Turkcell Iletisim Hizmetleri AS (TKC) 2009 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Turkcell 2009 Results Announcement Call on the 11th of March, 2010. Throughout today's presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions.

(Operator Instructions).

I will now hand the conference over to Koray Ozturkler. Please go ahead, sir.

Thank you very much, Vivian. I'd like to say hello to everyone on behalf of the Turkcell management team here. Welcome to our Year-End Conference Call. Before we begin to the presentation, I'd like to remind you that the presentation may contain statements that are forward-looking. These statements are based on the current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. Please note that all financial data are consolidated, whereas non-financial data are unconsolidated, unless otherwise specified.

At this time, I'd like to turn it over to Mr. Ciliv for his presentation.

Good morning and good afternoon. Welcome to Turkcell's Results Call for 2009. In 2009, Turkcell Group recorded revenues of TRY8.9 billion, EBITDA of TRY3 billion, and net income of TRY1.7 billion. These results demonstrate our successful execution versus competition and the impact of challenging environment.

The severe economic contraction in our key markets, competitive and regulatory developments, goodwill impairment charges, fixed asset write-offs, and legal provisions related to the authorities' decisions had a negative impact on our financial results. Also, group revenues were negatively impacted by the lower contribution of our consolidated subsidiaries. Astelit in Ukraine was impacted by the volatile macroeconomic conditions, while contribution from our betting business Inteltek declined due to lower commission rates.

On a posting note, [2009] grew its contribution to our top line and recorded a positive full-year EBITDA ahead of our expectations. Our EBITDA margin declined to 33.3% year-on-year, mainly due to the higher interconnection costs as a result of increasing of net traffic. Below the operating line, the group net income was negatively impacted by TRY381 million due to the provisions, impairment charges, and fixed asset write-offs during the year.

Considering the challenging environment in 2009, we have responded to market challenges quickly, in line with our customers' expectations. We made further investments into technology and infrastructure, continually strengthening the positioning of Turkcell Group for the future. Consequently, we have maintained our leadership position in Turkey and defended our operational profitability successfully.

Moving onto the next slide, I will talk about the mobile market in Turkey. Slide six, we faced various challenges in 2009. GDP in Turkey declined by 8.4% in the first nine months. Unlimited and flat-rate offers were introduced for the first time, following mobile number portability and implementation in November 2008.

The regulatory authority reduced interconnection rates by 20%, while devising the maximum and minimum pricing limits. The mobile line penetration decreased to 87% in 2009 from 92% in 2008 due to the reduced multiple SIM card usage in the economic downturn. Despite this challenging operating environment, Turkcell maintained its leadership position in the market as you can see in the charts to the right.

Moving onto the next slide, the 2009 challenging environment we just talked about had a negative impact on profitability of the market. While Turkcell profitability was down from 38% in 2008 to 35% in 2009, in the mobile market, excluding Turkcell, we estimate that profitability was down from 18% in 2008 to 2% in 2009.

Just to note, in 2008 third quarter, just before mobile number portability, mobile market again, excluding Turkcell was enjoying EBITDA margin around 22%. EBITDA margin for a competitor in 2009 Q4 was minus 2% in 2009, as I mentioned.

Two conclusions -- one, in 2008, both of our competitors were enjoying growth and healthy improving EBITDA margins from their existing customer base. Conclusion two -- mobile number portability, regulatory decisions about sharp drops in interconnect and the price cap, and the competitions two low-priced offers designed to attack and grab share from Turkcell significantly hurt the profitability of the market but especially competitors. This situation also accelerated fixed mobile convergence as fixed line traffic decreased to 15% of the overall traffic.

I am happy about the way Turkcell team responded to the challenges and defended our market share and operational profitability through hard work, operational excellence, and innovation. As Turkcell team, we have the technology base, infrastructure, and human resources to compete effectively as the challenges continue into 2010.

In 2009, we are also pleased to have led 3G implementation in Turkey. We currently cover 70% of the population with our 3G network, which was certified as one of the fastest in the world. We currently provide two to three times faster mobile internet access to our customers versus competitors.

