Ladies and gentlemen, thank you for standing by. I'm Vasilious, your chorus call operator. Welcome and thank you for joining the Turkcell’s Conference Call and Live Webcast to present and discuss the Turkcell’s First Quarter 2024 Financial Results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Ozlem Yardim, Investor Relations and Corporate Finance Director. Ms. Yardim, you may now proceed.

Thank you, Vasilious. Hello, everyone. Welcome to Turkcell's first quarter 2024 earnings call. Today, our CEO, Ali Taha Koc and CFO, Kamil Kalyon will be delivering a brief presentation covering operational and financial results, which will be followed by a Q&A session. Before we begin, I would like to kindly remind you to review our safe harbor statements available at the end of our presentation. Now I'm handing the meeting over to Mr. Ali Taha.

Thank you, Ozlem. Good afternoon, everyone and thank you for joining us today. At Turkcell, we are celebrating our 30th anniversary with great pride, having pioneered numerous milestones from our first call to becoming Turkey's leading technology provider. In the first quarter of 2024, we are delighted to share our successful results. By taking timely actions, we have delivered double-digit Real Growth despite global central banks tightening policies and reaccelerating inflation in Turkey. Our top line grew 12% to TRY31 billion with a remarkable 23% increase in EBITDA. These results have been driven by a rational price increases since 2021, which enabled mobile ARPU growth to reach 17% and fiber residential ARPU growth to reach 14%. Supported by lower energy and interconnection expenses, operating leverage expanded the EBITDA margin by 3.8 percentage points to 41.4%. Additionally, our commitment to focusing on value generating post-paid and fiber customer acquisition resulted in 333,000 net additions in the first quarter of the year. Overall, our strong operational performance resulted in a remarkable net profit of TRY2.6 billion. Our strong first quarter performance enabled us to revise our 2024 revenue growth upwards, which I will elaborate on later. Next slide, please. Let's take a look at our operational performance in the first quarter. Unlike previous quarters, competition in the mobile market was relatively less aggressive in this quarter. On the mobile front, we sustained our focus on the postpaid segment, which contributes more value to our financials, resulting in a net increase of 472,000 subscribers. Over the past 12-months, our postpaid base has grown with 1.7 million additions. Our postpaid customer base exceeded 27.6 million, reflecting 72% of the total on a three-point rise year-over-year. Disconnections from previous year's tourist lines, rising new acquisition price levels, and demand to alternative data solutions were the…

Thank you very much, Ali Taha. Now let's move on to our financial results. Our consolidated revenue increased by 11.8% on a yearly basis to TRY30.8 billion. The Turkcell Turkey segment was the biggest supporter of the Group topline growth with a 13% rise on a year-on-year basis. This was driven mainly by an expanding subscriber base, particularly on the postpaid side, and strong ARPU growth, thanks to sequential price adjustments with successful upselling efforts. The Techfin segment contributed TRY460 million to the top line with the strong performances of Paycell and Financell, which grew 33% and 54% respectively. Next slide, please. In the first quarter of 2024, EBITDA rose 23% on a yearly basis to TRY12.8 billion, thanks to strong revenue growth. The EBITDA margin expanded 3.8 percentage points year-on-year. Despite the increase in personal expenses due to the [Indiscernible] annual wage rise and the increased funding cost of our financing operation, the Group EBITDA margin benefited from a decline in the cost of goods sold, energy expenses, and interconnection expenses as a percentage of revenue. After the electricity prices increase in 2023, which was relatively low compared to inflation and our corresponding price adjustments in line with the inflation, the proportion of energy expenses to our revenue decreased, thereby supporting the EBITDA margin. Additionally, the continued decline in MTR positively impacted our profitability. A trend expected to persist throughout 2024. Next slide, please. Now let's dive into the net income performance. Thanks to a robust operational performance, EBITDA has contributed TRY2.4 billion to net income. The net FX loss item has pressured net profit by TRY1.8 billion, due to higher foreign exchange rate change, which is partially offset by mark-to-market of financial derivatives. By the first quarter, the increased weight of non-monetary assets on the balance sheet, the…

Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Tiron Cesar with Bank of America. Please go ahead.

