Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your Chorus Call operator. Welcome and thank you for joining the Turkcell's Conference Call and Live Webcast to present and discuss Turkcell's Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Ali Serdar Yağcı, Investor Relations and Corporate Finance Director. Mr. Yağcı, you may now proceed. Ali Serdar Yağcı: Thank you, Konstantinos. Hi, everyone. Welcome to Turkcell's second quarter 2023 results call. Today our CEO, Mr. Murat Erkan; and Acting CFO, Mr. Kamil Kalyon, will be delivering a brief presentation covering operational and financial results which will be followed by a Q&A. Before we kick off, I would like to kindly remind you to read our safe harbor statement placed at the end of the presentation. Now I'm handing over to Mr. Erkan.

Thank you, Serdar. Hello, everyone. Thank you for joining us. We delivered outstanding result in the second quarter. Our determined inflationary pricing strategy plays an instrumental role in delivering an ever accelerating performance. Outpacing the inflation, our revenue growth ramped up to 74% on a record ARPU growth and expanding subscriber base. Strategic focus area also supported top-line growth as always. On the profitability side, our EBITDA almost doubled reaching TRY 9.5 billion, driven mostly by strong top-line growth and reduced energy prices in Q2. We achieved a remarkable 44% EBITDA margin. This strong operational performance coupled with dynamic and prudent risk management, enabled a solid net profit of TRY 3.2 billion on a 70% year-on-year rise. Considering this result, we further increased our full year guidance. Next slide. Let's take a closer look at our mobile operational performance. Our focus on postpaid subscriber yielded a substantial gain of 404,000 subscriber in Q2, capping a 70% postpaid share of the mobile base. Following the gloomy Q1, we resumed price adjustment in April. And as the competitors followed us, overall price level escalated in the market. However, temporary competitive offers were observed in the market, triggering an increasing MNP volume. Rising acquisition price level and alternative data solution for tourists impacted prepaid subscribers. The inflation figure for July indicates a surge in inflation during the second half of the year. Yet we are committed to price adjustments. Accordingly, we raised our prices in August. As anticipated, the ripple effect of preceding price adjustment and intact upsell efforts propelled a remarkable 84% acceleration in mobile ARPU. The ARPU versus CPI spread widened further. Despite a slight increase due to line closure deferral from Q1, our mobile churn rate stood at 1.9%. Next slide. In the fixed broadband, our focus persists on fiber.…

Thank you very much, Murat. Now let's dive into our financial results. Our group revenues had an incremental rise of TRY 9.2 billion, corresponding to 74% growth year-on-year. Turkcell Turkey revenues were the main driver of the performance, thanks to expanding subscriber base and solid ARPU growth. Digital services growth also supported the remarkable performance. Turkcell International revenue grew by 48%, lower than overall group due to lower inflation and limited currency depreciation. Techfin business grew by 93% year-on-year with an incremental rise of TRY 383 million as evidenced by the traction in financial services companies, Paycell and Financell. Next slide, please. Now let's look at our EBITDA performance. Turkcell Group EBITDA reached TRY 9.5 billion, reflecting on the solid revenue growth. In Q2, EBITDA margin expanded by 3.7%. Increase in employee expenses was offset by a decrease in interconnection expenses, cost of goods sold and energy costs as a percentage of the revenue. Of note, 15% reduction in the electricity prices, which was introduced for industrial consumers in April, supports the margin. Also, we shall inform you that following the minimum wage increase in July, we have also increased our wage by around 37%, which will be weighing on our financials starting from Q3. Next slide, please. Let's take a closer look at our CapEx management. In second quarter, we kept implementing our disciplined CapEx plan, which brings our last 12-month CapEx intensity ratio to 20.7%. Mobile and fixed investments in total account for more than 70% of the total CapEx. Mobile CapEx investments had a higher share in total CapEx compared to last year as we had to make around TRY 420 million one-off CapEx due to earthquake. However, we managed to keep single-digit intensity. On the fixed side, even though we slightly exceeded our annual target, it…

[Operator Instructions] The first question is from the line of Mandaci Ece with Unlu Securities.

