TURKCELL ILETISIM HIZMETLERI A.S. - Q2 2024 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated September 13, 2024, reports the consolidated financial results for TURKCELL ILETISIM HIZMETLERI A.S. (Turkcell) for the second quarter and first half of 2024. The financial statements are prepared in accordance with IFRS and restated for hyperinflationary conditions in Türkiye under IAS 29. The Group operates four primary segments: Turkcell Türkiye, Turkcell International, Techfin, and Other. Notably, operations in Ukraine (Lifecell, UkrTower, Global LLC) were classified as discontinued operations held for sale as of December 31, 2023, with the sale transaction closing on September 9, 2024.
Key Financial Metrics (Q2 2024)
| Metric | Q2 2024 (TRY Million) | Q2 2023 (TRY Million) | Y/Y Change |
|---|---|---|---|
| Revenue | 34,913 | 35,029 | (0.3)% |
| EBITDA | 14,887 | 14,845 | 0.3% |
| EBITDA Margin | 42.6% | 42.4% | +0.2 pp |
| EBIT | 4,681 | 4,960 | (5.6)% |
| Net Income | 2,904 | (820) | Not Meaningful |
| Net Debt | 32,400 | 29,691 (Dec 2023) | Increased |
| Net Leverage Ratio | 0.6x | - | - |
Operational Highlights:
- Subscribers: Turkcell Türkiye added 346,000 net subscribers in Q2, reaching 43.2 million total.
- ARPU: Mobile ARPU (excluding M2M) grew 5.3% year-on-year; Fixed residential fiber ARPU grew 6.6%.
- Churn: Mobile churn rate dropped to 1.5% (lowest in six years); Fixed churn at 1.2% (lowest since 2006).
Material Changes vs. Prior Period
- Revenue Decline: Group revenue decreased slightly (0.3%) due to a high base effect from large-budget digital business projects in Q2 2023 and lower consumer equipment sales.
- Profitability Turnaround: Net income swung from a loss of TRY 820 million in Q2 2023 to a profit of TRY 2.9 billion in Q2 2024. This was driven by lower foreign exchange losses due to stabilized rates and effective hedging, alongside a strong EBITDA performance.
- Segment Performance:
- Techfin: Revenues grew 23.5% (Financell +33.9%, Paycell +15.8%), though EBITDA margin declined due to higher funding costs.
- Turkcell Türkiye: Revenue rose 1.5% and EBITDA increased 6.1%.
- Corporate Segment: Revenues fell 19.3% due to a 70.7% drop in hardware sales for digital business services.
- Discontinued Operations: The sale of Ukrainian assets (Lifecell) was completed in September 2024, with proceeds of approximately USD 524.3 million received at closing.
Guidance, Outlook, and Risks
Guidance Review: Management is currently reviewing its full-year 2024 guidance due to upward trends in monthly inflation in Türkiye, which have surpassed initial expectations. An update is expected with the Q3 results. The original guidance assumed an annual inflation rate of 37%.
Management Commentary: The CEO highlighted the successful sale of Ukrainian assets, reaffirming a strategic focus on Türkiye and technology-driven growth. The company celebrated its 30th anniversary and noted strong performance in the Techfin segment and low churn rates.
Risks and Contingencies:
- Macroeconomic Environment: High inflation (71.6% in June 2024) and currency volatility remain significant risks, impacting purchasing power and financial restatements.
- Regulatory: Ongoing investigations by the ICTA (Information and Communication Technologies Authority) regarding service quality, R&D obligations, and subscription agreements have resulted in administrative fines and potential refunds. A provision of TRY 254 million was recognized for probable outflows.
- Competition: Aggressive pricing actions by competitors triggered mobile number portability, though Turkcell maintained market leadership with low churn.
Investor Verification Checklist
- Inflation Accounting Impact: Verify the sensitivity of financial results to IAS 29 restatements given the high inflation rate in Türkiye.
- Ukraine Sale Finalization: Confirm the final sale value of the Lifecell assets after closing adjustments, as the initial USD 524.3 million receipt is subject to net cash/debt adjustments.
- Techfin Funding Costs: Monitor the trajectory of funding costs for the Financell subsidiary, which significantly impacted EBITDA margins despite revenue growth.
- Regulatory Provisions: Review the status of ongoing ICTA investigations and the adequacy of the TRY 254 million provision for potential fines and refunds.
- FX Hedging Strategy: Assess the effectiveness of the hedging portfolio in managing the short FX position (USD 123 million) amidst currency fluctuations.