Turkcell 2020 Form 20-F Summary
Business context and reporting period
Turkcell İletişim Hizmetleri A.Ş. filed its annual report on April 26, 2021, covering the fiscal year ended December 31, 2020. The audited consolidated statements follow IFRS as issued by the IASB and are presented in Turkish lira (TRY). Although the request identifies 2020 Q4, the filing primarily reports full-year results; it does not provide a clear standalone Q4 income statement.
The group operates mobile and fixed telecommunications, digital and technology services, and financial and other businesses. Turkey is its main market. In October 2020, Turkey Wealth Fund (through TVF BTIH) became the largest shareholder, with 26.2%; the report describes special share rights that give it the ability to appoint five of nine directors.
Key financial metrics
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Total revenue | TRY 29,103.7 million | TRY 25,137.1 million | +15.8% |
| Gross profit / margin | TRY 8,767.7 million / 30.1% | TRY 8,053.7 million / 32.0% | Margin down 1.9 percentage points |
| Operating profit / margin | TRY 5,772.3 million / 19.8% | TRY 5,033.3 million / 20.0% | Profit +14.7%; margin slightly lower |
| Adjusted EBITDA | TRY 12,270.3 million | TRY 10,426.4 million | +17.7%; non-IFRS measure |
| Profit for the year | TRY 4,239.6 million | TRY 3,276.7 million | 2019 included TRY 772.4 million gain from discontinued operations |
| Profit attributable to Turkcell owners | TRY 4,237.1 million | TRY 3,246.5 million | +30.5% |
| Net finance costs | TRY 1,131.7 million | TRY 1,727.7 million | Lower net cost, despite higher finance costs and FX losses |
| Cash from operating activities | TRY 13,092.8 million | TRY 9,026.6 million | +45.0% |
| Cash used in investing activities | TRY 6,780.6 million | TRY 3,027.3 million | Higher investment outflow |
| Cash and cash equivalents | TRY 11,860.6 million | TRY 10,238.7 million | At year-end |
| Total debt, including leases | TRY 21,586.4 million | TRY 20,305.7 million | At year-end; debt/equity ratio 104%, versus 112% |
| Total assets / liabilities / equity | TRY 51,498.4 / 30,713.5 / 20,784.9 million | TRY 45,715.0 / 27,632.0 / 18,082.9 million | At year-end |
| Capital expenditures | TRY 9,078.9 million | TRY 7,224.7 million | Company-reported figure includes specified IFRS 15/16 adjustments |
Reported performance indicators also strengthened: Turkey mobile ARPU rose to TRY 45.5 from TRY 39.8; postpaid mobile subscribers increased to 22.0 million from 20.4 million; and fixed fiber subscribers reached 1.66 million from 1.48 million. Management cited higher data use, customer mix and pricing, residential growth, corporate projects and digital-channel equipment sales as revenue drivers.
Material changes versus the prior comparable period
- Turkey segment revenue rose 17.1% to TRY 25,160.2 million and adjusted EBITDA rose 20.4% to TRY 10,585.0 million. International segment revenue increased 26.9% to TRY 2,542.4 million, reflecting local growth and currency translation.
- Gross margin declined as cost of revenue grew 19%, led by depreciation and amortization, equipment sales costs, network-related expenses and employee costs. Selling and marketing expense fell 11.7%, partly reflecting lower advertising and sponsorship spending and capitalization of subscriber acquisition costs.
- Finance income increased to TRY 2,119.5 million from TRY 297.5 million, including derivative and hedge-related effects and higher deposit income. Finance costs rose to TRY 3,251.2 million from TRY 2,025.1 million; net foreign exchange losses increased to TRY 2,409.6 million from TRY 1,039.6 million.
- Investing cash outflow increased, while operating cash generation improved. 2019 investing cash flow benefited from proceeds on the Fintur sale; the 2019 comparison also includes its discontinued-operations gain.
- The group sold its 55% interest in Inteltek in September 2020. It launched Turkcell Pasaj in December and reported 26% growth in standalone digital-services revenue to approximately TRY 1.3 billion.
Outlook, commentary, risks and unusual items
- Outlook: No specific 2021 revenue or earnings guidance is stated. Management expected 2021 operational capital expenditure to be around 20% of revenue and said Turkey communications and technology operations were expected to generate sufficient cash to support operations, investment and debt service, subject to risks.
- COVID-19: The pandemic affected roaming, store activity and some subscriber acquisitions, while increasing home-internet demand and network traffic. Management reported network investment to meet demand; additional capex, cash outflows and weaker customer spending remain risks.
- Currency and financing: TRY depreciated 23.6% against the U.S. dollar and 35.4% against the euro in 2020, according to the filing. A substantial portion of debt and equipment costs is foreign-currency denominated. Hedging is used, but may not remain available on acceptable terms. Some borrowings reference LIBOR, with benchmark transition and possible pricing effects disclosed as risks.
- Contingencies: The filing details tax, regulatory, competition and other proceedings, including ongoing SCT/VAT matters, ICTA investigations and disputes. The group recorded TRY 242.5 million of provisions for certain probable matters; outcomes and possible further liabilities remain uncertain. Bank letters of guarantee were TRY 1,975.5 million in the operating review, while the financial-statement note reports guarantees and financial guarantees of TRY 4,146.8 million under a broader scope.
- Other unusual items: The effective tax rate fell to 8.4% from 19.3%, principally because of recognition of deferred tax assets related to lifecell tax losses. The recoverability of those assets depends on future taxable profits. A TRY 2,585.8 million dividend for 2020 was approved after year-end for payment in three installments in 2021.
- Governance and controls: The change in control and special Group A share rights materially altered governance. Management reported internal control over financial reporting effective at a reasonable-assurance level; the filing also describes control deficiencies that management said did not constitute a material weakness.
Most important facts for investors to verify
- Review the audited IFRS statements and notes for debt maturities, currency exposure, derivative valuations and the reconciliation of adjusted EBITDA to IFRS profit.
- Confirm the 2021 capex plan, dividend installments and whether operating cash flow can fund investment and debt service under changed FX and interest-rate conditions.
- Track the resolution and potential financial exposure of the disclosed tax, ICTA, competition and other legal proceedings, including any further provisions or payments.
- Assess the assumptions supporting the lifecell deferred tax asset and the effect on reported earnings if projected taxable profits are not achieved.
- Evaluate the implications for minority shareholders of TVF BTIH’s board appointment rights, the Group A share structure and the related-party banking relationships disclosed for 2020.
- Compare full-year figures carefully: this annual filing does not provide a clear standalone 2020 Q4 financial result, and 2019 profit includes the Fintur disposal gain.