Turkcell Iletisim Hizmetleri: Full Year 2023 Results

Achieving Double-digit Real Growth;

Guidance Exceeded

ISTANBUL–(BUSINESS WIRE)–Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) (BIST:TCELL):

• Please note that all financial data is consolidated and comprises that of Turkcell Iletisim Hizmetleri A.S. (the “Company”, or “Turkcell”) and its subsidiaries and associates (together referred to as the “Group”), unless otherwise stated.

• We have four reporting segments:

• «Turkcell Türkiye» which comprises our telecom, digital services and digital business services related businesses in Türkiye (as used in our previous releases in periods prior to Q115, this term covered only the mobile businesses). All non-financial data presented in this press release is unconsolidated and comprises Turkcell Türkiye only figures, unless otherwise stated. The terms «we», «us», and «our» in this press release refer only to Turkcell Türkiye, except in discussions of financial data, where such terms refer to the Group, and except where context otherwise requires.

• “Turkcell International” which comprises all of our telecom and digital services-related businesses outside of Türkiye (BeST and KKTCELL).
  • As of December 31, 2023, Lifecell, UkrTower, and Global LLC have been classified as a disposal group held for sale and as a discontinued operation. Discontinued operations in Ukraine include Lifecell LLC, LLC Global Bilgi, and LLC Ukrtower.

• “Techfin” which comprises all of our financial services businesses.

• “Other” which mainly comprises our non-group call center and energy businesses, retail channel operations, smart devices management and consumer electronics sales through digital channels and intersegment eliminations.

• This press release provides a year-on-year comparison of our key indicators and figures in parentheses following the operational and financial results for December 31, 2023 refer to the same item as at December 31, 2022. For further details, please refer to our consolidated financial statements and notes as at and for December 31, 2023, which can be accessed via our website in the investor relations section (www.turkcell.com.tr).

• Selected financial information presented in this press release for the full year of 2022, and 2023 is based on IFRS figures in TRY terms unless otherwise stated.

• In the tables used in this press release totals may not foot due to rounding differences. The same applies to the calculations in the text.

• Year-on-year percentage comparisons appearing in this press release reflect mathematical calculation.

NOTICE

This press release contains the Company’s financial information for the year ended December 31, 2023 prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and includes certain financial information prepared in accordance with Turkish Accounting Standards (“TAS”) / Turkish Financial Reporting Standards (“TFRS”). This press release contains the Company’s financial information prepared in accordance with International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS29″). This release includes forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, Section 21E of the U.S. Securities Exchange Act of 1934 and the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. This includes, in particular, our targets for revenue, EBITDA margin and operational capex for 2024. In establishing such guidance and outlooks, the Company has used a certain number of assumptions regarding factors beyond its control in relation to macro-economic indicators such as expected inflation levels. Notwithstanding such guidance, outlooks and expectations, there is still uncertainty as to whether our assumptions, guidance, outlooks and expectations will be achieved, including based on the other assumptions outlined herein. More generally, all statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding the launch of new businesses, our operations, financial position and business strategy may constitute forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, among others, «will,» «expect,» «intend,» «estimate,» «believe,» «continue» and “guidance.”

Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. In addition, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by forward-looking statements. Should one or more of these risks or uncertainties materialize, or underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended, planned or projected.

These forward-looking statements are based upon a number of assumptions and other important factors that could cause our actual results, performance or achievements to differ materially from our future results, performance or achievements expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2022 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this press release. All forward-looking statements in this press release are based on information currently available to the Company and we undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company makes no representation as to the accuracy or completeness of the information contained in this press release, which remains subject to verification, completion and change. No responsibility or liability is or will be accepted by the Company or any of its subsidiaries, board members, officers, employees or agents as to or in relation to the accuracy or completeness of the information contained in this press release or any other written or oral information made available to any interested party or its advisers.

FINANCIAL HIGHLIGHTS

FULL YEAR HIGHLIGHTS

• Strong financial performance:

• Group revenues up 14.6% supported mainly by accelerated ARPU growth and strong mobile postpaid subscriber net add performance. Our digital services and techfin business also contributed to overall revenue growth.

