Turkcell Iletisim Hizmetleri AS (TKC) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Turkcell 2Q 2010 results announcement presentation on the 5th of August, 2010. (Operator Instructions) I would now like to hand the conference over to Mr. Koray Ozturkler, corporate affairs officer. Please go ahead, sir.

Thank you very much, Holly. I would like to welcome everyone on behalf of the management team here at Turkcell. As a brief note, I would like to remind you that this presentation may contain statements are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially due to factors discussed in the presentation. Please also note that all financial data are consolidated, whereas non-financial data are unconsolidated, unless otherwise specified.

I would like at this time to hand it over to Sureyya Ciliv for his presentation.

Good morning and good afternoon. Welcome to Turkcell's second quarter 2010 results call. During the quarter, Turkcell posted its highest revenues in any second quarter, TRY2.24 billion, while recording EBITDA of TRY724 million and net income of TRY422 million. These solid results were achieved despite the recent regulatory decisions on pricing and the challenging competitive environment.

In Turkey, mobile, data, and service revenues increased by 29% to TRY388 million, mainly driven by mobile data revenues. The increase in mobile data revenues, combined with our tariff adjustment and small transition from [units] to Turkish lira-based pre-paid pricing largely counterbalanced the negative impact of the regulatory decisions. In this difficult quarter, our EBITDA margins remained flat compared to last year and increased to 32.3% from 31.6% in the previous quarter, mainly due to the higher contribution of group subsidiary to our revenues and EBITDA. Group net income increased by 8.5% year on year, to TRY422 million.

Moving on to the next slide, I will now focus on market conditions and our achievements in Turkey in the first quarter of 2010. Slide six -- we see clear signs of economic recovery in Turkey, with an improvement in the consumer confidence index to 88 in June, 2010, and GDP growth of 11.7% in the first quarter of 2010. In the second quarter, the rate of contraction in mobile line penetration slowed down. During the quarter, the number of total subscribers decreased by 0.3%, as opposed to a 1.8% fall in the first quarter. At the same time, mobile line penetration decreased to [84%] and we now expect it to stay around these levels at the end of 2010.

During the quarter, mobile operators in Turkey continued to focus on post-paid segment and mobile data, with heavy marketing. At the same time, we saw price adjustments to existing tariffs and limitations on usage incentives in the pre-paid segment. The Turkish mobile market witnessed significant regulatory changes when the telecommunications authority reduced mobile termination rates by 52% and maximum prices by 38%, effective April 1st.

In the second quarter, we have redesigned our tariffs with a focus on value and loyalty. At the same time, we ensured the smooth transition to Turkish lira-based pricing, a move which was singled out as the best implementation in the market.

During the quarter, we continued to focus on smart phones and 3G devices, as drivers for our 3G business, while promoting the use of tailored mobile services. Consequently, we maintained our undisputed leadership in the market, with a 55% subscriber share and a 58% revenue share.

I would now like to provide you with a few comments on our key operational indicators. In the second quarter of 2010, our subscriber base totaled 33.9 million. During the period, the share of post-paid subscribers in our subscriber mix [totaled] improved to 29%, to 450,000 net additions, driven by our acquisition and upselling initiatives. These initiatives were also reflected in the higher share of postpaid revenues, which increased by 8 percentage points, to 58% of the total revenue base, compared to last year.

Meanwhile, net prepaid subscriber loss slowed down to 777,000 from 1,041,000 in the first quarter of 2010. Consequently, the number of pre-paid subscribers amounted to 24.2 million.

As for usage, the [effective] communication of our [carrier] campaign resulted in a 34% increase in MOU, to 171 minutes, compared to the second quarter of last year. Branded RPU increased by 4.3% year on year, to TRY19.4, mainly due to higher data revenues and the increasing share of post-paid subscribers.

Moving on to the next slide, I would like to elaborate on our 3G business in Turkey. In the first year of our 3G launch, I am proud to say that we have been the clear leader in the 3G market. We have established a [wide state highway] in Turkey, and one of the roads best served [forming] 3G networks in just one year, through our A-type license, and investments. We invested as much in 3G over this period as we did in 2G over 7.5 years, and we cover 80% of Turkey.

We are now reaping the benefits of our dedication to introduce 3G to Turkey. We have been delighted by the rapid takeup of 3G with six million registered 3G subscribers and seven million average monthly mobile data users. We have encouraged mobile data and service usage through our [objective] offers and 15 applications.