3G subscribers reached to 2.5 million of which 72% are active mobile internet users. Over the years, we have [contributed] to invest more into high-tech infrastructure as a result differentiating Turkcell against competition in quality, coverage, speed, and mobile services. We believe we will continue to benefit from these investments going forward, remaining as the preferred choice for our customers.

I would now like to elaborate more on the mobile data business in Turkey on slide eight. In 2009, as part of our growth strategy aimed at increasing mobile data and service revenues, we focused on positioning Turkcell as the leader in 3G area. Our offers promoting smart phones, USB modems, netbooks, and notebooks prior to the launch of 3G led to a strong uptake in 3G subscriptions.

In 2009, we had approximately 70% share in the smart phone market and 65% of the mobile broadband market as a result of our focus. Consequently, our mobile data revenues in Turkey almost doubled to TRY261 million, increasing the share of mobile data and service revenues in consolidated revenues to 16% from 14% in 2008.

We remain very excited about building up a new business model 3G. We think there are plenty growth opportunities in broadband business and for 3G services in Turkey. We will continue the focus on this area to drive growth and differentiate Turkcell against competition. We do not see fixed ADSL as direct competition for mobile internet. Mobile internet value proposition is complementary. And growth will come from iPhone-like devices that are more reasonably priced for mass market.

Now I will say a few words about our performance indicators in Turkey. Slide nine, our focus on retaining the valuable subscriber base in a contracting market continued into the fourth quarter of 2009. Along with the 278,000 net additions in the fourth quarter, we increased our postpaid additions by 85% to 1.9 million in 2009, improving the mix of our subscriber base in favor of the postpaid to 27% from 20% in 2008.

In an aggressive pricing environment, the prepaid subscriber base contracted by 11.9% to TRY26 million. Consequently, our total subscriber base contracted by 4.3% to TRY35.4 million in a market which contracted by 3 million lines in 2009. Keeping our valuable subscribers will remain high priority for us going forward.

Moving onto the next slide, slide ten, we maintained our blended ARPU at TRY18.5 in 2009 despite macroeconomic and competitive challenges throughout the year in decreasing interconnection rates. In 2009, prepaid ARPU remained flat at TRY11.6, while the increasing usage incentives, higher subscriptions to data packages, and the dilutive impact of the growing postpaid subscriber base resulted in a 12% decline in postpaid ARPU to TRY41.

Thanks to our successful campaigns and attractive [curves], we increased MOU by 40% to 134 minutes in 2009 compared to 2008. Consequently, our increasing postpaid subscriber base in usage, along with revenues from mobile data and services helped us grow our mobile revenues in Turkey by 1.9% to TRY8 billion.

Now I would like to comment on the recent regulatory developments in Turkey. As you know, the regulatory authority reduced Turkcell's mobile termination rate in February 2010 by 52% to 3.1 [kursh] and reduced the price cap to 40 kursh, 24 kursh net of taxes, effective as of April 2010. The recent mobile termination rate cut means that average mobile termination rates in the European Union are now up to five times above MTR rates for Turkcell.

We find this decision problematic for Turkey's telecom sector for two reasons -- one, excessive percentage drops; two, not enough lead time to react. As you can see on the chart, mobile termination rates and price cap cuts in the past have not helped improve the profitability of the Turkish market. In fact, as I said earlier, right before MNP, the two operators in average had much better operational profitability at 22% on average, while Turkcell was at 38%.

[Threat rate] tariff plans triggered by competition despite the lower MTR cuts actually penalized their profitability. This is why we find the authority's unforeseen decision to cut mobile termination rates and price cap as excessive. These decisions may further negatively affect the market and lead to more pressure on revenue and profitability levels for all market players. Extent of the impact will depend on how rational and timely the market reacts.

Therefore, we are not in a position to reiterate our guidance for 2010 at this stage. And if we revise our guidance once we have greater visibility regarding the market dynamics in the future.