• EBITDA up 19.9% leading to an EBITDA margin of 41.0%; EBIT up 213.5% resulting in an EBIT margin of 11.7%

• Net income up 82.5% to TRY12.6 billion

• Strong free cash flow³ generation of TRY7.3 billion; net leverage⁴ level at 0.5x; net long FX position of US$22 million

• Solid operational momentum:

• Turkcell Türkiye subscriber base⁵ up by 799 thousand net additions

• 1.6 million mobile postpaid net additions

• 173 thousand fixed subscriber net additions; 169 thousand fiber net additions

• 5.8 million total homepasses; 386 thousand new fiber homepasses

• Mobile ARPU⁶ growth of 18.4%; residential fiber ARPU growth of 0.7%

• 2024 guidance⁷; revenue growth target of high-single-digit, EBITDA margin target of around 42%, and operational capex over sales ratio⁸ target of around 23%

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

(2) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

(3) Free cash flow calculation includes EBITDA and the following items as per IFRS cash flow statement; acquisition of property, plant and equipment, acquisition of intangible assets, change in operating assets/liabilities, payment of lease liabilities and income tax paid.

(4) Starting from Q421, we have revised the definition of our net debt calculation to include «financial assets” reported under current and non-current assets. Required reserves held in CBRT balances are also considered in net debt calculation. We believe that these assets are highly liquid and can be easily converted to cash without significant change in value.

(5) Including mobile, fixed broadband, IPTV, and wholesale (MVNO&FVNO) subscribers

(6) Excluding M2M

(7) The guidance for the year 2024 includes the effects of implementing inflation accounting in accordance with IAS 29. Our 2024 guidance has been established using a certain number of assumptions regarding factors beyond our control, including in relation to macroeconomic indicators such as expected inflation levels. In particular, our 2024 guidance is based on an assumed annual inflation rate of 37%, applied on a monthly basis. Please note that this paragraph contains forward-looking statements based on our current estimates and expectations regarding market conditions for each of our different businesses. No assurance can be given that actual results will be consistent with such estimates and expectations. For a discussion of factors that may affect our results, see our Annual Report on Form 20-F for 2022 filed with the U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.

(8) Excluding license fee

For further details, please refer to our consolidated financial statements and notes as at December 31, 2023 via our website in the Investor Relations section (www.turkcell.com.tr).

COMMENTS BY CEO, ALİ TAHA KOÇ, PhD

2023 was a year in which Türkiye’s agenda was shaped by the February earthquake that came to be known as the disaster of the century, the general election period, and challenging macroeconomic conditions. Globally, the main impacts came from decelerated growth due to central banks’ continued tightening policies, ongoing wars creating humanitarian crises, and the effects of climate change. Despite these challenges, I am proud to share with you our determination to further strengthen Türkiye’s pioneering position on the journey of digital transformation.

During this time, we continued to enhance our technological infrastructure, know-how, and capabilities to provide our customers with a seamless and high-quality communication experience. We aim to develop new strategies to increase Türkiye’s digital access and make technology more inclusive. With our projects supporting digital transformation in various fields, from education and healthcare to business and social life, as Türkiye’s Turkcell, we continue to invest in the development of the technology sector and the future of our country.

Yet another year highlighted by prominent achievements…

We completed the year 2023 with a performance that exceeded our expectations. In 2023, according to inflation accounting practices^*, our consolidated revenues rose 14.6% to TRY107.1 billion, thanks to the expanding subscriber base, sequential price adjustments, and contributions from our techfin business and digital services. Consolidated EBITDA¹ rose by 19.9% to TRY43.9 billion, with an EBITDA margin of 41.0%. Meanwhile, net income increased by 82.5% year-on-year to TRY12.6 billion.

