Turkcell (TKC) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 13, 2026 at 1:00 p.m. ET

CALL PARTICIPANTS

• Investor Relations and Corporate Finance Director - Ozlem Yardim
• Chief Executive Officer - Ali Taha Koc
• Chief Financial Officer - Kamil Kalyon

TAKEAWAYS

• Revenue -- 71.8 billion Turkish liras, increasing 2.5% year over year despite a 32% inflation environment.
• EBITDA -- 30 billion Turkish liras, reflecting a healthy 41.8% margin in line with full-year expectations.
• Net Income -- 5.2 billion Turkish liras, impacted by the commencement of 5G license depreciation.
• Mobile Subscriber Base -- 40 million total subscribers, marking a historical milestone for Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC).
• Postpaid Net Additions -- 284,000 in the quarter, bringing the total postpaid base to 32.5 million subscribers.
• Postpaid Mix -- 81% of the total mobile base, following 2.4 million net additions over the last 12 months.
• Mobile ARPU -- 448 Turkish liras, growing 27% year over year as pricing actions were gradually reflected through contract renewals.
• Residential Fiber ARPU -- 570 Turkish liras, representing 37% year-over-year growth and outpacing the inflation rate.
• Fiber Subscribers -- 2.6 million total, supported by 31,000 net additions during the second quarter.
• Superbox (FWA) Subscriptions -- 818,000 total subscribers, following 64,000 additions as demand for plug-and-play home internet increased.
• Digital Business Services Revenue -- 8.7 billion Turkish liras, rising 33% year over year driven by digital infrastructure platform strength.
• Data Center and Cloud Revenue -- 1.6 billion Turkish liras, accounting for 2.3% of total group revenue.
• System Integration Backlog -- 16 billion Turkish liras, providing visibility for future revenue from more than 1,500 new contracts.
• Paycell Revenue -- 2.4 billion Turkish liras, growing 22% year over year with pay-later transaction volume surging 84%.
• Financell Net Interest Margin -- 7.8%, up from 4.5% last year due to disciplined portfolio management and reduced financing costs.
• Financell Market Share -- 43% by number of loans, maintaining leadership in the customer finance market.
• Operational CapEx to Sales -- 25% for the quarter, with 81% of investment directed toward 5G rollout and fiber expansion.
• Fiber Infrastructure -- 6.7 million total home passes across 31 cities, including 194,000 new passes added this quarter.
• Cash and Cash Equivalents -- 89 billion Turkish liras, supporting a net debt position of 44 billion Turkish liras.
• Leverage Ratio -- 0.4 times, remaining among the strongest levels in the company's peer group.
• 5G License Payments -- $605 million paid in the first installment, with $400 million installments due in Dec. 2026 and May 2027.
• TV+ Engagement -- 2.7 million subscribers, with viewing time increasing 64% year over year following a strategic partnership with HBO Max.

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RISKS

• CFO Kalyon stated, "inflation proved more persistent than anticipated, with regional geopolitical tensions adding further pressure to the macroeconomic outlook," which influenced management's revised year-end inflation forecast.
• CEO Koc noted that while previous assumptions for year-end inflation were 23%, management now anticipates it will "settle around 28%," creating a more demanding operating environment.
• CFO Kalyon reported that the commercial launch of 5G led to increased depreciation, stating, "roughly half of the year on year increase in the depreciation is attributable to these 5G license," which impacted quarterly net income.

SUMMARY

Management reported that the core connectivity segment maintained momentum while digital business services and fintech operations expanded their contribution to the group revenue mix. The company entered the 5G deployment phase, commencing depreciation of license assets while leveraging fixed wireless access to capture broadband demand. Strategic initiatives included the construction of hyperscale data centers for Google Cloud and the expansion of the renewable energy portfolio. Financial stability was supported by a leverage ratio of 0.4 times and a cash position of 89 billion Turkish liras.

• CEO Koc highlighted the fixed wireless access leadership, stating, "We are the undisputed market leader. With a 74% share of FWA, fixed wireless access market."
• The company activated a new data center module, bringing active IT capacity to 54 megawatts to support growing cloud and artificial intelligence demand.
• CEO Koc emphasized the data center infrastructure's readiness for new technology, noting, "Currently, we have 54 megawatts of capacity for AI usage."
• A strategic partnership with Google Cloud for the Turkey region involves constructing hyperscale facilities in Ankara, with service sales expected to begin within two years.
• Management indicated that 35% of the current mobile user base possesses 5G-capable devices, identifying device penetration as a key driver for future ARPU growth.
• The company expanded its renewable energy portfolio by acquiring a 12.1 megawatt solar plant, reaching a total active solar capacity of 74.4 megawatts.
• CFO Kalyon noted that the company's liquidity position fully covers all remaining 5G license obligations and debt maturities through 2030.