I would now like to elaborate on our strategic direction. In 2009, we maintained our leadership in terms of subscriber numbers, revenue, and profitability through our value propositions. We believe we are and will remain number one in three key areas, which will continue to differentiate us from our competitors. These are, number one, technology, benefits, and service quality we provide to our customers.

On the technology front, 3G rollout helped us achieve further differentiation from our competitors. Total number of 2G and 3G base stations increased to 19,200 from 15,100 in 2008. This is almost 1.5 times more than our closest competitor. As a result, we will continue to offer the best coverage, the best quality, the highest speed internet broadband access combined with the most innovative and user-friendly mobile services to our customers.

Following recent developments, we can say that Turkcell services are now available at our most competitive prices ever. We will continue to implement segmented offers and tariffs, usage incentives, advantageous terminal offers bundled with user-friendly mobile services.

Additionally, we believe we are more attractive now to capture even more traffic from the fixed network to our network. Our high-profile, co-branded marketing campaigns with some of the strongest brands in Turkey will continue to be a major strength for us.

We have also been further investing into our sales channels and other touch points. We relaunched our retail chain under new branding, customizing more than 1,020 stores with trained sales force, the latest technology, and services. We believe these types of enhancements will continue to help us win versus competition. Overall, best customer [explains delivered] through touch points and our call centers will remain as major benefit to our customers.

We believe these advantages altogether will again help us outperform the competition in 2010.

Now I will briefly elaborate on the performance of our subsidiaries. In Turkey -- we are now on slide 13 -- in Turkey, Superonline's contribution to Turkcell Group financials increased in 2009 as the Company recorded robust revenue growth of 58% compared to 2008 in Turkish lira terms. And Superonline had a positive full-year EBITDA for the first time, ahead of our expectations.

Superonline also recently won a tender to lease the fiber optic infrastructure network from the state-run BOTAS for 15 years. This will enable Superonline to selectively improve the size of its network by 2.5 times to 26,000 kilometers, while improving synergies with Turkcell's 3G network. We are confident about this business. And we believe it will contribute the Turkcell Group greatly in the mid to long term.

In Ukraine, the severe macroeconomic volatility adversely affected after its financial results due to the 48% depreciations of hryvnia against the US dollar, nevertheless afterward managed to increase its revenue in local currency by 19.5% despite the 15% contraction in Ukraine GDP.

Looking at 2010, the difficult market conditions in Ukraine is likely to continue. We are increasing management's focus on value-driven play in EBITDA performance. We believe afterwards performance will further improve in 2010.

Fintur's operation in Kazakhstan, Moldova, Georgia, and Azerbaijan were also faced with difficult macroeconomic environments in 2009. However, the Company maintained its market leadership across the region with a subscriber base totaling 13.6 million.

In 2009, Fintur's financials were adversely impacted by foreign exchange fluctuations. Revenues decreased by 12% to $1.6 billion, contributing $119.6 million to Turkcell's income based on the equity pickup methods.

Now I will hand it over to Serkan for a more detailed analysis of our financial results.

Good morning and good afternoon to all participants. Now I will talk in more detail about our financial results. Starting with revenues, our performance in the fourth quarter was negatively affected by the regulatory developments Sureyya mentioned earlier and the lower contributions from our consolidated subsidiaries.

In particular, during the fourth quarter, we made reimbursements to customers and to other operators following the telecom authority's decisions, which had a total negative impact of TRY60 million on our results.

Revenues for the full year slightly increased by 1%, thanks to the strong increase in usage, higher mobile, internet, and service revenues, and higher interconnect revenues despite a lower contribution of our consolidated subsidiaries.

The significant depreciation of the local currency in Ukraine against the US dollar negatively affected (inaudible) revenues in US dollar terms. In addition, Intertech's contribution also declined dramatically as commission rates decreased effective from March the 1st, 2009, causing Intertech revenues to decrease by 68% year on year.

Moving onto the EBITDA slide, our EBITDA margin in the fourth quarter decreased by 2.8 percentage points to 30.2%, mainly as a result of the reimbursements and repayments to the other operators and also higher interconnection costs, which were partially offset by lower selling and marketing expenses.