Yes, hi. Good evening. Thanks for the call and for the opportunity to ask questions. I have three questions, but they're all easy. The first one, if that's okay. The first one is on the guidance increase on the revenue. What surprised you the most in the past, let's say one, two months, so you had to hike this guidance? That would be the first question. The second question, I would like to understand what exchange rate are you assuming in your budget for the lira? And let's say, if the lira depreciates less than per your budget, could it be that you spent a little bit less CapEx, so maybe the CapEx intensity will be less than your guidance? And then the third question, going back to the datacenters, can you please explain your ambition in the field and how large do you think the capacity would be in the medium term? Thank you so much.

Hi, Cesar. Thank you very much for the question. We had a quarter with solid financial and operational performance actually, which has beyond our initial plans. Accordingly, our revenue growth guidance for 2024 increased to low-double-digit growth, and there's no change in our EBITDA margin and CapEx adjusted guidance. However, given the macroeconomic dynamics, projecting inflation will be challenging, and the actual figures may vary according to the realization -- realized inflation and other factors such as the cyclicality of revenues. And also the minister of treasury and finance [Indiscernible] announced that the middle term plan OVP, is planned to be reviewed at the end of summer. Accordingly, we will be closed following the macroeconomic developments for possible further revision. But to say true that the first quarter -- first couple of months of this quarter is better than our expectations, so that's the reason that we revised our guidance. For the datacenter business, we're expecting -- we already have four big high-tech datacenters, and we are planning to build more and actually we are looking for a collaboration with big companies to bring the data, whatever it is with data we have in the Turkey, we want to keep it and we want to be a data hub for this region. So that's the reason that we have a huge ambition about the data center business. So currently we have four big data centers and we are adding more to them and then in the future you're going to see more coming from Turkcell.

For the second question, normally our year-end U.S. dollars FX rate estimation is TRY37.5 and the average rate we are assuming TRY34. We believe that we will be in line with our guidance for the full-year for the CapEx side. However, in case of a spike in the FX rate, if it realizes within the years, we can postpone our discretionary CapEx in order to create a buffer. We are chasing the developments in the economical side, but most probably the FX rate will be realized within our estimations this year.

Thank you so much. That was very clear. Thank you.

You're welcome.

The next question comes from the line of [Indiscernible] with Barclays. Please go ahead.

Hello, good evening. Can you hear me?

Yes, loud and clear.

Good. Thank you very much for the presentation and congrats on the results. It's also great news about the upgraded guidance. I have two quick questions, so my first one, you mentioned that your cash position decreased because of investments in Eurobond. Could you please elaborate on that a little bit? And my second question is related to Ukraine. Obviously, we've seen some headlines in the news about potentially positive developments. But, my question would be, what will you do with the process from this asset sale? Will you do you plan to pay additional dividends or do you plan to use that for CapEx or maybe for your Eurobond repayment? That's it. Thank you.

Thank you very much. I will give the answer for the first one. The duration of the euro bond is five years. Turkish Sovereign and Bank, when we look at the, for example, yields in the Eurobonds, there's a high yield when we compare it with the deposit rates. Therefore, we prefer to invest Eurobonds in order to benefit from the high yields. For the second question maybe you can give.

As you may know in April the seizure of our -- on our Ukrainian assets lifted. It's a positive news. We are now waiting the necessary permission from our anti-monopoly committee of Ukraine. So this is the last step for the conclusion -- concluding of this deal. Although we do not have a board decision regarding the proceeds we will obtain from the sale of our assets in Ukraine, we have important investment projections in the coming period, such as data centers, solar energy and as well as the 5.5G auctions. So we will we are looking for huge investments projections in the coming period.

Got you. Thank you. So, do you still see the deal closing during this year?

Yes, definitely. Because there are two big roadblocks, one is just this seizure and another one is the anti-monopoly committee. Other than that, everything is clear. So hopefully, after this permission from the anti-monopoly committee of Ukraine finalized, hopefully near future and we are talking about in the period of months, we're expecting that's going to be done in this year.

Okay. Thank you very much.

You're welcome. Operator [Operator Instructions] The next question comes from the line of Ignebekçili Murat with HSBC. Please go ahead. Ignebekçili Murat: Hello. Thank you for the opportunity to ask questions. Can you clarify the calculation of net debt? I think you have changed something over there, because I see that the FX deposit accounts are no longer included in the net cash calculation. Am I missing something here?

Murat, we do not have any change in our net debt position calculation of net debt position. We are using the same method. Ignebekçili Murat: Net cash still the total cash is at TRY48.8 billion, and when we get to the…

Some portion of cash is categorized in the financial assets. Maybe it might. Ignebekçili Murat: Yes, yes, exactly. So why don't you include those in the cash calculation?