INDUSTRY GLOSSARY

• ARPU: Average Revenue Per User, a key performance metric for telecommunications companies.
• Churn: The rate at which subscribers stop using a service during a given period.
• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, used to evaluate operating performance.
• FWA: Fixed Wireless Access, a method of providing wireless internet access to homes or businesses using cellular networks.
• M2M: Machine-to-Machine, referring to direct communication between devices using any communications channel.
• NIM: Net Interest Margin, the difference between the interest income generated and the amount of interest paid out.
• POS: Point of Sale, the place and time where a retail transaction is completed.
• Techfin: Technology-driven financial services, distinct from traditional fintech by focusing on leveraging existing tech infrastructure.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. I am Gaeli, 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 Second Quarter 26 Financial Results. All participants will be in listen only mode and the conference is being recorded. Should anyone need assistance during the conference call, you may signal an operator. By pressing *0 on your telephone. At this time, I would like to turn the conference over to Mrs. Ozlem Yardim, Investor Relations and Corporate Finance Director. Mrs. Yardim, you may now proceed.

Ozlem Yardim: Thank you, Gaeli. Good evening, everyone, and welcome to Success 26 second quarter earnings call. Before we begin, I would like to kindly remind you to review our safe harbor statement which is available at the end of our presentation. Our earnings release and today's presentation are available on our Investor Relations website. Our CEO, Mr. Ali Taha Koc, will begin with an overview of our business performance, followed by our CFO, Mr. Kamil Kalyon who will take you through our financial results. After the presentation, we will open the line for your questions. it is now my pleasure to hand over to our CEO, Mr. Ali Taha Koc.

Ali Taha Koc: You very much, Ozlem. Good evening, everyone. Welcome to Turkcell's second quarter 26 results call. Today, I will take you through our operational and strategic performance for the quarter. After my remarks, Kamil will cover the financial results in more detail, and then we will be happy to take your questions. The key message this quarter is clear. We continue to deliver real growth in a challenging environment. Macro conditions remain demanding, with inflation still >30%. We keep on delivering real revenue growth for the 8th consecutive quarter. Supported by disciplined pricing, continued postpaid additions, and improved churn. In our strategic growth areas, digital business services, fixed wireless access, FWA, data centers, TV, and Techfin took another step forward.

Throughout all these slides, you will see 1 consistent story. Disciplined, value focused execution. Let's begin with the numbers. Group revenue reached 71.8 billion Turkish liras, up 2.5% year-over-year. I want to underline this. With inflation at 32%, this is genuine real growth. Driven by consistent pricing actions and healthy commercial momentum across our businesses. EBITDA was 30 billion Turkish liras with a margin of 41.8%, and net income was 5.2 billion Turkish liras. Our profitability continues to reflect the strength of our disciplined operations, and balanced capital allocation approach. On the operational side, momentum was strong across the board. We added 284 thousand postpaid subscribers in a single quarter. Turkcell fiber business added 31 thousand net subscribers.

Mobile ARPU was realized at 448 Turkish liras while residential fiber ARPU reached 570 Turkish liras. Techfin revenue was up 7% to 4.1 billion Turkish liras Digital business services revenue grew 33% to 8.7 billion Turkish lira. Data center and cloud revenue increased 10% to 1.6 billion and Superbox, our fixed wireless access technology added 64 thousand subscribers. These businesses are becoming core engines of Turkcell's growth, and reinforce our strategic strategy of building a more diversified and resilient business model. Now let me go deeper into each business starting with mobile business. Our mobile business delivered an outstanding quarter. We crossed the 40 million mobile subscriber milestone for the first time in Turkcell's history.

This is a testament to the strength of our network, our brand, and our commercial execution. Our past postpaid base reached 32.5 million subscribers driven by 284 thousand net additions in the quarter. And 2.4 million over the last 12 months. Our prepaid performance remained broadly stable this quarter. As we successfully continued the transition of our mix toward postpaid, which now accounts for 81% of our mobile base. This mix shift is significant. As postpaid customers deliver higher lifetime value through lower churn and multi service adoption. Churn tells the same compelling story. Monthly average churn improved to 1.6%, down significantly from a year ago. So strong net additions combined with declining churn prove 1 thing.

