Turkish Government to Launch 3G Tenders in November 2008

The Turkish government has finally made a decision to launch the 3G licensing process in Turkey with a date set for November 2008. Last year the 3G licensing process went through all rounds, with Turkcell, the country's largest operator by market share, named as the only bidder for the licence. Even prior to this, the licence had been very much delayed and at one stage was actually cancelled because the operators Vodafone and Avea abandoned the licence, stating that it was unfair that the regulator was issuing a 3G licence without imposing mobile number portability (MNP), which would have enabled customers of other operators to switch service providers with relative ease (see Turkey: 19 September 2007: 3G Licence Award Cancelled in Turkey). At the time of the original award, Turkcell, the sole bidder for the licence, paid 321 million euro (US$448 million) in order to obtain it; however, it had to give it up and wait for the regulator to reform the country’s competition regulations. Turkcell had been fighting to prevent MNP from being implemented in the country; however, in December 2007 the council of state rejected Turkcell’s injunction request (see Turkey: 11 April 2007: Turkcell Files Appeal To Block MNP). The service launch has been put under much pressure from Vodafone and Avea, which have the lower market share compared to Turkcell. The current regulations on MNP state that mobile operators are offered a six-month adaptation period to prepare their networks for the transition. Both Vodafone and Avea have selected a mobile solutions provider to integrate MNP into their networks (see Turkey: 17 June 2008: Vodafone and Avea Select Telcordia for MNP Implementation in Turkey).

Mobile penetration in Turkey is currently around 70%, with Turkcell taking the largest market share of 65%, leaving Vodafone and Avea with 21.5% and 13.5%, respectively. 3G services in the country will be necessary for business users and will be taken advantage of by the high youth population in the country. Operators will be able to deploy a wider range of services that will boost revenues. Although the country has demonstrated significant growth in the telecoms mobile sector, Turkey suffers from falling ARPU figures which are typical of an emerging market country. 3G services will provide stability in the trend for lowering ARPU figures. Vodafone already operates in markets where it has implemented 3G services such as in Egypt, where it launched "Bubble Motion Service", which is an alternative to the traditional "type and read" SMS service that works by a short voice message (SVM) being recorded in the sending handset and sent to the user who calls a number to retrieve the message. The service also works with email capability, where the recipient can send an audio file attachment to the email (see Egypt: 31 May 2007: Vodafone Egypt Sees Bubble Motion Service Increase ARPU by 1.5%).

Outlook and Implications

Fixed and mobile number portability has led the way for the 3G licences to go ahead. Mobile penetration has been increasing rapidly and the 3G licence award has come at the right time to stimulate the market, which would have otherwise seen lower growth.

• 3G Progress: Now that MNP is implemented, the 3G licence process can continue, causing Turkcell to face greater competition from Vodafone and Avea. Vodafone has already deployed a range of value-added services in the other markets in which it operates and will provide excellent coverage in Turkey. Turkcell must provide a wider range of mobile services in order to keep its existing customers; earlier this year, it introduced a mobile banking signature service, although, because of the sensitive nature of the service, take-up may be slow in the initial phases (see Turkey: 20 February 2008: Turkcell Launches Banking Signature Service in Turkey).
• Expected Price: At the time of the first licence award,Turkcell, the sole bidder for the licence, paid US$448 million for a licence. The nature of the mobile market in Turkey is similar to that of Egypt, which has a population only slightly higher than that of Turkey at 80 million, although mobile penetration is around 30%. The current price of the licence looks fairly cheap considering, the Egyptian mobile operators have already paid slightly more at US$599 million in a less mature market (see Egypt: 19 July 2007: MobiNil Buys 3G Licence for US$599 mil.).
• Impact on Churn Rates: Operators need to deploy a suitable suite of 3G services as fast as possible to prevent their customers from switching to other operators. Turkey's mobile operators will see churn rates increase as a result of the new regulation, Turkcell’s in particular. The operators will have to continue to be innovative with their services and continue to offer value-added services to maintain their current customer base.
• Following EU Telecoms Regulations: Currently Turkey is following the procedures required to win EU membership through the Ankara Agreement: a three-step process towards starting a customs union that would help to secure Turkey's full membership of the European Union (EU). Although the country's accession talks have since been prevented by a number of domestic and external problems, Turkey still needs to follow the regulations laid down by the regional bloc to maintain its chances of its entry in the long term. All EU countries now have, or will have by October 2008, number portability services for customers of local operators. Turkey has delivered this before the deadline, making it a small but essential step to maintaining standards with the rest of the EU.