: 1440. DO 1440 will be something that customers will hear more from us, as we explain how we created this high-performing operation.

How has today's globalized economy shaped the way Turkcell invests internationally?

Today's global dynamics do not necessitate a telco growing globally by acquiring or starting other telcos internationally. Belarus, Cyprus, and Ukraine are examples of Turkcell's old strategy. They are all investments that we made in the past that we are pleased with, though in the future our global growth story will come not from owning telco assets outside of Turkey but digital services. BiP, our communications application, has been downloaded in more than 190 countries and is growing quickly. Our products and everything we do is done at world-class standards, which is why many people outside of Turkey where we have no operations also choose us. We have close to 10,000 BIP customers in Oman, close to 150,000 in the UAE, 250,000 in Saudi Arabia, and 110,000 in Morocco. We do not have telcos there though we have customers, and we provide a service to those people. This expansion model requires us to work in partnership with other telcos. Our business model is completely different from the OTT players around the world; data—the most important natural asset in every country—has to be processed locally and turned into services locally. The telcos in every country have a responsibility do to that. That is why we develop partnerships with telcos in other countries to convert them into digital operators and is the reason why we intend to build an international franchise not to be just one company that provides services from Turkey to everywhere, but to offer the technology know-how to be operated in the countries creating jobs, tax dollars, and investment locally in every country that we partner with.

How do your international operations act as a hedge against volatility in your Turkish operations?

We do not rely just on our international operations as a means of hedging our risks in Turkey; we have a complete business hedging strategy. For every infrastructure investment we make, the average payback time is around four to five years. We also make sure we match our loans with the same maturity, which allows us to be less exposed to liquidity risk, a problem for Turkey. We continuously hedge against maturity risks, foreign currency risks, and interest rate risks and have created a company whose growth plans are always fully funded.

From an investment and technology standpoint, how important is your partnership with Huawei?

Huawei is one of our infrastructure technology providers. We work around 50% with Ericsson and 50% with Huawei in Turkey in terms of deploying our mobile infrastructure and fixed infrastructure. Based on our experience with Huawei, it has been a trustworthy and reliable business partner and has helped us significantly during the four years of Turkcell's transformation. We are aware of the warnings surrounding Huawei; however, on the other side, we are responsible for securing our networks, and we have the ability to ensure that our networks are secure and protected. We have a responsibility to keep our networks secure, and Huawei has been a reliable and resilient business partner.

What responsibilities do telcos have as network technologies continue to expand?

We should stop defining network technologies as simply 5G or any generation of network, because these are not the right terms for what we should expect in the future. We are coming to a world of democratization of information and AI, which has created not only a digital economy but also all sorts of ills for society. In Turkey, we have a saying that bad news travels fast, and in the digital age it is exactly the same; misinformation and other ways to manipulate the way people think travel quickly. As we move in this direction, we also need to prepare for the era of AI, where digital operators like Turkcell will have a major role in making sure that a country's infrastructure is ready. Every industry will experience a different impact from AI. Many people ask, what is today's killer app? The killer app depends on what one looks for, though to start with it is AI, because AI will come with completely different ways of doing business.

To what extent should Turkish companies collaborate to improve the country's telecommunications experience?

Turkey has a deficiency in terms of fiber infrastructure—the country has 10% of the infrastructure it needs and a limited number of home passes. Today, Turkcell has about 5 million home passes, Vodafone has around 1 million, and Turksat has another 4-5 million. To optimize our resources, we decided to have access to each other's home passes in order to bundle our services and increase value. However, with everything pooled together, we perhaps reach around 5.5 million home passes, and Turkey needs 20. It is a great step in the right direction; however, in addition to sharing existing infrastructure, we should open the doors to jointly investing in new infrastructure, which would benefit the country. None of the companies in the telecoms space are wealthy enough or in a position to alone make the major investments we need. Companies need to be allowed to combine their resources on certain infrastructure investments of national interest.

What plans are in place for the next 12 months, and what are your objectives to maintain the growth seen in 2018?

There are two kinds of information: headlines and trend lines. As investors, we need to look to trend lines in order to block out some of the panicky nature of news that pops up as headlines. The trend lines say Turkey is a young, growing economy that has proven its resilience time and again despite different challenges. Our domestic market is extremely strong, and we will continue to invest in digital infrastructure and digital services. However, what makes me extremely excited about in the coming years is exporting the digital know-how we have created. We are excited about our DO 1440 strategy and expanding what we export to other telcos that have been late to the game or are not blessed with the type of resources we have. Customers will be seeing many announcements from us in different parts of the world, Turkcell partnering with other telcos, and exporting BiP, Fizy, TV+, Yaani, and Lifebox. We will help them transform themselves into digital operators and will take this industry back on a growth track.