Customers are choosing Turkcell with long term loyalty. On pricing, mobile ARPU, excluding M2M, grew 27% year-over-year. Given the predominantly contractual nature of our postpaid base, pricing actions are gradually reflected in ARPU as contracts renew. Our strategy remains consistent. We take disciplined pricing actions to sustain real revenue growth supported by our strong brand and superior service quality. 1 of the most dynamic drivers of our connectivity business today is fixed wireless access. Let me now turn to our FWA performance. Superbox is our fixed wireless access FWA offering. Which we view as the next wave of growth in home Internet. We are the undisputed market leader. With a 74% share of FWA, fixed wireless access market.

After a soft start to the Q2 2025, growth has escalated for 4 consecutive quarters. We added 64 thousand subscribers this quarter alone. Expanding our total Superbox base to 818 thousand. The strong momentum we are building here is particularly encouraging. Looking ahead, 5G will act as a catalyst. Superbox, our FWA offering, delivers fast, reliable, plug and play, home Internet today. And 5G will elevate that experience to an entirely new level further accelerating market demand. Superbox enables us to capture broadband demand quickly and efficiently while working hand in hand with our fiber strategy. And fiber remains the backbone of that strategy. Let's move to fixed broadband. Our fixed broadband strategy is straightforward.

Grow on our own fiber, price with discipline, and deliver a premium service. And experience. Turkcell fiber reached 2.6 million subscribers. With 31 thousand net additions in the quarter. and 138 thousand over the last 12 months. We continue to increase the share of customers served through our own fiber infrastructure. Reaching 80% up 3 percentage points year on year. The increase reflects our sharp focus on expanding the highest value part of our fiber business. The strength of our fiber business goes beyond scale. Reflecting the quality of our subscriber base. 88% of our residential fiber subscribers are on 12-month contracts. While monthly churn improved to 1.1%.

Together, these metrics provide exceptional revenue visibility and reinforce the resilience of our fiber business. On pricing, residential fiber ARPU grew 37% year-over-year. Outpacing the inflation rate. Combined with continuous improvements in churn, these results demonstrate the strength of our fiber proposition and the value customers place on our service. At the same time, we continue to expand in Turkey with strong discipline. We passed 194 thousand new homes in this quarter. Bringing total home passes to 6.7 million across 31 different cities. With the take up rate of 41%. Take up rate is 1 of the metrics we track closely. As it demonstrate that we are expanding where demand is strongest.

Connectivity also opens the door to our digital customer service services. Starting with TV+. TV+ now serves 2.7 million subscribers. Subscriber momentum continues to gather pace throughout the year. Net additions increased from 62 thousand in the fourth quarter of last year to 106 thousand in the first quarter of this year, and accelerated further to 123 thousand this quarter. Content is a key driver of the TV business. Our strategic partnership with HBO Max, launched in November has significantly enriched our content offering and resonated well with customers. As a result, viewing time increased by 14% quarter-over-quarter and 64% year-over-year. TV+ is about more than just the numbers of subscribers. It strengthens engagement across our ecosystem.

Also, subscribers that actively use TV+ interact with Turkcell more frequently. Adopt more of our services, and build deeper longer lasting relationships with us. Now let's move to the fastest growing part of the group, digital business services. Digital business services delivered an outstanding quarter. With revenue up 33% year-over-year to 8.7 billion Turkish liras. This strong performance reflects the depth scalability, and market strength of the digital infrastructure platform we have built over the years. Today, our data center footprint spans 4 different locations. Kocaeli, Ankara, Tekirdag, and Izmir. Following the activation of a new module during the quarter, our active IT capacity reached 54 megawatts. We are now taking this platform to the next level.

Construction of hyperscale data center facilities, they get dedicated to Google Cloud, Turkey region, in Ankara, underway. A partnership of this caliber is a strong endorsement of the quality of our infrastructure. And further strengthens Turkcell's position at the center of Turkey's digital transformation. Including our hyperscale data center investments, our total investment amount reached €612 million. As of Q2, data center and cloud represent 2.3% of our group revenues. While still a developing revenue stream today, we see this business as 1 of the Turkcell's most promising long term growth platform. Growth in system integration was supported by both hardware and services.

More importantly, we entered the second half of the year with more than 1.5 thousand new contracts and a system integration backlog of 16 billion Turkish lira. This contracted backlog provides exceptional revenue visibility and reinforces our confidence in the sustainability of future growth. Finally, let me turn to our techfin businesses. Another critical pillar of the Turkcell ecosystem. Our techfin businesses contribute 6% of the group revenue this quarter and continue to strengthen the diversity of our earnings base. Paycell delivered another strong quarter. With revenue increasing 22% year-over-year to 2.4 billion Turkish lira, pay later transaction volume surged 84%. While POS transaction volume grew 67%.

