Turkcell Iletisim Hizmetleri A.S. — 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed May 13, 2024. This is an annual report, not a standalone fourth-quarter filing. Financial comparisons below are in Turkish lira (TRY) and, unless stated otherwise, restated to December 31, 2023 purchasing power under IAS 29. Comparisons therefore are not nominal-period figures.
Business context
Turkcell is a Türkiye-based telecom operator with mobile, fixed broadband, digital services and financial technology businesses. The group reported 56.3 million subscribers, including operations classified as discontinued, and 42.5 million subscribers in Türkiye. Its Ukrainian businesses were classified as held for sale and discontinued operations at year-end.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | TRY 107.1bn | TRY 93.5bn | +14.6% |
| Gross profit / margin | TRY 22.7bn / 21.2% | TRY 11.8bn / 12.6% | Margin +8.6 percentage points |
| Operating profit / margin | TRY 7.8bn / 7.3% | TRY 3.0bn / 3.2% | Operating profit +164.5% |
| Adjusted EBITDA | TRY 43.9bn | TRY 36.6bn | +19.9% |
| Profit for the year | TRY 12.5bn | TRY 6.9bn | +82.2% |
| Operating cash flow | TRY 41.7bn | TRY 42.3bn | −1.3% |
| Cash and cash equivalents | TRY 50.0bn | TRY 42.8bn | +16.8% |
| Total debt, including leases | TRY 84.1bn | TRY 88.7bn | −5.2% |
| Capital expenditures | TRY 36.5bn | TRY 30.6bn | +19.3% |
Profit from continuing operations was TRY 10.6bn; discontinued operations contributed TRY 2.0bn. Basic and diluted EPS was TRY 5.75 overall, including TRY 4.85 from continuing operations. The company reported TRY 4.7bn of income tax benefit, a TRY 3.8bn IAS 29 monetary gain, and TRY 1.5bn share of profit from equity-accounted investees, including Togg. These items materially affect the reported increase in profit.
Operating cash flow less cash purchases of property, plant, equipment and intangible assets (TRY 29.5bn) was approximately TRY 12.2bn. The filing’s capital-expenditure measure is broader, also including right-of-use assets and other additions. Year-end debt included TRY 2.4bn of lease obligations; cash less reported debt implies approximately TRY 34.1bn of net debt, before considering restrictions or other liquidity needs.
Material changes versus 2022
- Türkiye segment revenue rose 18.0% and segment Adjusted EBITDA rose 24.1%, supported by price adjustments, subscriber growth and upselling. Postpaid mobile subscribers increased by 1.6 million; the postpaid share reached 71.5%.
- Türkiye mobile ARPU excluding M2M was TRY 174.0, up from TRY 146.9; average monthly mobile data use increased to 17.0 GB from 14.7 GB. Fiber subscribers grew to 2.3 million from 2.1 million.
- Gross margin improved as revenue growth outpaced cost-of-revenue growth. However, employee benefit expenses increased 40.7%, selling and marketing expenses 23.7%, and impairment losses on financial and contract assets 62.1%.
- Techfin revenue increased 28.9%, but segment Adjusted EBITDA fell 8.1%, principally due to higher funding, personnel and marketing costs. Other-segment revenue and Adjusted EBITDA declined 25.1% and 31.6%, respectively.
- Debt declined and equity increased to TRY 122.2bn from TRY 109.4bn. The debt-to-equity ratio was reported at 68.8%, down from 81.1%.
Outlook, commentary and risks
- Management expects 2024 operational capital expenditures to be approximately 23% of revenue. It expects continued spending on mobile and fiber networks, data centers, renewable energy and disaster resilience. A future 5G spectrum award and rollout could require significant additional cash outlays; no 5G tender timing or price guidance is provided.
- Management says liquidity and capital resources are adequate for current needs and cites hard-currency cash equivalent to approximately USD 1.4bn, broadly matching debt service due over the next two years. It also identifies continuing exposure to inflation, lira depreciation, higher financing costs, competitive pricing and working-capital needs.
- Türkiye’s year-end inflation was 64.8%; the lira depreciated approximately 36.4% against the U.S. dollar during 2023. IAS 29 restatement materially affects reported figures, and future inflation adjustments could change results and financial position.
- The February 2023 earthquakes damaged network assets and disrupted service. Management estimated the 2023 revenue impact at approximately TRY 1.5bn, operating expense impact at TRY 0.4bn and capital-expenditure impact at TRY 0.9bn, on figures not adjusted for inflation. A donation of up to TRY 3.5bn was approved; earthquake-related donation expense was a major contributor to higher other operating expenses.
- The sale of the Ukrainian businesses to NJJ Capital was agreed at an enterprise value of USD 525m, subject to closing conditions and adjustments. At year-end, related assets of TRY 17.1bn and liabilities of TRY 6.3bn were classified as held for sale. A Ukrainian court seizure order affecting certain corporate rights was lifted in April 2024; completion remained subject to prerequisites and approvals.
- Material exposures include regulatory investigations and potential fines, including matters involving license obligations, service quality, consumer refunds and disaster communications. The filing reports TRY 379.5m of provisions for certain ongoing investigations and lawsuits. It also reports TRY 16.2bn of bank letters of guarantee in its liquidity discussion and TRY 17.9bn of contingent guarantees in the financial-statement note; the scopes differ and should be reconciled.
- Other significant risks include foreign-currency debt, floating-rate borrowings, limited hedging availability, cybersecurity and network outages, supplier concentration, the 2029 expiry of 3G and 4.5G authorizations, and the BOTAS fiber-use agreement’s expected renewal tender in 2024. The 2G license was extended to April 30, 2029 for EUR 120m plus VAT.
- The 2023 financial statements received an unqualified IFRS audit opinion, and the auditor also concluded internal control over financial reporting was effective at December 31, 2023. The report nevertheless notes control deficiencies that management did not consider material weaknesses.
Important facts for investors to verify
- Reconcile the 2023 profit increase to continuing operations, discontinued operations, tax benefits, IAS 29 monetary effects and equity-accounted earnings; assess recurring earnings separately.
- Confirm the scope and calculation of capital expenditure, the stated 23% 2024 outlook, and the cash available after committed investment, dividends and debt service.
- Review debt maturities, floating-rate exposure, foreign-currency hedges and the difference between balance-sheet debt and contractual cash obligations.
- Track completion, final proceeds and any further legal or regulatory conditions for the Ukrainian divestment.
- Assess the outcome and potential financial impact of regulatory investigations, earthquake-related claims, and the material deferred tax assets, particularly those associated with Ukraine.
- Check subsequent filings for the approved TRY 6.277bn dividend, scheduled for payment on December 5, 2024, and for developments in the 5G tender, license renewals and BOTAS fiber agreement.