Turkcell Iletisim Hizmetleri AS (TKC) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Yearend 2012 Results Conference Call on February 22, 2013. Throughout today's recorded presentation, all participants will be in a listen-only mode. (Operator Instructions).

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

Thank you for your participation. I'd like to say welcome to our call on behalf of the management team here.

We will start today with a presentation by our CEO, Sureyya Ciliv, followed by a presentation by CFO Murat, and then we'll go into the Q&A session.

Just before we start the presentation, I'd like to just go over the brief notice we have typically. Please, remember that this presentation may contain statements that 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 with factors discussed in this presentation.

Please, also note that all financial data are consolidated, whereas non-financial data are un-consolidated, unless otherwise specified.

Sureyya, please, go ahead, sir.

Good morning. Good afternoon. And welcome to Turkcell's results call for the fourth quarter and full year 2012.

In 2012, our Group revenues grew by 12% to TRY10.5 billion, while we recorded EBITDA of TRY3.2 billion, posting 11% year-on-year growth. We are pleased to have exceeded our guidance due to our winning value propositions leading to solid growth in voice and mobile broadband businesses, as well as the strong performance of our subsidiaries.

Our net income rose to TRY2.1 billion year on year as a result of strong operational performance and the lower impact of one-off items. Excluding one-off impacts, our net income, notably, grew by 20% in 2012.

Specifically, in the fourth quarter, we have generated the highest quarterly revenue in our history. Turkcell Group revenues grew by 15% year on year, while EBITDA climbed 22% to TRY848 million. In the fourth quarter, our reported net income was TRY459 million, up by 13% year on year. And, again, excluding one-off items, net income would have been at TRY565 million.

Moving on to page 5. We are glad to reap the returns of our business model, which is leveraged by continued investment in our brand and network. Specifically, in 2012, our revenue growth has tripled compared to last year, while double-digit growth in EBITDA has marked a significant turnaround. Despite the challenging and rapidly changing dynamics of the Turkish mobile market, our voice revenues grows by 6%. As confirmation of our long-term vision for the mobile broadband business, we are particularly excited by another year of high growth of 44%.

I'm also pleased to see that our domestic and international subsidiaries have been increasing their profitable contribution to the Group with a total rise of 33% in revenues in 2012.

Moving on to page 6. In 2012, the mobile markets remained highly competitive as other players continued to pursue market share. Therefore, despite some upward price movements in the second half, for the full year, the declining trend in revenue per minute levels continued.

Moreover, we have recently observed some sub-brand initiatives in the market with lower acquisition prices. Closely monitoring these developments, we suspect that they may potentially have a negative impact on the sustainable profitability of the market. Therefore, we will observe and respond as appropriate. We will remain committed to defending our valuable customer base and the long-term profitability of Turkcell.

Nevertheless, we intend to remain the clear market leader through our continued focus on delivering superior customer experience.

Moving to page 7. In 2012, we registered strong net additions of 590,000 to reach a total of 35.1 million subscribers. We continued to improve our postpaid base with around 1.5 million net additions due to increase in data subscriptions, switches from prepaid, and our contracting efforts. As a result, share of postpaid users reached 38% of our total subscriber base while the contribution to revenues rose to 65%. Meanwhile, the rising postpaid share in our subscriber mix plus higher voice and data usage led to a 10% rise in ARPU for the quarter and 6% for the full year.

Moving on to page 8, I will talk about our strategic vision which has led to today's results and positioned us for future growth.

To provide the best customer experience, we prioritized investment in our network and new technology in a changing communication world, where the new era is all about mobility, internet, smart devices, and applications. Reflecting this change, our ongoing strategy since 2007 of transforming from a GSM operator to a communications and technology company makes us the only choice for our customers and keeps us ahead of the competition. With our nationwide mobile broadband speed of 43.2 megabits per second and fiber broadband speed of 1,000 megabits per second, we have eased access to information and serve as the global example on several fronts.

As a result of our network investments and cutting-edge services, such as cloud computing, machine to machine, and Turkcell TV, as well as Turkcell-branded smartphones and tablets, we have contributed more value to both the economy and our customers. Our technology vision, experience, and innovation continue to increase this value day by day.

Moving to page 9. To capitalize on our investments in our network and new technologies for superior customer experience, smart device availability is essential. Parallel to this, we continue to lead the smart device market with our Smartphone Festival, latest technology smartphone offers, and our own T-series smartphones. In fact, our T-series, with its affordability and local content developed by Turkcell, are the most preferred device of the Festival. T-series also reached almost 750,000 sales since its launch. And now we are extending the success with the Turkcell tablet to the tablet market to further widen access to mobile broadband with Turkcell quality at an affordable price.