Consequently, total payment value across the Paycell ecosystem reach 39 billion Turkish lira during this quarter. Paycell now serves 6.8 million active users across a broad range of everyday payment services, while the ongoing expansion of our POS solution is further strengthening our merchant ecosystem. Together, these customer and merchant capabilities continue to reinforce the scale, and the resilience of our payment platform. At Financell, our focus remained firmly on profitability, and portfolio quality. This effort resulted in a significant improvement in net interest margin while increased from 4.5% to 7.8%. While the cost of risk remained well under control at 3.4%. Revenue was 12% lower year-over-year reflecting our disciplined approach to portfolio management.

Financell continues to lead the customer finance market with a 43% market share by number of loans. Our 16.1 million preapproved credit customers provide significant potential for future growth. As we close the quarter, 1 key message stands out. Our core connectivity business continues to perform with resilience. While the businesses we have been investing and are becoming increasingly important drivers of our growth, and profitable. We remain committed to executing our strategy with discipline, investing in high return, long term growth, while continuously enhancing operating margins. Before I conclude, let me briefly touch on our outlook. Since the beginning of the year, the macroeconomic environment has evolved. And we now anticipated year end inflation to settle around 28%.

Compared with our previous assumptions of 23%. Even with this revised inflation assumption, our financial guidance remains unchanged. Finally, I want to express my sincere gratitude to the entire Turkcell team. Their dedication, and commitment are behind every achievement we have shared today. With that, I will hand it over to Kamil for a more detailed review of our financial results.

Kamil Kalyon: Thank you, Ali Taha. Let me now take you through our financial results. During the second quarter, inflation proved more persistent than anticipated. With regional geopolitical tensions adding further pressure to the macroeconomic outlook. Despite these headwinds, delivering positive real growth clearly underscores the inherent stability of our business model. This performance is a direct result of our strong brand equity disciplined pricing strategy and solid commercial momentum across every segment. Simply put, these results give us full confidence in the quality and long term sustainability of our growth trajectory. Turning to our financial performance in this environment. We generated 71.8 billion Turkish liras in revenues marking an impressive 2.5% year on year growth.

Turkcell Turkey continued to drive group expansion delivering 1 billion in incremental revenue with accelerated momentum across the corporate segment played a pivotal role in supporting this performance. On the profitability side, I want to highlight our deliberate strategy around 5G. As the clear leader at every stage of the 5G transition, we intentionally stepped up our marketing investments this quarter to further solidify customer adoption and translate our 5G leadership into long term commercial value. Even when measured against an exceptional strong comparable base, we delivered a healthy EBITDA margin of 41.8% which sits fully in line with our full year expectations. Next slide, please.

Moving on to net income, I would like to briefly outline the key dynamics shaping our financial performance this quarter. Following the commercial launch of 5G, depreciation of the associated assets commenced this quarter. Roughly half of the year on year increase in the depreciation is attributable to these 5G license. As expected, the resulting increase in depreciation impacted the bottom line while marking an important transition as our 5G investments moved into active deployment, and monetization. This impact was partially offset by higher monetary gains associated with the capitalization of the 5G license compared with the same period last year.

Despite the year on year increase in our net debt position, our active treasury management continued to deliver tangible benefits. Excluding FX effects, we generated higher financial income while reducing finance financial expenses with both contributing positively to our bottom line year on year. Moving to our equity-accounted investments. TOGG, in which we are proud to be a founding shareholder, continue to scale its operations during the quarter. As the business matures, the heavy start up losses of its early years have now largely normalized delivering a more favorable contribution to the group year on year.

On the tech side, our tax expense was significantly lower year on year supported by the fixed asset revaluation effect and tax incentives tied to our growing data center business leading to a meaningful improvement in our effective tax rate. Bringing all these factors together we delivered a strong bottom line performance translating into a net income of 5.2 billion Turkish liras. Next, I would like to walk you through the main drivers behind our net FX loss. Before discussing this quarter's effects impact, let me first emphasize that we continue to manage both FX and interest rate risk proactively, with a disciplined approach that balances risk hedging costs, and financial returns.

On the borrowing side, the $1 billion of the Merabah facility we secured last quarter increased the FX component of our debt portfolio. This exposure is largely balanced by our sizable FX denominated cash and financial assets which provide a natural offset against our FX liabilities. At the same time, we actively managed these assets under our treasury strategy to optimize returns while maintaining a disciplined approach to FX risk. Another factor contributing to the FX impact this quarter was our remaining 5G license installments. With 2 payments still outstanding, these obligations remain subject to FX revaluation. Furthermore, the accelerated pace of TI depreciation compared to previous periods has naturally added to our reported FX expenses.