The EBITDA margin for the full year is down by 3.5 percentage points to 33.3%, mainly due to higher direct cost of revenues. As a percentage of revenues, direct cost of revenues, excluding depreciation and amortization, increased by 4.4 percentage points, mainly due to higher interconnection costs resulting from increased offnet traffic.

On the other hand, during the same period, general and administrative expenses increased by 0.2 percentage points as a percentage of revenue due to increasing bad debt expenses, while selling and marketing expenses decreased as a percentage of revenues.

Moving onto the net income slide, our fourth quarter net income decreased by 45% year on year to TRY253 million. The main drivers of this result were lower EBITDA, legal provisions, impairment charges, and fixed asset write-offs, as well as the absence of minority income from Ukraine operations. Major provision items for the period included a TRY39 million provision related to the tax fine on distributor-linked discounts given in 2004 and the TRY27 million penalty of the competition board regarding mobile marketing services. In addition, in the fourth quarter, we recorded a goodwill impairment [online] to TRY2 million and a fixed asset write-off of TRY27 million, related to our operations in Belarus.

For the full year, our net income fell by 26% to TRY1.7 billion year on year, driven by lower EBITDA, legal provisions, impairment charges, and fixed asset write-offs recorded in the fourth quarter and also the absence of minority income from (inaudible) throughout the year.

Other than those recorded in the fourth quarter, we satisfied approximately TRY119 million total provision for the tax fine on distributor discounts in 2003, legal disputes with Turk Telecom regarding international voice traffic and transmission lines leases. The total impact of legal provisions, impairments, and fixed asset write-offs in 2009 was TRY381 million.

Moving onto the last slide, our financial position remains strong with more than TRY4.6 billion of cash on our balance sheet as of the year end. Our consolidated debt at year end was TRY2.3 billion. TRY808 million of this amount was related to our Ukrainian operations. During 2009, we successfully increased our debt of our annual EBITDA ratio to 76%.

Major cash outflows throughout the year were the capital expenditures and also dividend payments. Our capital expenditures totaled TRY2.7 billion, of which TRY1.8 billion was related to Turkcell Turkey, including the 3G license, TRY325 million to our Ukrainian operations, TRY133 million to our Belarus operations, and finally TRY260 million to Superonline business. In 2009, we also paid a record cash dividend of TRY1.1 billion to our shareholders.

This brings our introductory presentation to an end. Now we are happy to take your questions. Thank you.

Thank you very much, Serkan. Before we go to the Q&A session, I'd like to remind you that we like to limit your questions to two per person to give more chance to people to ask questions. Vivian, at this time, we are ready to take the questions, please.

Thank you very much, sir. (Operator Instructions). Thank you. The first question is from Sean Gardiner. Please state your company name and then your question.

Company name is Morgan Stanley. Firstly, could you just give us an update of what your interconnect revenues and costs were for 2009 just so we can understand the items at risk and on a central basis? And then secondly, I think there were some comments earlier about you talking about CapEx plans for 2010 on Reuters. Can you just update us what you're thinking for CapEx investments by markets, Turkey and Ukraine and Belarus? Thanks.

Regarding your first question, our cost and revenues, interconnect revenues were around TRY800 million, which represents around 10% of revenues, Turkcell Turkey revenues. On the interconnection cost side, total cost was around TRY700 million, which represents around 8.7%, 9% of revenues.

Thank you.

On the CapEx side, we are not in a position to give clear-cut guidance based on our evaluation of the market and our strategies. We will revise our CapEx investments accordingly. This first I would like to leave.

Well, maybe can you just -- you've had significant growth in your usage in 2009 in Turkey. Can you maybe talk about the capacity you have on your network at the moment?

Again, I think this is a good question. But I find this pretty important confidential data. So we would like to hold onto this question.

Okay. Thank you.

I hope you understand.

Yes, thanks.

Thank you. And the next question is from Alex Balakhnin. Please state your company and then your question.

Yes, hi. This is Alex Balakhnin from Goldman Sachs. My question is -- with all these changes, with interconnect, with the reduction of the maximum offnet prices, can you probably elaborate on your competition strategy? I understand you cannot talk in details for the same reasons why you are not giving guidance.