We included. Normally we have TRY49.5 billion in our hand and TRY15.1 financial assets. And for example, when you look at our leverage 0.58, these two amounts are included into this calculation. Ignebekçili Murat: Okay, when I look at the footnote, so I see 40 almost TRY49 billion as cash and also TRY10 billion as financial assets separately. That's why I…

[Technical Difficulty] roughly. Ignebekçili Murat: TRY15?

Fifteen, yes. Ignebekçili Murat: Okay, we can follow-up on this later.

Okay. Ignebekçili Murat: And were there any working capital issues in the first quarter? Because there's around almost TRY12.5 billion EBITDA, around TRY7.5 billion CapEx in the quarter.

Yeah, Murat. Ignebekçili Murat: So -- and the change in net debt and the net debt increased TRY6 million or TRY7 million. So I think there should be some negative impact from working capital, right? Or is it tax payments or anything like that? Can you clarify that, please?

Normally, we hit around TRY9.9 billion cash outflow in this quarter related to working capital side. This was mainly driven by the as you know, we are -- we paid the second installment of the earthquake donation, in January. Additionally, we paid personal bonus payments in February. And in February, again, we paid a huge amount of wireless fee tax payments as we have some payments to our suppliers and decreased trade payments in Q1 ‘24 compared to the first quarter of the last year. We are closely following our net working capital side and I think we will recover especially collection of the wireless fee tax payment from our clients, our net working capital structure will be better in the coming periods. Ignebekçili Murat: Okay. Thank you very much. And finally, when you look at the financial expenses during the quarter of very limited FX activity or limited FX depreciation? We have financial expense as I see around more than TRY5 billion of FX losses. Could you elaborate on that, please?

Yes. Normally, as you said, I think around 6% or 7% depreciation in the FX rate realized in Q1. But as you know, along with the sequential rate hikes from the CBT side short-term rates and hedging costs increased very significantly. Therefore, this was the main driver behind the increase of our FX loss and the financial expenses. In addition to the credit rates are also increased very much before the election side, you remember. Therefore, these three effects affected our FX position or FX loss side negatively. Ignebekçili Murat: So is it safe to assume that given that the interest rates in the market have already settled at some level, albeit very high, we should not see further significant FX losses in the coming months? The price is only the market-to-market?

Yes. As mentioned in my speech, our expectation in the FX side, we are not expecting a very high increases in the FX side. Therefore, most probably in order to decrease our hedging costs, we would like to make it short position might be in the coming periods in order to reduce our financial costs, because our estimation regarding the FX rates I think it will go for a short or mid-term side. We are not expecting any FX increases in this year. Therefore, most probably we will be opening a short position in our net FX position. Ignebekçili Murat: Thank you. That's very clear. And finally, about the operation. When you look at a typical postpaid client, it is to renew this contract? What is the, like, front book, like-for-like, growth in the invoice if one is to renew this contract, compared to last year. So a new contract renewal price is up how much on a year-on-year basis?

Normally, as we said, our revenues grew by around 13% in [Indiscernible] site, the first site. And we have a very how can I say, our ARPU rates are increasing very well when we compare it to the last period, it's around 17% we have ARPU rate hike? And when we look at, for example, starting from the 2025, we had -- we made a lot of price increases and more than a 100% increase in prices within the last 20 months. We can easily say that, because we successfully implement our inflation pricing policy.

Invoice to invoice, you can talk about 100%, more than 100% invoice to invoice. Ignebekçili Murat: Yes. So a typical platinum tariff is up 100% in manual terms, compared to same week last year?

Might be.

Might be. We are talking about the blended ones, but we're not talking about the markets or platinum. We're just talking about the blended. Ignebekçili Murat: So yes, and the inflation rate hopefully declines in the coming quarters. In the interim, this will translate into a much larger number. I see. Thank you.

You're welcome.

The next question comes from the line of Demirtas Cemal with Ata Invest. Please go ahead.

Thank you for the presentation and congratulations for very good results. My first question is about your strategic focus area. I see a little bit more momentum in both the Techfin Business and Digital Services revenue side? Could we expect this track to continue going forward? Because in previous years there was a little bit slower growth, but I see higher momentum. Is it sustainable? This is my first question. The second question is how do you see the consumer sentiment in your front? Do you see any changes in the consumer behavior and could you give us some color on the roaming sites? What are your expectations on that side? Thank you. And the last question is again, it has been asked about the net debt. What was the amount of wireless pretax paid in the first quarter? Thank you.