We also see an impressive growth in smartphone sales, along with the decrease in handset prices. Smartphone sales constituted 18% of all handset sales in June, 2010, compared to 3% last year. Going forward, we expect this growth trend to continue.

I'm also very pleased that our market has recognized the value of 3G, despite our competitors' skepticism earlier over whether Turkey was ready for the new technology. We are quite pleased with the acceleration of mobile data and service usage, due to our efforts to promote data usage through our innovative applications and attractive offers. Turkcell Turkey's mobile data revenues increased by 79.4% to TRY170.1 million. In line with our key objective from day one, we will continue to make investments aimed at closing the digital divide, allowing Turkey to become a true information society. We expect to increase our 3G coverage in Turkey to 90% by the end of 2010.

I will now briefly elaborate on the performance of our subsidiary, Superonline. We are delighted by the strong growth achieved through our fixed broadband business, Superonline, which confirms our confidence in the era of convergence in total telecom solutions. In line with our expectations, Superonline recorded 25% year on year revenue growth in the second quarter, driven by the higher contribution of carrier, enterprise, and residential segments. Superonline [non-Turkcell] revenues made up 58% of total revenues. During the period, Superonline recorded a double-digit EBITDA margin of 13% for the first time.

Increasing group synergies paved the way for our mobile and broadband businesses to benefit from our competitive advantages. In the second quarter, Superonline [total] increased its share in Turkcell's requirements to 37%, up from 20% a year ago, resulting in a decline in transmission costs at Turkcell.

Although there are some regulatory developments in the fixed line market, the market has not been fully liberalized yet. Some regulatory activity is occurring in the areas of naked DSL and fixed-number portability. However, preventive measures implemented by the [telecom] operator in the market remain, although we do not believe that these are sustainable. We see the long-awaited market liberalization, which is expected to put pressure on the competition, as a future opportunity for our fixed and mobile business.

All in all, we expect to see an increasing contribution from Superonline to the group's financials going forward. For 2010, we expect similar revenue growth in Turkish lira terms and improved EBITDA margin, compared to 2009.

I will now talk about our Ukrainian operations. Our company in Ukraine, Astelit's revenue increased by 4.2%, to $89.5 million, and in local currency terms, by 7.8%, compared to a year ago, while subscribers declined to 11.7 million, due a more value-focused strategy in the market compared to a quarter ago. In the second quarter, Astelit focused on effective pricing and efficient cost control initiatives, particularly targeting interconnection costs. As a result of its turnaround strategy, Astelit achieved a significant improvement in EBITDA, which increased nine-fold year on year. Consequently, EBITDA margin increased to 22.7%, up from 2.7% in the same period of last year. Aside from improving macroeconomic conditions, on the regulatory front, there are some encouraging developments, such as the MNP, which will benefit our operations following its planned implementation in the first half of 2011. We are pleased with the recent performance of Astelit and we expect Astelit to achieve a double-digit EBITDA margin in 2010 and to further build on its profitability going forward.

I will now talk about Fintur. In the second quarter of 2010, Fintur operations continued to maintain their strong market positions and added 0.5 million net new subscribers. As a result, its total subscriber based reach 14.6 million. Fintur's consolidated revenue increased by 8.8% year on year, to $428 million in the second quarter, mainly due to its strong uptick in subscriber numbers and improved macroeconomic conditions in Kazakhstan. Fintur's contribution to net income increased to $36 million in the second quarter of 2010, up from $28 million a year ago.

I will now talk about group outlook. Slide 12 -- we are well-positioned to offer superior value propositions for our target customers and maintain our competitive edge against the competition, due to our investments in innovative mobile services. Our priority is our customers; we will continue to win hearts and minds of our customers by increasing our customer focus and reinforcing our relationships. Our priorities going forward will include retaining our high-value customer base through innovative voice and data offerings, pioneering the development of our mobile data and services business, capitalizing on the opportunities arising from fixed mobile convergence through integrated telecom solutions, and creating new revenue streams in the emerging financial services, health care, and education sectors.

On top of these, we are investing in our fiber optic network to achieve further differentiation and our international footprint will also give us further opportunities.

Regarding our local and international group companies, we believe their contribution to Turkcell Group will gradually increase in line with their growth strategies. In particular, we are encouraged by the improving performance of Astelit. We are also very confident that we will see the benefits of our investments in Superonline's fixed line networks.

