Turkcell Iletisim Hizmetleri A.S. (TKC) Q2 2012 Results Earnings Call July 26, 2012 10:30 AM ET Executives Sureyya Ciliv – Chief Executive Officer Murat Erden – Acting Chief Financial Officer Koray Ozturkler – Chief Corporate Affairs Officer Emre Sayin – Chief Consumer Business Unit Officer Analysts Alex Kazbegi – Renaissance Capital Cesar Tiron – Morgan Stanley Vera Sutedja – Erste Group Mehmet Agyuz – YapıKredi Presentation Operator
While improving our top line, we manage to sustain a profitable business model in nominal terms. Our EBITDA rose year-on-year to TRY779 million, with an EBITDA margin of around 30.4%. Yet, prevailing intense competition continued to impact the margin levels of all players in the Turkish market. Strong operational performance, plus the absence of the one-off Belarus related items we recorded in the second quarter of last year, the increased Group net income to TRY534 million.Moving on to page five to talk about the driving force of this growth. Page five. In the second quarter of 2012, Turkcell Turkey grew by 9% year-on-year, with an increasing pace over the past three quarters. This was driven by accelerated growth in voice revenues by 6%, despite intensified competition in the Turkish mobile market. Meanwhile, the mobile broadband business fell about 44% year-on-year revenue growth. The operational performance of our subsidiaries were strong. Their contribution to the top line grew at 37%, mostly driven by Turkcell Superonline and Astelit. Overall, we are proud of the fact that Turkcell Group posted its third consecutive quarter of double digit growth with increasing momentum. Let's have a broader look at the margin of the market in Turkey on page six. During the second quarter of 2012, competitors pursuit of market share remained unchanged, in light of increase of net incentives, and a further decline in average prices, which continued to pressure market profitability. Minutes of usage rose by 15% year-on-year to this record peak for the Turkish market of 297 minutes, while revenue per minute fell to 7.5 Turkish Kurus, 8% down on 2011, mainly due to aggressive porting offers with higher off-net incentives. As highlighted earlier this year, we have been committed to defending our customer base for future growth. Our strategy is to sharpen customer focus and drive innovation and operational excellence. We strive to deliver superior customer experience.
We believe that we deliver great value to our customers through mobility and total telecom solutions, and we expect to receive an adequate return from these high value services that we provide. This is how we maintain our 53% market share, recording higher net additions in the second quarter, and deliver strong financial results.Moving on to page seven. As highlighted earlier, we registered strong net additions of 192,000 to reach a total of 34.7 million subscribers. This further improved our postpaid base with around 536,000 new customers, thanks to a simplified tariff structure with attractive and affordable offers communicated during the first half, and our contracting efforts. We are also pleased with a 5.6% rise in our blended ARPU, chiefly driven by a growing postpaid base in our subscriber mix, and a higher mobile broadband configuration. (Inaudible) to market trends, our MOU also rose by 14% year-on-year to around 250 minutes. Now moving to next slide, we will look at the smartphone market. The smartphone markets remain the key to growth of our mobile broadband business. Therefore, we focus on driving smartphone penetration through a [Technical Difficulty] this portfolio includes the latest models in smartphone technology, as well as more affordable alternatives that nevertheless, provide an acceptable and productive user experience. Recently, we included a new model to our portfolio, with the launch of Turkcell MaxiPlus 5, the successor to the Turkcell T-series smartphones and now, better equipped with smart applications developed in-house. Meanwhile the Turkcell MaxiPlus 5, designed for professionals, will be offered in the third quarter. The arrival of Turkcell branded smartphones greatly helped in widening access to mobile internet through its affordable prices, compared to high but declining average smartphone prices in the market. Read the rest of this transcript for free on seekingalpha.com