We constantly evaluate alternative hedging strategies. However, under current market dynamics, the cost of fully hedging our FX exposure remains elevated. We believe our current approach strikes an effective balance between managing effects risk and maintaining cost efficiency. Finally, it is essential to evaluate our finance expenses holistically rather than focusing solely on reported FX loss. As part of our proactive liquidity management, we utilize FX swaps to convert hard currency liquidity into Turkish lira and deploy the resulting funds into high yielding money market instruments and deposits.

While the cost of these transactions is recognized as a FX losses, for accounting purposes, resulting Turkish lira liquidity generates meaningful interest income which is recorded separately and therefore is not captured in the FX loss line. Therefore, reported FX loss should not be viewed in isolation as it captures only 1 component of the broader economic outcome of our treasury strategy. Next slide, please. Turning to our investments. Our operational CapEx to sales ratio stood at 25% in the second quarter bringing our first half ratio to 23.2%. We allocated the 81% of our operational CapEx directly to our core business primarily supporting 5G network rollout and the continuous expansion of our fiber infrastructure.

During the quarter, we added 194 thousand new fiber home passes, expanding our total footprint to 6.7 million. Meanwhile, the fiberization rate of our base stations reached 47.5%, further strengthening the quality and the resilience of our integrated network. Beyond our core telecom infrastructure, we continue to expand our renewable energy portfolio. In April, we acquired a 12.1 megawatt solar power plant in Mersin, bringing our active solar generation capacity to 74 point 4 megawatts. We expect this capacity increase further over the coming quarters as projects currently under the development become operational. We also made further progress in our data center investments.

We activated the final module of our Ankara data centers and broke ground on the data center infrastructure supporting the Google Cloud region in Turkey. With these investment milestones covered, let me now turn to our balance sheet position. Turning to our balance sheet, our financial position remains strong. With cash, and cash equivalents reaching 89 billion at quarter end. Our cash position remains resilient compared to year end 2025, despite significant planned cash outflows including the first 5G license installment the annual wireless usage fee and bonus payments. The Moraba financing completed during the period further strengthened our liquidity position and provided additional financial flexibility.

We remain focused on proactive liquidity management balancing efficient funding with the preservation of a strong balance sheet. As anticipated, these planned cash outflows resulted in net debt of 44 billion Importantly, our leverage ratio remained very low It just 0.4 times well, within our comfort zone and among the strongest levels in our peer group. Looking ahead, our robust liquidity fully covers all remaining 5G license obligations and debt maturities over the next 4 years. Next, let's take a closer look at our FX exposures. Finally, let me touch upon our foreign risk management.

As part of our proactive treasury strategy, we selectively use FX swaps to optimize returns on our cash balances converting a portion of our hard currency liquidity into Turkish lira to benefit from attractive TL yields. At the same time, we maintain a substantial portion of our cash in hard currencies, providing a natural hedge against our FX liabilities. At Quarter-end, 60% of our cash was held in hard currencies while 87% of our financial debt was denominated in hard currencies.

At the end of second quarter, we had 4.3 billion US dollar equivalent of FX denominated financial liabilities balanced by 2.6 billion US dollar equivalent of FX denominated financial assets and effective hedging portfolio of 1.2 billion US dollars, The year on year increase in FX liabilities primarily reflects our 5G license obligations and related investments the expansion of our data center capacity and the BOTAS standard. All directly linked to the execution of our long term investment strategy. As a result, our net short FX position remained comfortably within our medium term target range of plus and minus 1.5 billion US dollars.

With that, I will hand the call back to the operator and we would be happy to take your questions.

Operator: You very much. Ladies and gentlemen, at this time, we will begin the question and answer session. If you wish to remove yourself from the question queue, then you may press *2. Please use your handset when asking your question for better quality. Anyone who has a question may press *1 at this time. 1 moment for the first question, please. The first question is from the line of Cemal Demirtas with Bank of America. Please go ahead.

Analyst: Hi, good evening, everyone. Good evening, everyone. Thanks for the call and the opportunity to ask questions. And congratulations on the results. I have 3 questions. Sorry about that. The first 1 is very easy. Just wanted to understand what would be the drivers that would help you reaccelerate growth in the second part of the year? So that it is more in line with the guidance you provided. I am talking about revenue growth. The second question, I would like to understand a little bit better why the margins at Paycell and Financell are so volatile. So for example, if I look at the Paycell margins, there was a 5.5% decrease this quarter versus last year.