All in all, we believe that our solid performance in this tough quarter provides a strong base that we can build on, and we reiterate our guidance for the remainder of the year.

Turkcell is facing the future with confidence, thanks to the improving macroeconomic environment, the strong and agile team effort across the group, and our growing 3G business.

I will now hand over to Serkan to talk to you through our financials.

Good morning and good afternoon to all participants. I will now talk about our financial performance in more detail. Turkcell's consolidated revenues increased by 1.7% to TRY2.2 billion in the second quarter of 2010, compared to the same period last year. This was primarily due to the increased contribution from our subsidiaries, and 29% growth in our mobile data and services business, despite lower MTR and decreasing (inaudible) in Turkey.

During the second quarter, negative impacts or regulatory decisions on our voice revenues were minimized through our sales and marketing activities, and with TRY87 million increase in our mobile, data, and services revenues. In [consequence] Turkcell Turkey's revenue decreased only by 1.4%, to slightly less than TRY2 billion.

Growth from our subsidiaries was mainly driven by higher revenues of Superonline, together with our Belarusian operation and our [betting] business in Turkey.

Compared to the previous quarter, higher revenues from outgoing calls, mobile data services, roaming in Turkey, and higher revenues from our subsidiaries were offset by lower interconnection revenues, generated by Turkcell Turkey, which on a consolidated level, revenues remained flat.

Moving on to the EBITDA slide, consolidated EBITDA increased by 2.1% to TRY724, compared to the same period last year, while our EBITDA margin remained flat, at 32.3%. This was mainly due to lower interconnection costs and selling and marketing expenses, which were partially offset by higher network and general and administrative expenses. As a percentage of consolidated revenues, [direct] cost of revenues, excluding depreciation and amortization, decreased by 1.4 percentage points, year on year, mainly as the result of the interconnection costs declining by 2.7 percentage points, due to the NTR cut, and the absence of provisions related to the [Millicom] litigation case. Meanwhile, network-related expenses and other items increased by 0.8 and 0.5 percentage points, respectively.

General and administrative expenses as a percentage of revenues increased by 1.6 percentage points year on year to 6.1%, mainly due to increasing bad debt expenses which results mainly from the change in the period of collection [trend] taken into consideration for the calculation of bad debt provision.

Selling and marketing expenses as a percentage of revenues remained flat, around 19.5% in the second quarter of 2010, compared to the same period in 2009. However, compared to the previous quarter, our EBITDA margin increased to 32.3%, as a result of increasing contribution of our subsidiaries, and lower interconnection costs, which were partially offset by higher G&A and selling and marketing expenses.

I will now talk about our net income. Our net income increased by 8.5% year on year, to TRY422 million, while our net income margin increased by 1.1 percentage point to 18.8%. The main drivers of the year on year increase were the higher EBITDA, lower interest expenses and translation losses, and the absence of legal provisions recorded in the second quarter of last year, amounting to TRY87 million, as opposed to TRY32 million of obsolete fixed asset writeoffs recorded in this quarter.

Meanwhile, compared to a quarter ago, net income remained flat, with increasing depreciation expenses, mainly due to obsolete fixed asset write-offs and translation losses, as opposed to the TRY42 million of litigation provisions recorded in the first quarter, regarding the telecom authority's administrative fine.

Moving on to the balance sheet and cash flow slide, our financial position remains strong, with approximately TRY4.2 billion of cash on our balance sheet, as of the end of Q2. Our consolidated debt increased by TRY366 million, quarter on quarter, to TRY2.7 billion and approximately TRY1 billion of which was related to our Ukrainian operations.

Of this total debt figure, TRY1.9 billion is at a floating rate, and TRY1 billion will mature in less than a year. With reference to these figures, we continue to maintain a strong balance sheet with a solid cash position until the year-end.

We had several major cash outflow items in this quarter, including the capital expenditures of TRY361 million and a dividend payment TRY859 million. TRY221 million of total CapEx was related to Turkcell Turkey, TRY66 million to Superonline, TRY28 million to our Belarusian operations, and also TRY22 million to our Ukrainian operations.

The final major cash out flow item during the quarter was the TRY71 million payment to the competition authority regarding our previous disputes pertaining to mobile marketing activities and also the telecom authority's fine in relation maximum pricing limitations. Provisions were previously taken for these payments, and court cases are still pending. The total amount was included in the Other item in our cash flow statement.

