Turkcell posted its 1Q09 results recently. While revenues were in-line with expectations, EBITDA, operating income and adjusted net income were above expectations. In 1Q09, revenues declined on a year-over-year basis due to a decline in blended Average Revenue per User (ARPU). This decline was further accentuated by a decline in the value of the Lira against the US dollar.
"Turkcell Iletisim Hizmetleri A.S. (Turkcell), incorporated on
October 5, 1993, is a provider of mobile services in Turkey. The
Company provides mobile voice and data services over its global system
for mobile communications network. As of December 31, 2008, Turkcell
provided service to its subscribers in 202 countries through commercial
roaming agreements with 607 operators. The Company provides wireless
and value-added mobile communications services to subscribers
throughout Turkey. Subscribers can choose between its postpaid and
pre-paid services. As of December 31, 2008, Turkcell had approximately
29.5 million pre-paid subscribers and 7.5 million postpaid subscribers.
The Company has investments in Azerbaijan, Georgia, Kazakhstan,
Moldova, and also in the Turkish Republic of Northern Cyprus, Ukraine
and Belarus. In August 2008, Turkcell announced that it had completed
the acquisition of an 80% stake in Belarusian Telecommunications
The Company’s subscribers can choose
between its postpaid and prepaid services. As of December 31, 2008,
postpaid subscribers signed a subscription contract and receive monthly
bills for services. Prepaid subscribers must purchase a starter pack
which consists of a Simcard and includes airtime ranging from 20 to 250
counters. Scratch cards can be purchased in increments of 25 to 1000
Earnings plunged in 1Q09 by 18.5% with declines from several revenue streams across the board. The exceptions were revenues from call centers. Net income declines to $0.16 pershare for the quarter as compared to $0.22 per share in the prior year's quarter. These results were dramatically less than consensus estimates.
On a positive note, the subscriber vase increased to 36.40 million. ARPU dropped 21.2% to $10.40 from $13.20.
Short-term, the outlook for TKC is not so good. Macroeconomic forces will negatively impact both domestic and non-Turkish operations. The recent strengthening of the Turkish Lira vs. the dollar is a positive and will help the long term. The investment horizon for TKC is twelve to twenty-four months. Within that time, we expect to see a return a reversal of the latest set-backs and a return to growth. Our target value for TKC is $18.00. It may take a while but we expect to see the shares trading at that level.
Disclosure: The author holds no position in TKC.