To the opposite, the Financell margins increased by almost 20 percentage points. So I would like to understand that a little bit better. And then the third question is on the CapEx. We have seen, I think, your key competitor increasing slightly CapEx guidance in line with the FX volatility and that high inflation. Are you still comfortable with your current CapEx guidance? Thank you so much.

Kamil Kalyon: Thank you very much. I will start from the third question. Yes. We are still confident about to reach our guidance in the CapEx side. Even if there would be, how can I say, a fixed increases, As you know, coming from this period, we are very disciplined about the CapEx spending side? Therefore, we will be carefully spending our money, and we think that we do not expect more deviation in the CapEx guidance side. In the second question, Cemal side, for, like, for, I think, last 2 years period in Cemal, we are focused on the POS solutions. In physical to pay POS solutions and the other side.

Therefore, the profitability of these transactions a little bit eroding the Paycell's EBITDA margin. While we have a very important amount of growth in the Paycell side. But sometimes, these post transactions can be a little bit a little bit in total, we are very happy to see the performance of the Paycell side. Regarding the finances financial side, due to the economical conditions in Turkey, there are, can I say, tightening policies. Therefore, the demand for the terminal or the equipment site is a little bit how can I say, poor this year? Therefore, this directly affects Financell's credit line, and the activities.

But since the cost of financing is reducing in this way, therefore, you can see higher EBITDA margins in the Financell side. Therefore, the volatility is coming from this 1. But we are still very happy to the contribution of the Techfin side into our overall picture.

Ali Taha Koc: So the for the first part, that is why we are expecting the growth in the second half. Why? Because currently in the telecom market, the competition is naturalizing, and it is becoming a more realistic competition is in the market right now. Compared to mobile number portability if you compare to last year. This year is a little bit better. And the we have a dynamic pricing actions that we put in the first half of the year. So the impact of that price changes is going to support our second half growth. And I am pretty sure that the DBS and fintech continues to support our growth in the second half of the year.

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

Kamil Kalyon: Thank you.

Operator: The next question is from the line of Mandaci Ece with HSBC.

Mandaci Ece: Yes. Hi. Thanks a lot for taking my question. My question is a follow-up on the growth outlook. So just wondering when do you see the impact of recent price hikes to become, you know, fully visible in the growth and, you know, it goes towards your guidance of you know, a high single-digit level So if you could give some color on that, that will be very helpful. And then the second question is on your FWA offering. Very interesting to see the growth in that segment.

If you could help understand, you know, of your current customer base, of around 800 thousand if I remember correctly, Are they all on 4G devices or those devices they have are capable of using 5G as well. So do they need to upgrade their device basically to benefit from the 5G transition? So that will be, you know, helpful to understand. And in terms of the pricing of FWA, you know, what kind of discount or parity it has versus the fiber product If you could talk about the offering itself, what the speed customers are getting now, and what speeds they are likely to get with 5G.

If you could give some dynamics around the product, that will be very helpful.

Ali Taha Koc: You very much for the question. First of all, the first part, the growth impact, Because of the lag effect of our price change, and also a 12 month contract. So beginning from the end of the Q4, you are going to see the impact and the growth much clearer. The for the, FWA part, FWA is currently as you may know, we got the highest frequency band and we had the biggest investment in the 5G. We have a higher capacity, and our 5G offerings are with supporting Wi-Fi 7 as well.

So what we are doing right now is we are just offering this product to all of the customers in Turkey who has a old fashioned technologies using, like, DSL. And then on top of it, it is a very portable and plug and play easy to use device. So there is a huge appetite from the market They wanna buy it. And at the beginning, we just for our own 4G users, 4G Superbox users, we started to swap them with our 5G devices because currently, 4G, current 4G spare box only supports 4G technology.

But we deployed 5G all around the world around the Turkey. that is in order to utilize that kind of capacity, they need to have 5G equipment. And the if you compare the pricing of our Superbox compared to the fiber, Superbox pricing is a little bit above fiber prices. But there is a huge impact of the usability. So it is very easy. You can go and get grab that device, and then you can plug and play, and then you can use it very easily.

Mandaci Ece: Did I did I hear that correctly? The box is more expensive than fiber.

Ali Taha Koc: Comparable prices. You know, you can just a little bit. You know? So just they are close because you put some limits on this product tariffs. It is 250 gigabytes or 500 or 1 terabyte. So depending on the, the limits that you have, the price can change, but it is comparable prices.