For the remainder of the year, we reviewed our capital expenditures. Through some improvements in our procurement costs and postponement of minor expenditures, we revised down our CapEx estimate for the whole year from TRY2.4 billion to TRY2.0 billion.

This concludes our presentation today and we will take any questions that you may have. Thank you.

Thank you, Serkan. Holly, we are ready to start up the Q and A session, please.

Thank you, sir. (Operator Instructions)

Alex Wright, UBS.

I'd like to ask about the margin outlook for this year, please. As you said, you're targeting a stable margin for the full year compared to last year, which implies some improvement in the overall consolidated margin in the second half of the year compared to the first half. So, could you just expand on the drivers of the margin improvement, please, and within that, if you could talk a bit about what has driven the increase in bad debt provisions in Q2 compared to previous quarters -- what trends you expect going forward in bad debt provisioning and also in sales and marketing costs? Thank you.

OK, first of all, on the margin side, our guidance is the same margin for 2009 that we are giving guidance in 2010. Second, I think you can expand on the bad debt -- I think it has at least two components. One of them is our post-paid subscribers increase, from pre-pay, with a lot of switches from pre-pay. Obviously bad debt is possible, it increased. And the second area is we also changed our accounting and we took a more conservative approach. You can comment on that, Serkan.

Alex, this is Serkan. As already mentioned, previously we were calculating our bad debt based on the last nine years collection trends. But due to several reasons, we are experiencing adverse collection trends for the last years. Therefore, we have decided to change our provisioning methodology, based on the last four years collection trends, which is obviously worse than the last nine years' trends. Therefore, during the second quarter, because of this transition in the methodology, calculation methodology, we have recorded TRY16 million additional provision for the quarter. If you exclude that TRY16 million one-time additional provision, the Q2 apples to apples bad debt provision would be TRY41 million, which is similar to Q1 bad debt provision, which was TRY39 million. Therefore, the sudden increase in the Q2 bad debt provision is mainly coming from the change in the methodology of the calculation, to move from a less conservative to a more conservative calculation methodology.

Going forward, since our post-paid subscriber base is increasing, and frankly speaking, the collection trends are deteriorating in the market, therefore we are expecting that it won't be as low as last year, but it will be less than the Q2 bad debt provision.

OK, thank you. And why do you think the collection trends are deteriorating at this point?

Actually, if you look at the period for the last two, three years, the trend was deteriorating, but we think that after taking some precautions in the market, our collection criteria, the deterioration is stopping. So from now on, we are expecting better collection trends from our customers.

OK, thank you.

Yeah, I would like to add to that, that maybe Lale can add as well, you know, about bad debt, number portability is one of the sources for the problems in this bad debt. We do see some customers moving from one operator to another and they can move without paying their unpaid bills. And you know, the other operators in the past, they lobbied against our proposal for a check of debt payment, or bill payment, before they-- before a customer was allowed to port their numbers. So-- and I hear that other operators are now facing similar bad debt challenges. Maybe they will be more willing to cooperate and convince the regulator that it will be a requirement in number portability to pay your current bill before you are allowed to move to another operator. So this is one area.

I also know that we did, in the last year or two, included selling netbooks and laptops and other terminals in addition-- attaching these to our promotional campaigns, and in the distribution channel, we sometimes had challenges in collecting from the customers and we improved our credit-checking and processes in this area as well. Lale, anything that you want to add?

OK, Lale says she doesn't have anything else to add.

OK, could I just return to the first part of the question, which is on the margin outlook for the full year. You confirmed that you're expecting a similar margin for the full year compared to last year, so that implies quite an improvement in the second half compared to the first half. So, can you just elaborate on what you will expect will drive that trend of improving margin in the second half of the year, please?

So our expectation is to be around 33% EBITDA margin for 2010, and basically I think we have our third quarter geographically-- sorry, seasonality-wise, the strongest quarter and we continue to work on our efficiency programs. Those are the two reasons.

OK, thank you. Thanks very much.

William Kirby.

You mentioned that there'd been some liberalization in the fixed line recently. Is-- what is stopping Superonline now from offering to provide naked DSL to your subscribers, please?