As a result of these actions, we increased the number of smartphones in our network by 2.4 million to 6.2 million to reach 19% penetration in 2012. Given Turkish potential, we confidently foresee further increases ahead.

Moving to page 10. As highlighted, mobile broadbands remain one of the major growth factors in 2012, and mobile broadband revenues for the year exceeded TRY1 billion on a rise of 44%. Revenue generated by smartphone users has been the key driver of our mobile broadband business, which [as] the fourth quarter, rose to 49% of mobile broadband revenues. We expect this rising trend to continue, parallel to our efforts to further increase smartphone penetration of our network. Overall, our mobile broadband and services revenues climbed 17% year on year, while its share in Turkcell Turkey's total revenues reached 26% for the full year.

Moving to slide 11. Our fiber broadband business, Turkcell Superonline, sustained its growth pace beyond our expectations, registering a positive EBITDA and EBIT soon after the launch of fiber investments. Turkcell Superonline has now reached another milestone by recording a positive net income. This confirms our profitable business model of niche investments. Meanwhile, [home passes] rose to around 1.3 million. And, by increasing our [FTT] subscriber number by 59% year on year, we reached a total of 425,000.

Specifically, in the fourth quarter, Turkcell Superonline saw revenue growth of 35% and a slight decline in EBITDA margin year on year, due to increased marketing activities, as planned. And, for the full year, revenues grew by 49% to TRY684 million, while the EBITDA margin reached 21%.

Looking ahead, we expect Turkcell Superonline to sustain strong revenue growth on increasing profitability.

Moving to page 12. Our Ukraine operations region-focused strategy and execution continued to deliver on our plans. Astelit recorded 1 million net additions in 2012, increasing its three-month active subscriber base to 8 million, despite intense competition. This also resulted in solid fourth quarter and full year results, as expected.

In the fourth quarter, revenue rose 5% year on year, while the EBITDA margin rose to 27%. And, in 2012, revenue rose 10% to $405 million on a year-on-year increase, while the EBITDA margin climbed 28% on a 2.7 percentage point rise.

Going forward, we expect Astelit to generate more value for the Group, its customers, and the people of Ukraine.

Moving to page 13. In 2013, we will create further value for our customers and shareholders and continue investment in our mobile and fiber networks to execute our rational growth strategies that put the customer first.

Let me share our 2013 guidance with you, where we expect Group revenues in the range of TRY11.2 billion to TRY11.4 billion and EBITDA in the range of TRY3.3 billion to TRY3.5 billion. Meanwhile, the Group's operational CapEx to sales ratio is expected at around 15%, similar to that of 2012.

As our Investor Relations team has recently announced, the Turkcell executive team will be hosting a capital markets day in London on March 25. We hope to see you there to further discuss our business activities and future growth strategies.

Thank you, and I will now hand over to Murat for the financial review.

Good morning, and good afternoon to all participants. I will now talk in more detail about our financial results.

As highlighted, during the fourth quarter, Group revenues reached a record high of TRY2.8 billion. Turkcell Turkey recorded impressive growth of 12%. Meanwhile, the 11% rise in voice revenues, despite limited or no growth in the global telecom industry, and 47% higher contribution of the mobile broadband revenues, were the underlying reasons of this. Strong 28% growth in subsidiaries revenues was the other major contributor.

For the full year, Group revenues was at TRY10.5 billion, almost equally driven by voice and mobile broadband and services. TRY694 million of the increase in revenues was attributed to the 9% growth of Turkcell Turkey. At the same time, subsidiaries revenues rose by 33% to TRY1.8 billion and contribution to the top line to 17% from 14% a year ago.

Moving on to page 16. In the fourth quarter, EBITDA, in nominal terms, climbed 22%, and the EBITDA margin rose by 1.8 percentage points. Despite the 36% rise in interconnection costs, direct cost of revenues, excluding depreciation and amortization, lost 0.3 percentage points year on year. This was mainly due to lower network-related expenses and other items as a percentage of revenues.

G&A expenses as a percentage of revenues slightly rose, by 0.3 percentage points year on year, due to high (inaudible) expenses as a result of high postpaid share in our subscriber mix plus increased handset bundled offers.

Selling and marketing expenses as a percentage of revenues fell by 1.8 percentage points year on year, mainly on lower nominal growth in both items.

For the full year, consolidated EBITDA rose by 11% in nominal terms to TRY3.2 billion, while the EBITDA margin was slightly down, to 30.9%. This was mainly due to high interconnection costs and (inaudible) expenses, broadly offset by lower selling and marketing expenses on the reduced (inaudible) usage fee expenses.