Mandaci Ece: And that is good. And in terms of any response from competition on that side, have you seen anything?

Ali Taha Koc: So 74% market share, I think, answers your questions. Okay.

Operator: Thank you. The next question is from the line of Cemal Demirtas with Ata Invest. Please go ahead.

Cemal Demirtas: Thank you for the presentation and congratulations for good results. My first question is about the strategic perspective, Ali Taha Koc. I remember that when you were, you know, appointed as the CEO, in your minds, you were know, maybe expecting or you were foreseeing to have 22% out of 12%. In the future. You had your ambitious targets at that time. And, you know, you are progressing the company in years. I would like to ask you, you know, strategy perspective question. You have more drivers right now. But you are getting more than mobile operator.

When do you think we will see the other areas like the result platforms, data center to have more significant contribution in your revenues Could we expect any 3 year plan that is, you know, at least give out the direction maybe in the following quarters. Maybe it is not that clear now, but at least that kind of thing will get us, you know, more information to get that digital platform more than helping you for instance. Actually, it will be very, you know, good thing to point that because currently, you know, the system is bit harder, I would say. In our view, we had difficult to understand the verification.

But we understand that the market is focusing on the weak article at least at this moment. So I think any clarification on that or, you know, any long term perspective as you did in the past in data center? It could be very helpful. Maybe sorry for this long question.

Ali Taha Koc: And the second 1 is about the short term perspective. In your earnings release you mentioned that ARPU improvement could come in the fourth quarter And if we assume that in the fourth quarter, are we gonna see some improvements? Or you mean, you know, it is gonna be in 2027? Thank you. Thank you very much. Thank you very much for the question. So when I started this role, I had a I have a dream, you know. So I have still that dream, but I am gonna executing it firmly and with the disciplined approach.

So what we happen In 2016, Turkcell started its is journey in the DC provider, It built its first DC in 2016. and then it started a DC business as a collocation provider. So collocation business is very good, profitable, very business. But in order to come up with a, like, a dream of the becoming another truck sale, you need to add the service business on top of it. So that is the reason that we have a huge agreement with Google Cloud like a $3 billion investment to reach that dream. Because with the collocation businesses, it is limited. Because what happens in the it affects very deeply about all these political issues.

If no 1 can buy servers, they do not need collocation services as well. Currently, you can see that the price of the servers are going high, and then because of the processor and the RAM crisis, the price of each drawer is getting higher and higher. So on top of it, everyone's looking for the services, cloud services. So that is the reason that we have a huge agreement with the Google Cloud. Currently, this year, our revenue of the DCN cloud revenue reached 2.3% of overall revenues. It was 1% or something a couple of quarters back. It went up to 2.3%, but we are constantly improving that percentage and revenue.

And with the, we started the construction of the Google Cloud data centers. And in 18 months, hopefully, we are going to start in the 2 years. We are gonna start selling services And the service business is going to bring more revenue And I am pretty sure that in 5 to 6 years, you are gonna see more revenues coming out of that. You know, we are expecting in 2030-2031, 10% to 15% of the revenue is gonna come from our data center business. But that is a long term story.

And then also with the AI, I am pretty sure that the value, this investment value is gonna be more recognized because in order to have AI capability, you definitely need a data center. And guess what? Currently, we have 54 megawatts of capacity for AI usage. And if anybody can bring their servers or the AI chips, we have the location for them. So that is the reason that I have I am very optimistic about the revenue, and it is gonna come. Any other question? Yeah. Can you repeat the second question? Questions. I am sorry. I forgot the second question.

Cemal Demirtas: If I ask society now, you mentioned in your early career, you expect that recovery in our ARPU. You know, fourth quarters and onwards, Meaning, you know, after Q2 to Q4, you know, 2 times 27, or we are going to see it in the fourth quarter?

Ali Taha Koc: Thank you. So what we just put in the price and the ARPU levels hours, and then I am pretty sure that it is going to slowly increase, but we are gonna see the real impact in 2027.

Kamil Kalyon: Yeah. But you will get the signals, the positive signals, because we are investing a lot of things to make our ARPU high. Starting from this year. Therefore, you will be seeing the signals in the third quarter of 2 thousand 26 most probably in February, but the exact results will be taken in 2027.

Cemal Demirtas: And 1 related to your, you know, backlog from system integration project. You see that 16 billion versus time deal in terms of the previous card. But Should we expect gradual increase in the power following quarters? Or should we expect more significance improvements maybe late 2027 or 2020 on that front.