On the fixed line, you know, as far as I know, around the world, almost in every country, number portability was implemented on the fixed line first, and then mobile number portability followed. But in Turkey, although number portability on fixed line has been announced, I think the number of people who have ported is extremely limited, close to zero, because the process is still not working properly. So, I think working with the regulator to make sure that this number portability process is fair and smoothly operating is a key priority for Superonline, and other operators in the market. So that is what I meant by the liberalization.

OK, so you don't plan to start offering naked DSL in the near future at Superonline?

OK, I think you know, we looked at this-- we were doing this two years ago, but at the time, the business case was so bad, we decided to not participate in a bad business. We now are evaluating the situation again, and you know, if- if the numbers have improved or have the possibility to improve, we are going to revise our decisions and think about selling DSL as well.

OK, thank you.

[Fiza Tiran]

First, can you please quantify the impact of the recent price cap that has been announced on the first minute, and say if it has any impact on the guidance you gave previously, at least at the top line level? Second, I noticed that you became a net payer of interconnect during the quarter, and I would like to know if you expect this trend to worsen in the next quarters? And also, if you could give an update on what portion of your traffic is still on net? Thank you.

On the first question, I think for everybody's information, the authorities, the regulatory body, recently set a maximum limit to charging only for calls lasting less than 60 seconds. So this decision is to be effective per announcement from September 1st. However, we think, you know, less than a month's notice is too short for us to implement such a major change in our systems and also in educating our call centers and our channel. So, we are in discussions with the authority to allow a more reasonable implementation period. As they have done so in the conversion from units to Turkish lira conversion.

We do not expect this decision to have a material impact in our 2010 results, on our business, as we plan to take action and make revisions to our tariffs to minimize the impact on our revenues.

This is Lale Develioglu. Let me take up the second question, about the interconnect fees, being a net payer. In the second quarter, Turkish authorities- interconnection revenues and cost as a percent of revenues were 6.4% and 7.3%, respectively, which placed us as a net payer, as you mentioned. As you know, we are working in a quite dynamic sector, but what we see is this trend may continue unless there's a dramatic traffic change. We plan our offers, we design our offers, to balance our costs and revenues, so we don't see going forward dramatic change in this trend. It is about this level.

OK, can you still say what's the percentage of traffic that remains on-net during the quarter?

Yes, we may. This is Koray. There are two ways of looking at it. One is we can look at the overall on-net percentage in total traffic -- i.e., outgoing and incoming traffic, outgoing plus incoming, or percentage of on-net traffic, its share in outgoing traffic. So if you look at the outgoing plus incoming traffic share of on-net, it's coming from 75% to 73% from Q1 to Q2. If you look at it as in outgoing traffic only, without including the incoming traffic minutes, it is about 58%. Lale-- Lale--

58%-- if you look at this total, 73%. If you look- as a percent of outgoing.

Yeah, thanks for the correction. It's exactly as Lale said, 58% and 73%, depending on how you look at it. But it is continuing in stable trends. We don't expect major shifts in this traffic trend.

We have seen a significant percentage of change, like over 10 percentage point changes from 2008 to 2009, but [2000] onward, we don't expect dramatic declines in the percentage of on-net traffic going forward.

Michael Blassie.

I just had a question on some reclassifications as I'm looking at the financial statements here, particularly in the accounts receivable line. I believe there were a substantial amount of receivables aged in the one to five-year period, and as of 12/31/09, which look like they've been reclassified. Can you provide the reason for that?

This is Serkan. Specifically for Turkey- in Turkish market, it's illegal in Turkey to write off the receivables, therefore we are keeping our receivables on the balance sheet. But on the other hand, all the-- for all the receivables longer than one-year period, we are taking 100% provision. Therefore, you can see that we have high receivables, which are aged more than one year, because we cannot write them off. But for all of them, which we already took 100% provision as a bad debt.

And where is that provision located? Is that in the allowance for doubtful accounts line?

Yes.

OK, thank you. Perfect.

We have a follow-up question from Alex Wright.

I just wondered if you could update us on the overall dynamics, relative to the competition, because you know, it looks as though Vodafone increased revenue share in the quarter, despite having the greatest exposure to interconnect revenues. So are they still- would you say they're still the most aggressive on the market in terms of looking to gain subscriber share, and perhaps if you could just talk about, you know, about how the market share trends have developed and how you expect them to develop, going forward? Thank you.