Congratulations on the strong results. I have a couple of questions on your guidance and potential ARPU growth going forward. The first is about the subscriber additions in the mobile side. We are seeing there a slower increase compared to previous years or previous quarters. So is that stable performance, will be sustainable for the second half? How would you think about or guide about the subscriber addition? The second question is about the mobile ARPU growth. We have seen a significant recovery. And was there any price adjustment on the mobile? Or was it just fixed side as of August? So should we think above 90% ARPU level or more normalized level given the high base of last year for the second half, particularly on mobile ARPU? And thirdly, I saw that you have upgraded your guidance for full year. On the EBITDA margin side, I think that you are a bit more cautious regarding the EBITDA margin performance for the second half. Is it due to expectation of higher cost inflation because you're also making price adjustments? Could you please provide some more color about these questions?

First of all, regarding subscriber growth and subscriber growth target. In the mobile segment, we experienced net add of 165,000 subscribers in the second quarter. This is supported by the seasonality effect, which is lower than the normal trend. Essentially, 404,000 net additions in postpaid was partially offset by the net loss in the prepaid segment. Rising new acquisition price held and alternative data solution for tourists particularly impacted the price sensitivity prepaid subscriber. However, we believe that this alternative solution could pose security risk. On the fiber and IPTV side, net subscriber add continuous as usual, supported by net add. And also for this year, we expect a net add of around 1 million subscribers as well. Regarding second question, mobile ARPU growth and price increase. We did increase for the mobile -- during August, mobile and fixed. They are not in the same time, but we increased our price during August. And we will closely follow the inflation. So we -- as everybody knows, our strategy is based on inflation pricing. So we're going to closely follow the inflation. And during the inflation increase, we're going to increase our price. For the EBITDA guidance, I think this is mainly -- but there are two reasons, actually. One of them, in the first half, the energy price decreased, so it has decreased 15%, I believe, in April. So for the next half, we put some expectation on the price increase for the energy price. The second thing is because of the inflation, for the employee salary, we had to increase our employee salary in July, 37%. So this is going to impact also second half EBITDA for the employee salary increase as well. So these are the things that makes us a little bit cautious. But obviously, we're going to follow up closely to recover the EBITDA, but it's going to be around 40% level anyway.

[Operator Instructions] The next question is from the line of Demirtas Cemal with Ata Invest.

My question is about the financial expense side. When we look into details, we see significant increase in financial expenses. And as far as you don't have very big long -- short FX position, you have some net debt position. And even if we come up with the FX changes, from first quarter to second quarter, and we multiply it by your net debt position, we come up with TRY 10 billion financial expense. Could you give us more detail, how should we approach to your financial expense side? Because your EBITDA is strong, is good and your guidance has revised that. And the FX impact is possibly on that numbers also. So what's the -- how should we think when we try to reach the bottom line? Because EBITDA is strong but huge financial expense. So if you didn't hedge, what would be the result, I would like to understand the effect of all those hedges on your bottom line? So how does it save you -- and how did it save you? If you didn't hedge, what would happen in second quarter? If you have any just color on that.

Thank you very much, Cemal, for the question. As you know, following the sharp currency movement in the fourth quarter of 2021, strike levels was some of the call options that we hope -- we had sold as part of our participation in currency swaps well exceeded. Consequently, in order to maintain the particulars of our hedging portfolio, we opted for short-term derivative instruments as the current market conditions have not been idle for the long term. We have a net long FX position in the amount of US$84 million at the end of the second quarter, as you say, which is in line with our neutral position definition. The hedging costs of short-term instruments have normalized after the elections but we saw an increase in the FX rates, unfortunately. According to the majority of our FX gain, has arisen from the increase in the FX rate, which offset the loss arising from the valuation of our short-term derivative contracts due to the normalization of the TL interest rate curve. Despite this negative impact from the interest rate curve, our derivative portfolio printed a positive M2M valuation which helped us to keep our FX loss limited. Going forward, the movement of swap curve will also have an impact on FX gain and loss. However, we aim to stick around our FX-neutral definition as we declared previously, plus or minus US$200 million. I should also note that we continue to evaluate market conditions. If we can find favorable conditions, we might consider restructuring our portfolio.

So in the third quarter, you're going to use the similar instruments. And if you assume that the currency will be more stable, should we also assume your EBITDA will remain high and your financial expense will go down, is it the model we can take?