Kamil Kalyon: Thank you. Yes. When you look at our Q1 results and Q2 results, we had very, very important significant projects. Coming from the governmental bodies and the other side. Therefore, we see the valuable effects of these projects this year. Most probably, they will come because when you start a big project in a company or in the governmental side, there are a lot of following projects are coming from this project. Therefore, our expectation in 2027 these projects will be continuing in the 2027 because, as we explained previously, the most important or strong muscles of our company, are not only focusing on the individual side only.

We are also very, very strong in the enterprise side in the market. Therefore, that is why Google or the other big companies are choosing us as a partnership. Yes. We have a very good technical expertise, but our Salesforce regarding this enterprise side is very strong. Therefore, we invested this service line 6 or 7 years ago. But we are now harvesting this investment in this years. And most probably, it will continue in the coming years.

Cemal Demirtas: Thank you for thank you for your answers. Yeah.

Operator: The next question is from the line of Evgeniya Bystrova with Barclays. Please go ahead.

Evgeniya Bystrova: Hello. Good evening, and thank you for the presentation. I have just 1 quick question, and apologies if you covered it in the past But I wanted to understand better or maybe you could break down for me the expected payments for the 5G tender. I know there was a payment in Q1 including the VAT, but correct me if I am wrong. So what was the specifically the 5G payment in Q1? And what are the expected payments in the next quarter? And what is the timing for that? Thank you.

Ali Taha Koc: Okay. It is 3 installments. The first installment is also included the VAT. Either way, they happen at January of this year. The second installment is gonna be in the December. This year. And it is around $400 million. And the third and the last installment is gonna be next year, May 2027. And it is, again, like, around $400 million. Yeah. And the first installment amount is 600 to 5 million US dollars. Because of includes the VAT as well? So we pay the VAT or upfront. Okay. Thank you. that is very clear.

Operator: Thank you. As a reminder, if you would like to ask a The next question is from the line of Yusuf Karagoz with Ak Yatirim Thank you so much for the presentation.

Analyst: I have 2 questions. So do you expect any changes to the credit limits as far as know that there is a limit to installment on newly devices, And this is for to this is so important for the for the 5G penetration and also for the finance And my second question is that have you started to see the contribution from the 5G on ARPU growth? And my last question will be related to data centers. So how much EBITDA data center generate in the second quarter of this year And if you have any, you know, could you share it as details about the data center or any other I mean, the segment for digital business services.

Thank you so much.

Ali Taha Koc: Thank you very much for the question. The first part is very important for us, especially with the 5G penetration. it is around 35% right now of our all of our users. 30% to 35% of them have the 5G phones. But in order to support that, we are supporting the local production also late last year. We had the agreement with Samsung to produce in Turkey, which is gonna be included. That production is gonna be a series 1, and it is gonna be below 20 thousand Turkish lira.

But with the latest developments, as especially on the RAM price crisis and then also supply chain issues, we are seeing that the product of the phones are getting more expensive. So that is the reason that we are doing lots of lobbying in order to increase that limit. But in our planning, we always keep that limit amount, 20 thousand Turkish dollars fixed, But if it is changed, I am pretty sure that it is gonna positively affect our outlook, especially for the financial. But I am pretty sure that 18 months ago, they changed that limit.

I am pretty sure that in soon, because we are not gonna able to find any phone which is smaller than $20 thousand so we cannot do any installment. But on top of it, you can do a 3-month, 3 installments. Besides 12 installments, you can do 3 installments. But overall, I am pretty sure that for the penetration, that limit needs to be The second thing that, with 5G, we can see that the usage amount of the usage and then the data usage has increased, And on top of it, the 5G is gonna improve our ARPU slowly. And what I am pretty sure that the users who are using 5G have higher ARPUs.

And then when we move them all to our customers from 4G to 5G, with the 5G capable phones, I am pretty sure that our ARPU is going to have a positive impact on that.

Kamil Kalyon: And Regarding the EBITDA margins of the DC operation, I we are not expecting any erosion in our EBITDA margins. When we look at our business plans, we see that the we see that the EBITDA margins that will come from this DC operation will not erode our consolidated EBITDA margins.

Ali Taha Koc: But without the with the 5G ARPU levels, we are bringing a new concept called FWA, fixed wireless access. So we are double using the our 5G spectrum. For the cell phones as well as the home Internet. So we are gonna see a growth and then a revenue growth from the FWA part as well.

Analyst: Thank you so much.

Operator: 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.

Ali Taha Koc: Thank you. Thank you very much, and see you in our third quarter call.

Kamil Kalyon: Thank you very much for sparing your time. Thank you for joining us. Bye.

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

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