OK, Lale, you can also contribute- add to my comments. But if you look at the results over the last three, four years, you would see that Vodafone's revenue share has not changed significantly. It has been between 26% to 24% most of the time, and if you look at, you know, their revenues versus two years ago, you will see that they are at similar levels. And you know, we look at revenue share and- but we look at a lot of other KPIs as well. I think it's important to look at the market dynamic by looking at the big picture and you know, not only one KPI but many of them together. Obviously, Vodafone Turkey is on Vodafone's portfolio, the only subsidiary that has negative EBITDA and their losses have also tripled in the last year versus the year before that. And also by doing campaigns for telephones, terminals, and you know, offering packages, sometimes these revenue numbers could include terminal values as well. So-- but if you ask me to give an overall view of the market dynamic, we see that Avaya, with its new management, is acting very rationally and they have improved their EBITDA margin and they, you know, they are making investments and decisions-- you know, keeping a more balanced view. I think Vodafone appears in the market, where they have an open check, and it seems like they didn't care about EBITDA and we will see how long this continues.

If I may add to it, we should also keep in mind that the second quarter was quite an extraordinary quarter in its nature, due to the regulatory decisions which were effective as of the first of April. We have seen a slight decline in our market share. However, we managed to increase our share in critical segments, such as the youth and the professionals, which is important for us. We also monitored the revenue trends in the market, and we continue to build on our higher [RPU-generating] (inaudible) which we also think is very healthy. We believe that growing top line, with profitability, is crucial, and we look into the critical segments, growing segments, in our base as well.

And perhaps just to ask one follow-up question on that. If Vodafone continues with its present behavior for much longer, do you think you need to change your behavior in any way from your current behavior?

You know, our strategy is very clear, really, more than revenue share or subscriber share, we are focused on growing our business and I am using tbe words ``growing our business'' in a profitable fashion for the long term. And we-- we have taken actions to increase our focus on our market segments, go ahead with micro-segmentation, and using 3G and mobile Internet and mobile services, we are, all of Turkcell, with our partners, we are focused on delivering targeted, superior solutions to our target customers. And we are focused on how we do make sure we are delivering the higher value for those specific segments of customers? And this will give us customer satisfaction, customer loyalty. It will help us grow our business profitably, and to create stickiness with our customers.

So, we, as I mentioned, our goal is grow our business profitably, but we recognize that for profit, you need EBITDA. For EBITDA, you need revenue. For revenue, you need good customers. And we are going to, like we have been doing, and we will continue to do so, we will defend our customers to the nth. I will not give up on our good customers. So, I wanted to make that clear.

OK, thank you very much.

Anna Bossong.

Yes, thanks very much -- I'm Anna Bossong from UniCredit. I just wanted to ask firstly what happened to the [TRY50 million nom] or the provision I was expecting you to make from the tax dispute about VAT and special communications tax on roaming -- if you are looking to make that provision later, or you've already provided for it?

And secondly, on the talk about the price cap on calls of one minute or less, I understand you already have a price cap of TRY 0.4 per minute, so is this different for the first minute, please?

This Koray. Regarding your first question, TRY50 million provision had already been taken in Q2 results, in the financial statement, and that TRY50 million has already paid to the government in July.

Whereabouts in the statement was it, please?

TRY50 million [tier] provision has been taken in Q2 results, so we have already taken the provision. And that amount has been paid to the tax office in July, 2010.

Thank you. Which line in the profit & loss statement?

Just a second.

Thank you.

The ``other income and expense.''

OK, other income and expense was actually pretty good for the quarter. Were there some oneoff positives in there as well?

Can you repeat your question please?

Sorry. Other expenses -- was there any-- TRY4.1 million in the second quarter versus TRY40 million in the first quarter, so you're saying that TRY4.1 million included TRY50 million of provisioning. So my question is, were there some positive oneoffs in that line as well?

OK, part of the provision has been taken before Q2, so in Q2, all that are different-- different amount has been taken in Q2, and some of the TRY50 million is towards interest-- interest-- good interest for the principal, so the total impact of TRY50 million, divided into other expense and interest expense. But part of the total amount has been taken in previous quarters, so you can only see the-- see additional amount in Q2 results.

Can you tell us how much was in that particular line, in EBITDA in Q2?

There is no impact on EBITDA, because [it's below EBITDA], and in Q2, TRY20 million in Q2.

Thank you.

--TRY30 million during previous quarters.

Perfect. Thanks.