Moving on, page 17. In the fourth quarter, Group net income grew by 38% to TRY459 million, mainly on improved operational performance. Recall that, in the same quarter of 2011, Group net income had suffered from a number of one-off items totaling TRY105 million, mostly due to Belarus. In this quarter, net income was also impacted by one-off items, mainly relating to A-tel provision, useful life revision of fixed assets, and other provisions of legal disputes and (inaudible) impairment. Excluding one-off items, net income would have risen by 29% to TRY565 million in the fourth quarter of 2012 from TRY437 million in fourth quarter 2011.

Moving on to the next slide. In 2012, Group net income grew by 77% to TRY2.1 billion on high EBITDA of TRY329 million, high interest income on bank deposits, and significantly lower one-off impacts. For the full year 2012, one-off impacts on net income were TRY212 million, compared to TRY735 million in 2011. In 2012, one-off items related to impairments recognized and provisions booked for A-tel, useful life revision of fixed assets, and other provisions and impairments.

Recall that, regarding A-tel, we decided to exercise our right to annul the agreement, since we have significantly built up our own distribution capabilities over time. The decision is expected to positively affect our results from operations in the long term. Excluding the aforementioned one-off items, Group net income would have been TRY2.3 billion, corresponding a 20% year-on-year growth.

I'm moving on to the next slide. Our financial position remains at approximately TRY4 billion of net cash on our balance sheet, while our consolidated debt decreased quarter on quarter to slightly over TRY3 billion. For the year, major cash outflow items was the CapEx of TRY1.7 billion. Of this total CapEx figure, TRY947 million was related to Turkcell Turkey, TRY452 million was related to Turkcell Superonline, and around TRY234 million to our subsidies in the Ukraine and Belarus.

Please, note that, in 2012, operational CapEx as a percentage of revenues was around 15%, and we expect a similar ratio for 2013.

As a final note, I would like to highlight that Turkcell Group continued to improve its free cash flow, which was 18% year on year.

This brings our introductory presentation to an end. Thank you.

At this point, we are ready to start the Q&A session. Ken, if you could, please, initiate the Q&A session.

(Operator Instructions). San Dhillon.

Just a couple of questions; firstly, on smartphones. You are at a penetration of 19%. What do you expect penetration to be next year? And, related to that, how is absolute data usage trending? Is it growing in line with the mobile broadband revenues?

And the second question, on dividends. I believe you will propose a 2012 dividend for the board of directors to review at the upcoming AGM. Will you also make a proposal for the 2011 dividend? Thanks.

I'll answer your question about the smartphones. We are expecting the penetration level to go up to 28% next year -- I mean this year, end of this year. And this is, of course, having an impact on the mobile internet revenues, which we expect to be in mid 30s in terms of growth. That's in line with our expectations. And, of course, there is a beta effect here, which is pulling the numbers down, but we think it's in line with the growth of smartphones as well.

About the dividend, you know that, as management, we make a recommendation to the board of directors, and then the board's proposal is voted in the general assembly -- general shareholders meeting. So we will discuss this in the next board meeting. And, until that time, I do not want to make a comment. But we do realize the circumstances, and we plan to do the best for our shareholders.

Okay. Cheers, guys. Thank you.

Cesar Tiron.

Congratulations on those very strong numbers. Looking at your guidance, it seems quite conservative, especially at the EBITDA level. And I was wondering if you can tell us what caused you -- on the low end of the guidance, that would imply quite a substantial decline in the margin. Could you, please, explain to us what could lead to a decline in your margins in 2013 and also talk a little bit about new tariffs that have been implemented by your competition, I believe, at the beginning of the year? Thank you very much.

Obviously, we want to make a conservative plan; at the same time, a good plan. But we are a little bit concerned about the price discounts and very aggressive price tariffs that are going on in the market. And we also know that Avea is working in creating partnerships, sub-brands, which are also attacking the market with really aggressive tariffs.

And our position is -- our customers are the team for us, and we do not want to let anybody steal our customers or buy our customers. And we are focused. We are a value player. We want to get paid for our quality services with a reasonable profit because telecom is a very heavy-investment business. But, at the same time, if -- to defend our customer base, sometimes, if it is necessary, we will be matching competitors' price discounts.

So, similar things happened in the beginning of 2012. There were very aggressive price moves, and we matched them. And then the market rationalized a little bit.

But, now, we are still a little bit concerned about very aggressive prices that started with Avea and their partners, like BIMcell and PTT cell. And Vodafone has matched these tariffs. And we have also taken action to announce also aggressive offers.

So, although our strategy is to be a value player, to defend our customer base, we will get aggressive in pricing if necessary. This is our strategy, because we believe that our customers are our most valuable assets. And we have to fight to defend them.

Does anybody else want to add anything else to this?