Yes, might be, but it depends on the economy management interest policy. If the interest is -- especially currently, the interest rates for Turkish lira loans are very high, as you know. It might go -- it might be going higher in the next term. If the interest expenses increase like this way, maybe we can weigh kind of extra additional financial -- finance interest expenses.

Okay. And as a follow-up question, rather on to the operation side. We see the prices are increased again. When we look at competitors, they are also -- they are increasing the prices to just match the increase in costs. How do you see the third quarter outlook? You revised your guidance, but how do you see from your side about the pricing, and at least also the additions, subscriber additions. What could be the trends for the third quarter, question? And one other question about the strategic perspective, both Türk Telekom and Turkcell are like controlled by the Wealth Fund. And at some point, there is 5G issue, there's a licensing of Türk Telekom. These are all on the -- possibly on the agenda. And as far as we know, in the past, before finding a solution to 5G issues or others, licensing of Türk Telekom would be also linked to that about the full regulatory system. At least from Turkcell perspective, what should we expect in the regulatory environment for the next one year? Could we expect -- and already the elections are completed. So what should be the issues going forward for telecom sector, also for your side?

First of all, regarding the price increase and the competition follow-up, so far, we increased -- as a market leader, we increased our price based on inflation. And it seems our competition also following up us. On the fixed line side, it is really difficult to see or foresee what's going to happen, but we see some movement on the fixed side, which is good for us, so we can increase our prices. For the mobile side, I think as the leading operator in the mobile, our priority in a high inflation environment is to adjust our price in a timely manner. So we're going to continue what we did so far and follow the inflation. The other question was regarding a strategic perspective of Türk Telekom, Turkcell controlled by Wealth Fund. So I think for the 5G, everybody is expecting for next year, the license not this year. So we'll see what's going to happen. But Wealth Fund has, I believe, 22 companies underneath. So for the licensing side, I mean, we're competing in telecom. So Wealth Fund is a strategic investor for both parties. I don't see any issue on this side for the -- as I said, for the 5G, we expect 2024 as a licensing or spectrum tender as well.

The next question is from the line of Demirak Kayahan with AK Investment. .

I have a couple of them. The first one, I mean, did you cancel any other price increases this year in formulating the guidance? Or otherwise asking this, when should we expect I mean another price increases given the direction of your cost inflation? That'd be my first question.

Okay. For this question. I mean, we just increased our prices. We're going to follow the inflation. But my feeling is by the end of the year, one more price increase we can expect. But obviously, there’s price increase for the next year, not this year -- not this year numbers or revenues, anything. But we -- I think we can expect price increase for last quarter in Q4.

And would it be possible to give any direction in terms of the expected CapEx intensity for the next year? I mean, would it be -- in your view, would it be -- should we expect something lower than this year, or a bit higher given the expansion plans, maintenance?

Yes. To be honest, it is very difficult to see for next year CapEx guidance. But obviously, our aim is decreasing our CapEx ratio -- sales CapEx ratio. So my expectation would be little lower, but not too much on this side. But it's too early to say because we don't know the FX, because our CapEx -- 75% of our CapEx depends on foreign exchange. So it is really difficult to forecast for next year CapEx. And macro conditions also is going to give us sometimes hard time, sometimes good time. So we'll see. But it is too early to say anything about 2024.

Okay. Okay. And the final question from the -- I have for international operations. I mean the numbers in Ukraine is looking quite strong, given the difficult operating environment. There's, I mean, decent growth in USD terms, margins are going up. Should we expect this to continue going forward, how do you see the situation over there?

Obviously, you're asking a difficult question because Ukraine is under war. So based on existing behaviors, I mean, we will see a successful operation over there. But this is -- sometimes it's really difficult to speak while ongoing war is happening over there. So we are happy about Ukraine lifecell performance. Things getting easier but it doesn't mean like before the war. As everybody knows that Ukraine had around 8 million to maybe 10 million people move out from Ukraine. So this makes -- are they going to come back or not? We'll see. So it is really difficult to forecast for next year or coming years. But so far, we are good. If things stable, we're going to continue as good as today, but it is under war. So it's difficult to comment on this.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Turkcell management for any closing comments. Thank you.

Thank you very much for joining us, and have a good day. Have a good night, whatever it is. Thank you. Bye, bye. Ali Serdar Yağcı: Thank you for joining us. We hope to see you in the next month.

Thank you. Bye, bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.