Turkcell Achieves Strong Q2 Performance Amid Economic Challenges

Turkcell’s Resilient Q2 Earnings Performance

In a challenging economic environment characterized by high inflation, Turkcell (NYSE: TKC) showcased its resilience during its Q2 2024 earnings call. The telecom giant, which celebrated its 30th anniversary, reiterated its commitment to innovation, as stated by CEO Ali Taha Koc. Despite the external pressures, financial results indicated robust performance.

Financial Highlights

Turkcell maintained stable revenues of TRY35 billion and reported a net income of TRY2.9 billion. While challenges such as declining equipment sales and the aftereffects of a previous year's earthquake posed obstacles, the company still experienced a growing subscriber base and an uptick in digital services.

Critical Figures

• Stable Q2 revenues at TRY35 billion and net income of TRY2.9 billion.
• EBITDA reached TRY15 billion, achieving a 42.6% margin.
• A total of 346,000 new subscribers were added, with a push towards postpaid and fiber customers.
• Mobile postpaid segment saw an increase of 477,000 subscribers.
• Fiber broadband subscribers grew by 42,000, with a low churn rate of 1.2%.
• Digital Services revenue grew by 5%, while Techfin revenues expanded by 16%.
• International revenue increased by 2.7%, totaling TRY890 million.
• CapEx climbed to 22.5%, signaling further investments in infrastructure.
• Turkcell intends to revise its 2024 outlook in Q3, factoring in inflation.

Strategic Outlook

Looking ahead, Turkcell plans to review its 2024 guidance following inflationary pressures. The anticipated completion of Ukrainian asset sales could boost investments, particularly in areas like 5G infrastructure.

Dividend Strategy and Future Investments

• The company remains committed to a dividend policy that aims for at least a 50% payout of distributable net income.
• Financial management continues to prioritize cost efficiency, alongside monitoring macroeconomic shifts.

Challenges Ahead

Despite the strong quarterly performance, there were notable challenges:

• Declining equipment sales hampered overall growth.
• Last year’s earthquake impacted year-on-year comparisons, affecting FQ2 growth analysis.

Opportunities for Growth

On a positive note, the management highlighted several bullish factors:

• Revenue and ARPU increased by 5% in the first half of the year. Price adjustments are set to enhance future ARPU.
• Turkcell's significant cash holdings in hard currencies bolster its capacity to manage foreign exchange risks.

Q&A Session Highlights

During the Q&A segment, the management elaborated on:

• The ongoing effects of economic policies and inflation on their business strategies, leading to a contraction in equipment sales.
• Consideration of various financing avenues for an upcoming Eurobond reissuance.

Conclusion and Future Prospects

Through effective cost management and strategic investments, Turkcell is preparing for an upward trajectory in the upcoming quarters. Management expressed that the company’s robust cash reserves, paired with investments in technological infrastructure, will strategically position it for sustained growth.

Frequently Asked Questions

1. What were Turkcell's revenue and net income for Q2 2024?

Turkcell reported revenues of TRY35 billion and a net income of TRY2.9 billion for Q2 2024.

2. How did Turkcell's subscriber base change?

The company added 346,000 net subscribers, primarily focusing on growth in postpaid and fiber segments.

3. What challenges did Turkcell face this quarter?

Turkcell experienced declines in equipment sales and was affected by economic pressures from previous earthquakes.

4. What are Turkcell's plans for 2024?

Turkcell intends to revise its 2024 guidance in Q3, considering inflation trends and ongoing economic conditions.

5. How is Turkcell managing foreign exchange risks?

Turkcell holds a substantial portion of its cash in hard currencies, aiding in mitigating foreign exchange risk.

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