But what do you keep in mind, thinking about the competition because, on one hand, you say that the profitability has reduced because you have to follow the competitors' step and to sacrifice your margins. On the other hand, you sound like you are comfortable with just the fact of superiority of the profitability of all your competitors.

So what are you planning to do? Are you planning to maintain price and stability by any means? Or you think you will have to initiate another round of price reductions? Any thoughts on this would be very helpful.

Okay. I think the answers to this question will be keep out of our strategy. We do have I think basically two main strategies. One of them is to continue to lower prices and increase MOU and grow revenues that way. And -- but there are certain limitations for I think the whole market in this space. And another option is for the average prices to start going up to more reasonable levels. And this will -- these are the market dynamics that we will watch carefully.

Basically, we were pointing out that these price cuts have hurt competition's profitability a lot more significantly than Turkcell's. And consequently, I would think that eventually companies need to start making money. So there may be incentive for all players to look at their pricing and bring it to rational levels. And we hope that we do not repeat the basic irrational pricing that happened in early 2009.

Probably just a big follow up on this -- you mentioned that it should be like all three players thinking about their prices. But are you prepared to send signals to your competitors on the pricing? Or you prefer to wait before you receive signals from them?

We are a market leader. We do things not necessarily send signals, but our strategy is to focus on our customers, deliver them high value, and also receive reasonable payments for it. And this strategy has been successful in the past. And we will continue to execute on that strategy, basically focusing on our customers and how we can deliver higher value to them and as a result improve our revenues.

But our good customers are our most valuable assets. When we see significant attacks on this, just like in 2009, we will defend those customers very strongly, like we did in 2009.

Thanks so much.

Thank you. The next question is from Lena Osterberg. Please state your company and then your question.

Yes, Lena Osterberg from Carnegie. The question I have -- you say that there's been a significant change in traffic patterns from 2008 to 2009. I was wondering if you could say how much share of [on-net] calls you had in 2008 and how much you had in 2009.

Yes, Lena, this is Koray. Let me give you first the sector average. In terms of on-net traffic sector is about at 72% levels for on net.

72%.

72%. And it's about -- the rest is to the other alternative operators and the fixed line. And when we look at Turkcell's leverage, it is slightly higher than the sector average right now. It's around 75% levels.

And how did this change from 2008 to 2009?

It is -- it has -- it's coming from 80% levels.

Okay. Thank you.

Thank you.

Thank you. The next question is from Herve Drouet. Please go ahead with your question after stating your company.

Yes, Herve Drouet from HSBC. Two questions -- the first one is -- if you anticipate some growth, especially in net booking adds you were saying and data wireless usage, how much do you currently have in terms of headroom capacity in your network? And how do you think that will impact your CapEx plan, especially in terms of number of base stations? I just want to try to see if in your view you might potentially be in capacity constraint in some areas if we have a sharp increase of wireless data.

And also, maybe as well, in terms of the traffic usage we've seen increasing, especially between '09, can you tell us how much of it is just voice and how much of that is data? Thank you.

In terms of the network traffic, approximately 70% of the whole data traffic is right now carried on 3G. At this time, we do not see -- foresee any capacity issues. There's room. And we are very careful about pricing balances as well. We think there are some opportunities in that area. So there are no unlimited offers. That's why we are happy with the current trends.

And the next question was about the traffic. The minutes of usage, if I understand it right, the MOU figure that we are disclosing is just voice. And it doesn't include data. So --

And can you share with us in terms of data traffic in this case?

What is the question? On the data traffic, we have seen significant increase in mobile data traffic since the 3G launch. We think it's about 5.5 times the data traffic has increased. But these are still -- 3G network has significant capacity. And there were a lot of introductory offers as well. We are very careful about being the value player. We follow the strategy where we are focused on customers and where we try to be the highest value for those customers and then get a reasonable payment for our services.

So we are continuing on those. And we are making sure that we are not in the position of, let's say, AT&T in the United States. So -- but I would also like to say that more than 70% of our data traffic is going through our 3G network.

