Global Insight Perspective | |
Significance | The operator has announced its first-half results with revenue increases on all its core services. |
Implications | The operator needs to sap as much revenue as possible from fixed-line services, IP TV, and VOD services will play an important role in the future. |
Outlook | The operator faces tough competition in the mobile market however is expected to show on going growth from broadband services. |
Turk Telekom reported first-half 2008 results of 4,977 million Turkish lira, a 12% increase year-on-year (y/y) with a 36% revenue increase from its mobile unit Avea to 1,017 million lira, with ADSL also up 36% y/y to 791 million lira. Operating expenses, which came to 2,796 million lira, was up 15% y/y. The increase in operating expenses was due to mobile growth and maintenance & repair to improve network quality. EBITDA was 2,182 million lira up 6.9% with a margin of 44%, operating profit came to 1,352 million lira, up 12.6% y/y while net income was 1,026, down 6.9% y/y.
The operator reported a decrease in PSTN line of 2% y/y to 17.8 million at the end of the first half with an ARPU of 24.3 lira per month up 2.9%. ADSL connections were up 15.5% y/y to 5.2 million with an AROU of 26.8 lira, down 6.2%. Avea reported 11 million customers up 10% y/y with 3.9 million pre-paid customers and 7.1 post-paid customers. The operator maintained its market share in domestic telephony and wholesale broadband in H1 2008 compared to 2007 year end, it increased its GSM market share to 17.2% compared to the 16.2% of the same period. Commenting on Turk Telekom's outlook, Paul Doany, chief executive officer of Turk Telekom said: " On mobile side, we offer mobile cellular services over 2G and 2.5G (EDGE), expanding to 3G shortly. At broadband ADSL/VDSL services, new corporate data services will follow soon. Following the music portal the video portal is now ready, in addition to education software ready for launch very soon throughout all the public schools." Doany went on to mention the operator's plans to launch WiMAX and its current IP TV services with interactive voice/messaging/data services which will support VOD/catch-up TV features.
Outlook and Implications
In a press release issued by Turk Telekom, the operator believes that despite the tough economic conditions high single-digit revenue growth will be achieved in 2008. The company considers that the consolidated EBITDA margin recorded for the first half of 2008 should be maintained for the full year. There are risks in the second half of 2008 related to general market and competition environment.
- Growth From Mobile Communications: The operator's mobile unit Avea showed solid performance with a revenue increase of 36% and a customer increase of 10%. The performance was particularly good as it faces tough competition from Vodafone and Turkcell who have a market share of 27% and 56% respectively; Avea has the remaining 17%.
- Broadband Services: ADSL lines have shown particularly high growth in many emerging markets over the last year; again revenues from ADSL services were up 36% y/y. ADSL is expected to be Turk Telekom's highest growth unit next year as mobile penetration rates will slow as the country comes closer to the 100% mark. In addition to this Turk Telekom is the main provider in Turkey.
- WiMAX Outlook: The CEO is trying to address the problem of WiMAX in rural areas. The lack of copper infrastructure in some areas along with distance problems between customers and local exchanges for ADSL applications led the company to invest in WiMAX services which are close to completion.