OK, on the second question, I think you were asking about this TRY0.40 rule. The maximum price as of April 1st came down to TRY0.40. Used to be TRY0.65, I think. And so this is TRY0.40 per minute.

We- I mean, we do have second-based pricing, minutes-based pricing, where our tariffs comply with this rule, of maximum TRY0.40. But we also have some tariffs that are like two minutes for TRY0.65 if you do-- or if you load more money, you could speak up to five minutes for TRY0.50. So, in people- customers who have selected this tariff versus, you know, minutes or seconds-based tariffs, they are benefitting from the specific tariff structure that they could speak for five minutes for TRY0.50. We thought this was a good value for our customers who wanted to speak longer. But, the new decision is, I guess, a clarification, saying that even in those tariffs, if, for the first minute, if they hang up in less than one minute, should not be charge for amounts greater than TRY0.40.

I understand. Thank you very much.

But the new ruling is, I think basically my comment on this is, we did have different tariffs for different customers, and it was their choice to select their tariff. We will obviously comply with the relatively decisions, but we just need time to be able to implement significant changes like this, in a quality fashion, for millions of people.

Perfect. Thank you very much.

We have a follow-up question from Fiza Tiran.

Yeah, actually, two questions, please. The first one would be to understand if you have any evidence of [Qstar] and [MTS] following your-- the price increases that you've done in the Ukraine. That is the first question. The second one, I would like to understand one more time if you expect EBITDA to increase in 2010 or not, because you said you expect the same margins, but you expect revenues to grow, so that suggests an EBITDA increase, and previously you said that EBITDA would be flat. Just wanting to understand that.

On the Qstar and MTS, Serkan, do you want to take-- do we have any comments on this?

Basically, we hope that the market in Ukraine will become more rational. Our company was kind of involved in starting this [free your net] campaign in the Ukrainian market. We now made some adjustments and we have more value-based pricing, we have more focus on our customers, we are more focusing on mobile Internet, like mobile services. So, you know, I-- unfortunately, I don't-- I cannot answer very precisely your question, but I know Qstar seems more responsive to our changes. MTS, I think, seemed a little bit less willing to adjust, but again, in that market as well, you know, these strategies and tactics change, depending on the market dynamics. We are following this strategy, this-- it seemed to pay off for us, but keeping customers for the long term is also very important. So, if the market doesn't turn more rational, then we will have to do whatever it takes to keep our customers.

OK. And for the EBITDA margin -- for the EBITDA--

For EBITDA margin, I think, you know, our revenue growth for the year is- has come down to this low single-digit, and we plan to maintain the EBITDA margin around 33%, so this could lead to EBITDA growth in absolute terms.

For specifically for Ukraine, we are expecting the revenues to grow at low single-digits for the rest of the year. And regarding EBITDA margin, we are expecting to keep the EBITDA margin similar to Q2 levels.

In the Ukraine?

Yes.

OK, thank you very much.

(Operator instructions) Michael Blassie.

Just going back to this receivables reclassification, just looking at some of the amounts here, and I guess I understand that the amounts have been provisioned against, but what I don't understand is what drove the reclassification. Can you tell me what drove the change, from moving them from a one to five-year bucket to other buckets within the aging analysis?

I think you're referring to a page in the audit report. After the conference call, can we call back to you to explain in more detail?

Yes, that's fine.

OK, thank you.

There appear to be no further audio questions at this time. Please continue with any other points you wish to raise.

Thank you, Holly. Before we close, I think Mr. Ciliv will make some closing comments and then we'll wrap it up. Thank you.

Great. And very shortly, I want to say that I think Turkcell's future, I am very confident, because we have made long-term investments in the last year and a half -- we have made significant investments into our network, now we have more than 5,200 3G base stations, ahead of anybody else in the market, and we see the smartphone numbers I guess, and we are very happy to see the growth of our non-voice business, and we define business voice plus, obviously, it's mobile Internet and services. So, I think a long-term investment into the infrastructure, into our channel, into our brand, into our customer relationships, has resulted with Turkcell having around 34 million subscribers, twice as many customers as anybody else in the market, and I think these customers chose Turkcell because of our quality of our services and I think I feel confident we'll continue to offer the best quality and services to our customers, and as a result, continue growing our business in a profitable fashion.

So, thank you very much for your support. Have a good day.

Thank you, sir. Ladies and gentlemen, this concludes the Turkcell 2Q 2010 results announcement presentation. Thank you for participating. You may now disconnect.