On the traffic side, because of the 3G handsets, there is still a small percentage of the install base. As a result, we see in the future years more of the voice hopefully move to 3G network as well. This is why I think in a way for operator investing into 2G versus 3G in this time doesn't look like the highest return on investment.

All right, thank you very much.

Thank you. The next question is from Ilke Homris. Please go ahead with your question after stating your company.

Hi. This is Ilke from Is Investment. I have a few questions on Superonline. In your presentation on page 13, you say Superonline meets over 20% of Turkcell's transmission demand. How much was this in 2008? And how much do you think it could account for at the end of this year? And is this a major reason behind the strong growth in Superonline's revenues in 2009? And if not, then what caused this growth?

And my second question is if you could share with us the breakdown of MOU for prepaid and postpaid. And what do you think the level of postpaid would be among total subscribers at the end of 2010? Thank you.

So Superonline will capture a higher percentage of our data traffic going forward. But again, for competitive reasons, we cannot share more than this. But we are optimistic about the progress the Company is making. Superonline we see has three uniquely focused businesses. One of them is the wholesale business, where Turkcell is one of the largest customers. But we also opened this service to other companies, other operators as well.

And second business is the business segment, especially the enterprise segment. And we are growing at a rapid pace in that segment as well. And the third space is the premium residential, where we can offer fiber optic connection to residential -- premium residential homes. But this offer, again, is not competitive -- a direct competitor of Turk Telecom's ADSL market. This is a very niche market. And compared to Turk Telecom's install base, it is smaller numbers. And these three focused business groups are making good progress.

As for the MOUs, we actually do not break this down due to the concerns. But I can tell you that obviously postpaid is generating a lot more MOU than prepaid. And let me look at the quarterly trends -- growth trend in the postpaid side. It's significantly more right now than prepaid. So it's actually -- that's also in line with our strategy of acquisitions [towards prospect].

Thank you very much. And my last question was on what percentage do you think would be the share of postpaid at the end of this year as compared to 27 at the end of 2009.

We are not ready to give guidance on that, Ilke, as we have not specified any guidance for 2010 right now. I don't think we're in a position to give details.

Okay. Thank you.

Thank you.

Thank you. And the next question is from Dalibor Vavruska. Please state your company and then your question.

Hello. This is Dalibor Vavruska from ING. Just a couple of questions -- one is I understand that at this particular stage you prefer not to give revenue guidance because of the uncertainty also coming from the regulatory situation. But I'm just wondering. Some of your peers, some of the companies prefer giving pessimistic or cautious guidance with the idea that they could maybe beat it this year. I'm wondering if you maybe can flex some scenarios that you're envisaging. Or just tell us a little bit about what prevents you from being more specific. Where do you see -- where exactly do you see the uncertainty and perhaps flag the scenarios that you're working with?

And the second question is regarding the provisions, especially the regulatory cases. And again, it might be useful if you can just talk a little bit about this and just highlight, again, some sort of cautious worst cases that you work with, which maybe is not fully included in the provisions and some -- so what does it depend on? What should we wait for in terms of the announcements to make sure that we're not missing any sort of future developments in that area? Thank you.

Dalibor, this is Koray. I think we've already discussed the uncertainties existing in the market. We think it'll be -- we want to be careful about speculating on this. It all depends on the behaviors of the competition, as Sureyya said. We are the leader in the market. And we will behave that way. But I think we have to see a world trend, offers, campaigns, on-net play versus off-net play, and the balances there. Until we see specific actions, it is difficult for us to give you guidance.

Well, I understand. My only thing is like last year wasn't any easier, right? I mean, last year was -- you had this MNP and all these attacks. So I mean, do you think that this year is even more difficult to predict than 2009?

Not necessarily it's more difficult. But in many ways, you're right. I think 2010 is going to be easier year versus 2009 because of the macroeconomic conditions. And also, we hope that there is some learning by the players in the market. And we see our Superonline business. We see mobile internet. There are other businesses. There were smaller operations there gaining speed and growing. But be patient with us for a little while. And we want to give you guidance that is going to hold for throughout 2010. And all of this happens very quickly. And there are quite a few variables that we need to go through. So please be patient with us.