Again, let me start with the strategy focus areas. I just want to say that our momentum is going to keep on going till the end of the year and then most probably into the next year as well. So Techfin and DSS side is going to grow. And for example, Paycell saw a quarter with double-digit real growth performance, Paycell. And then also the meanwhile, finance also supported the Techfin segment growth as well in the first quarter of 2024. And also, our Digital Business Services will grow and with the digitization of the older companies, as well as the public sector. They're expecting that, that growth and the momentum is going to continue. So everybody wants to be digital and at the end of the day, Turkcell is a leading integrator and leading technology firm in Turkey. So we will be happy to digitalize and just support them in their businesses. So we're expecting especially the data center business as well as the co-op businesses is going to grow faster than we expect. So hopefully, we're going to see this momentum keep ongoing.

Demirtas, we paid TRY1.7 billion while fixed payment in February. As you know, we are paying in advance to government side and we are collecting this from our customers within the year.

Thank you.

You’re welcome.

And the consumer trends at roaming site?

So we are closely following that part as well. But, for us, what we are doing is we are just doing some new campaigns about the smart contracts. So we are just letting all the users to see if their tariff is over or not, and then we just make that, that service free of charge. So we are trying to improve our Net Promoter Score as well. So we are seeing that it is kind of easy technologically easy, especially with the electronic and eSIM, but we are closely following the trends. And then we are in order to convince people to use our eSIM or just our subscriber domain. And, so we will close the following it up, but I to say the truth that I will tell you more when we have more data, especially during this tourist season, especially the summer. We're going to see the numbers, because this is going to be the first time that we're going to see lots of tourists with electronic sin -- eSIM. So that's the reason that we're going to see the impact, both positive and negative. We have more data. I will talk more better at the end of the summer.

Thank you.

[Operator Instructions] The next question comes from the line of Mandaci Ece with UNLU Securities. Please go ahead.

Thank you very much for the presentation and congratulations on your strong guidance. So my question is about the corporate revenues. I see [Indiscernible] I see a 3% decline in your corporate revenues. Digital business solution revenue is flat, but apart from it, I'm noticing some decline. Is this just for the first quarter? Do you expect as I can understand, you're expecting some drop over there going forward, but what was specifically the reason for this decline in the first quarter? Thank you.

So let me talk about the DBS and then the revenues growth for this quarter. Especially, our digital business services revenues remained flat in first quarter of 2024, mainly due to the fewer one-off large budget projects and hardware sales, compared to last year. And actually, additionally, revenues from public sector clients dropped from 41% Q1 of last year to 24% this quarter. And then also, it indicates reality and indicating a slowdown in public sector sales mainly due to the saving measures in the public. At this point, we're compensating for the slowdown with our value-added and recurring services and like data center and cloud businesses. So hopefully, we're just going to compensate this slowdown effect from the public sector.

Normally, we do not have any problem for the recurring service in the corporate side. As Ali Taha mentioned, we have three significant projects in the last quarter of 2023. Therefore, within the year’s most probably we do not -- we will close or we will realize real growth in the corporate side also.

So margin wise, was this the reason -- one of the reasons why you had, I think a better margin maybe? Could there be a [Indiscernible] with the expected increase, could there be a margin dilution effect in the quarters ahead?

From -- are you asking from the consumer side or the from the corporate side?

Corporate side, I mean.

In the corporate side from the recurring side, it's all the recurring -- the income coming from the tariffs, we do not have any dilution regarding the margin side and we are a little bit sensitive from the project perspective, because this year would be a little bit hot for the corporations and state establishments for the budget purposes. Therefore, we do not want to enter risky projects in this year. Therefore, we are selecting the more profitable and no any double receivable risk projects within this year. Therefore, we do not wait or expect a margin dilution in the corporate side also. But as you know, the terminal side or that how can I say, hardware side is a little bit less profitable issues. But we are very good at for example balancing this issue and we do not want to dilute our EBITDA margin and we are very careful about the baskets, which we how can I say prepared for this project?

Thank you.

You're welcome.

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.

Again, thank you very much for the time and I will be happy to present you our Q1 great results. So hopefully, we're going to have the similar and then better results in the Q2. Hope to see you next time. Thank you.

Thank you very much. Hope to see you.

Thanks for joining. Thank you.

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