In 2023, while maintaining our leadership in the mobile segment, we remain committed to our rational pricing strategy, despite the aggressive short-term campaigns of our competitors. This approach enabled us to maintain our dynamic position in the industry. Moreover, thanks to our customer-oriented strategy, innovative and comprehensive offerings, large sales network strengthened by digital channels, and best-in-class infrastructure, we had 799 thousand net subscriber additions. This year, we maintained our focus on postpaid subscribers, ensuring a higher revenue growth contribution, and gained a net 1.6 million subscribers. On the fixed broadband side, while focusing on penetration with our fiber product, we also remained focused on revenue growth. By extending our end-to-end fiber service to an additional 386 thousand home passes in 2023, the total number of households reached rose to 5.8 million. Our fiber subscribers reached 2.3 million.

Our strategic focus areas continue to support growth

We continued our digital service portfolio activities, comprising significant brands such as BiP, TV+, lifebox, fizy, GAME+, and digital advertising. In 2023, the number of stand-alone paid users² enjoying our digital services increased by 9% year-on-year to 5.6 million.

In 2023, Digital Business Services remained the primary supporter of corporate customers on their digital transformation journey. In addition to end-to-end tailored digitalization services, data centers and cloud services were the key contributors to revenue growth. We have completed over 3,500 projects in system integration and managed services to date; the backlog from system integration projects has reached TRY3.1 billion. In the digital data era, we consider the ownership of data, the raw material of industrial transformation, remaining in our country to be an important initiative. To keep Türkiye’s data within the country, we are committed to retaining our leadership position in the data center market. We intend to further bolster our investments, having already allocated EUR330 million since inception.

Our techfin services, Financell³ and Paycell, continued their operations successfully in 2023. Financell, continuing to diversify its product portfolio according to the financing needs of individual and corporate customers, had reached a credit portfolio of TRY6.2 billion by the end of 2023. Paycell, with its extensive product portfolio that provides fast and secure payment solutions, had reached 8.0 million users by the end of 2023. While the «Pay Later» service, which constitutes a significant portion of Paycell’s revenues, remains the key vertical driving growth, POS solutions, which have been rapidly expanding since the last quarter of the previous year, have also supported Paycell’s growth.

We are shaping the future with our sustainability vision

As per our sustainability strategy, we aim to positively impact our environment, society, business, and planet in all our endeavors. Therefore, as a leading company in the technology and telecommunications sector, we integrate sustainability into our business strategy and operations. In this context, we don’t just consider our investment in renewable energy an environmentally friendly step but also an essential element in managing our energy needs. In addition to our wind energy power plant, our solar energy plant projects, which will have an installed capacity of 300 MW, along with greenfield and rooftop solar power installations, we are confidently moving towards a future where we expect to meet 65% of our energy needs from our renewable energy sources in 2026. This brings us one step closer to our goal of achieving net zero emissions by 2050. These investments enhance our environmental sustainability while making our business model more competitive and sustainable.

In addition to these efforts, as Turkcell, we greatly emphasize social investment projects to ensure equal opportunities for all segments of our society, utilizing the inclusive power of digitalization. We carry out projects that prioritize social benefit, promote digital literacy, raise awareness about the conscious use of technology, and enable participation in various aspects of life for many groups, from children to young people and from the elderly to individuals with disabilities.

While supporting environmental sustainability with our renewable energy investments, we aim to add value to all institutions and businesses through digital transformation. This dual approach brings us closer to our goal of becoming a net-zero company and strengthens the social integration and inclusivity of technology. In the coming periods, through the steps we will take towards environmental and social sustainability, we believe that as Turkcell, the leading telecommunication and technology company, we will shape Türkiye’s Digital Century.

Turkcell means Technology

Meanwhile, our approach to artificial intelligence technologies strikes a delicate balance between fostering innovation and prioritizing societal benefit. We are fully confident that, in line with this strategy, we will play a critical role in shaping the future. As Turkcell, we effectively integrate artificial intelligence solutions into every aspect of our operations while ensuring the ethical use of AI in our actions. The chatbot that we have developed, supporting around 200 thousand customers per day, provides a tangible example of how these technologies can be implemented in business models. Additionally, we have AI-supported recommendation systems on our fizy and TV+ platforms, enhancing our capacity to provide content tailored to users’ preferences. Furthermore, Turkcell’s artificial intelligence team has played a significant role in developing the ‘In-Car Face Detection, Recognition, and Analysis System’ for Turkiye’s domestic pride, Togg, the Turkish EV. These projects epitomize how technology transforms our business processes and contributes to social benefit.