Okay.

Regarding your second question about provisions and the risks, case by case, we are evaluating the risks of the Company from coming from the regulators and also the legal cases. We are evaluating the legal counsel. And case by case, we are provisioning the appropriate amount. And as of the year end, end of year end, the total provision that we have recorded for average risks coming from the competition board, telecom authority, disputes with the tax [audit] and Turk Telecom, the total amount was around TRY250 million.

And apart from those, currently, we have various disputes with the tax authorities, as you know. And also, there are certain investigations pending with the telecom authority. And the material ones were already disclosed in the audit report. And for those at this moment together with our legal counsel and the auditors, we did not see any additional need to provide additional provisions at this moment. But in the future, it's very difficult for us to say a concrete conclusion about the outcome of those disputes and investigations.

Okay. Thank you.

Thank you. And the next question is from Anna Bossong. Please go ahead with your question, stating your company.

Hi. Anna Bossong from UniCredit. Two questions -- the first one has to do with price cap. I'm trying to find out what the full impact is going to be versus the MTR cuts basically. Can you give us some idea of how much the price cap reduction is going to affect you and also secondly in which segment of customers it'll have the most impact?

Secondly, if you could give us some recent trends in competition in recent markets, are you seeing any easing? Or is it still remaining very intense? Just an update there would be great. Thanks.

Hi. This is Lale Develioglu. I'll try to answer your question. As we have mentioned initially, we do not want to comment on the full impact it will have on our financials and as well as on the market. But what we will aim to do is we will aim to balance the cuts or the revisions the price cuts requires on our tariffs with segmented offers and aiming to increase still the consumption of our customers.

And can you elaborate also on the dispute last year with the regulator about this price cap that you were saying at the time you went (inaudible) why they were upset? Were they trying to force every single price to be below the price cap? Or how did it work that you were caught unawares last year?

There are two things. One is the price cap cut. The other one is the MTR. This is Koray. There are two things, the MTR cuts and obviously the price cap cuts. On the MTR side, there was a ruling that our average on-net pricing has to be over the mobile termination rates. We believe we have actually complied with that ruling with exception of one tariff plan. And because of the commitments that we made to customers on that particular tariff plan, it was taking us longer to adjust. And a recent development is another MTR cut. So at this time, we don't have any issue about being over the current mobile termination rates on any tariff actually. And the price caps itself has effective impact for off-net calls mainly. And as Lale said, we will look at it at segment basis to adjust our campaigns in line with the new pricing.

But you can't give us an idea of if, for example, if it was due today what the impact would be on your revenues.

It wouldn't be fair to say because everything is not statistic. We will change certain things. Trends will also change. That's why it's not static. It is not fair to give guidance on that at this time.

Okay. Thanks. And the recent trends in the marketplace?

Recent trends. Anna, what do you want, from a competitive point of view you mean?

Let --

Let's have Lale comment on it.

A couple of things -- first of all, what we see is a couple of moves on the competitor side toward more rationalization that we have seen recently price increases on the competitor's certain tariffs. So we see that there is a drive toward a more rational environment. But these tariff increases are partial ones. And we are yet to see more steps to be more positive about it in general for 2010.

And these price increases were in this year, not last year.

Yes, certain adjust -- actually price increase -- by price increases, I mean, certain adjustments, upward adjustments in certain tariffs or reductions of free offers in certain segments. So it is not necessarily a tariff price increase. But it is partial adjustments, upward adjustments, or downward adjustments of free minutes given.

Thank you. That's very helpful.

Thank you. (Operator Instructions). There appear to be no further questions at this time. Would you like to continue with any points?

No. Thank you for joining our conference call. And please be reminded of the (inaudible) recording of the call will be available for you next two weeks. And we'll keep in touch. Thank you.

And this concludes the Turkcell 2009 results announcement. Thank you for your participation. And you may now disconnect.