We aim to elevate Turkcell’s strongest and most significant capability, the best-in-class mobile and fixed network infrastructure, to the next level, focusing on increasing FTTS (Fiber to the Site) and modernizing through GPON (Gigabit Passive Optical Network) in the upcoming period. We continue to take determined steps towards being the best in the technologies of 5G and beyond. In this context, alongside our network preparations, we are increasing R&D collaboration with our business partners.

In 2024, we expect⁴ high-single-digit growth in Group revenues, an EBITDA margin of around 42%, and the operational capex over sales ratio⁵ of around 23%.

In the upcoming periods, our determination to carry Turkcell and our country to a brighter future with a focus on innovation and our spirit of excellence will continue uninterrupted, positioning Turkcell as the pioneer of Türkiye’s Digital Century.

I express my gratitude to our Board of Directors, colleagues, customers, and shareholders who have been by my side throughout this successful journey. Together, I am fully confident that we will achieve further success.

(1) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income

(2) Including IPTV, OTT TV, fizy, lifebox and GAME+

(3) Following the change in organizational structure, the revenues of Turkcell Sigorta Aracılık Hizmetleri A.Ş. (Insurance Agency), which was previously managed under Financell, have are now classified as «Other» in the Techfin segment as of the first quarter of 2023. Within this scope, all past data has been revised for comparability purposes.

(4) The guidance for the year 2024 includes the effects of implementing inflation accounting in accordance with IAS 29. Our 2024 guidance has been established using a certain number of assumptions regarding factors beyond our control, including in relation to macroeconomic indicators such as expected inflation levels. In particular, our 2024 guidance is based on an assumed annual inflation rate of 37%, applied on a monthly basis. Please note that this paragraph contains forward-looking statements based on our current estimates and expectations regarding market conditions for each of our different businesses. No assurance can be given that actual results will be consistent with such estimates and expectations. For a discussion of factors that may affect our results, see our Annual Report on Form 20-F for 2022 filed with the U.S. Securities and Exchange Commission, and in particular, the risk factor section therein.

(5) Excluding license fee

*International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS29″)

FINANCIAL AND OPERATIONAL REVIEW OF FULL YEAR

Financial Review of Turkcell Group

(1) Excluding depreciation and amortization expenses.

(2) EBITDA is a non-GAAP financial measure. See page 16 for the explanation of how we calculate Adjusted EBITDA and its reconciliation to net income.

(3) EBIT is a non-GAAP financial measure and is equal to EBITDA minus depreciation and amortization expenses.

Revenue of the Group grew by 14.6% year-on-year in FY23. This growth is attributable to the expanding customer base of Turkcell Türkiye driven by the postpaid subscriber base, and price adjustments. Additionally, revenue growth was supported by our techfin business and digital services.

For the full year, Turkcell Türkiye revenues, comprising 86% of Group revenues, grew 18.0% to TRY91,953 million (TRY77,952 million).

– Consumer business rose⁴ 18.7% driven mainly by subscriber net additions both in mobile and fixed segments, price adjustments and upsell efforts.

– Corporate revenues⁴ rose 20.3% mainly supported by digital business services revenue growth of 23.0%.

– Standalone digital services revenues from consumer and corporate segments grew 19.4% driven mainly by an expanding standalone paid user base.

(4) Following the change in the organizational structure, the revenues from sole proprietorship subscribers that we define as Merchant, which were previously managed under the Corporate segment, are being reported under the Consumer segment as of and from the third quarter of 2023. Within this scope, past data has been revised for comparative purposes.

– Wholesale revenues grew 3.3% to TRY6,475 million (TRY6,269 million).

Contacts

For further information please contact Turkcell

Investor Relations
Tel: + 90 212 313 1888
investor.relations@turkcell.com.tr

Corporate Communications:
Tel: + 90 212 313 2321
Turkcell-Kurumsal-Iletisim@turkcell.com.tr

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