Sureyya, just to categorize what you summarized, when we look at our costs, general administration expenses, sales and marketing expenses, potentially, for those reasons, we may have some increase. And, also, the network. On the network side, we will continue to invest. There are some radial costs associated with expanded network, energy costs. When all these things combine, we think this is reasonable guidance at this point.

Maybe just to clarify on the tariff side, which is totally in line with what Sureyya said, towards the end of 2012, the prices for non-reportable, achieved tariffs (inaudible) went up towards TRY19 or TRY20, plus, prices. But BIMcell's latest tariff is TRY10; so, half of what is available in the market, and 250 minutes all directions, which is a very low offer. And, of course, Vodafone came down to TRY15 prices, and that's concerning to us. We think that might actually damage the markets at this point. And, as Sureyya said, we are also taking precautionary measures.

So, basically, if I can follow up on everything you've said, if you were to reach, say, for example, the low end of the guidance or the mid end of the guidance at the EBITDA level, which would imply margin erosion, it would mainly come from the gross margin, you would say, and from the interconnect?

It could come from price discounts. It could come from higher interconnect. And it could come from higher marketing expenses.

Basically, I mean, we are making a forecast 12 months in advance for the year. And we do not know exactly how the competitors are going to act. So we need -- our strategy will be to defend our position, our share. We do not have any patience to lose market share, to lose our customers. As a result, we want to be ready to compete hard, even if it takes price discounts or increased marketing spending or increased commissions, whatever it takes. So we have to be prepared for very competitive market conditions.

We hope it doesn't get there. We are not going -- we don't plan to lead this fight. We think opposite. We think this Turkish mobile market needs to improve its profitability for all operators. But sometimes our competitors choose to start these significant price discounts. And sometimes we find their actions puzzling because they are not very profitable, both of our competitors. And it is obvious that huge investments are required for the market. And the profitability of the market needs to improve. But sometimes companies are willing to lose money in the short term to win customers. But my position is we will defend our customers, whatever it takes.

Thank you very much.

Herve Drouet.

My question is, firstly, on churn. We've seen in the fourth quarter the churn continuing to decline. Do you think it's something we may see, as well, looking forward in 2013?

On Superonline, as well, the margin is improving. You are guiding still for some significant growth at Superonline. I was just wondering if we should expect, as well, on Superonline further improvement of the margin.

And, finally, in terms of the tax or the levy on voice versus data and the difference where you have (inaudible) tax more on the data side, do you believe this is going to remain so or, in the medium term, there could be some plan to adjust taxation voice versus data equally? Thank you.

First, I'll comment on Superonline. Yes, we do expect Superonline's EBITDA margin to improve in 2013 and beyond. And there was a little bit slowdown in the fourth quarter because we had extra special, one-time, significant marketing expenditures. But my expectation is and our plan is, and I am pretty confident that we can deliver on this, our EBITDA margin in Superonline will continue to improve through 2013 and beyond.

About churn, we are expecting the churn trend to continue and expect a decline in the churn percentage in, especially, postpaid customers. And that will have a positive impact. And, altogether, our churn rate will stay low and, actually, a bit lower than 2012.

And there was a comment or there was a question on taxation difference between voice and data. And will this change? In the short term, I do not expect that taxes on voice will change. Yes, on the internet, taxes have been decreased to 5%. But we have not been fully able to benefit from this in the prepaid market. And, in 2013, we want to make progress in resolving this issue, though, for all customers. We do benefit from it, and we do pass the benefits to our postpaid customers. But, in prepaid, because voice and data are bundled together, we have not been able to pass the lower taxation to our customers.

Thank you very much for your answers.

Alex Kazbegi.

The first question is just to discuss maybe a bit on the regulatory side. Are there any proposed changes which you know about? And, namely, what's going to happen with the MTRs? They've been, of course, fairly quiet on this front. But, since there is no glide path or not any specific decision, what's your sort of, say, take on the MTRs in general; so, to say, regulatory outlook for the 2013?

The second question would be on your distribution network. I guess it would be the absence of a deal with A-tel or maybe with some others would mean that you're pretty confident with your own distribution network. Could you tell us again how many points of sale you have, how much sales you do through your own distribution network? And, if you would be again going mostly through your own distribution network vis-a-vis, again, selling mostly through the dealers, what kind of impact would you expect on the margins from that? Is that something which is sizeable which can be then factored in going forward? What is your take on that? Thank you.

On the regulation question about the MTRs, first, I want to voice my own opinion. I think MTR rates in Turkey have fallen too much. We are significantly below the European average. And that does create a problem for the Turkish economy. It even creates a problem for Turkey's trade deficit. It creates a situation where we have to pay much higher rates when we call, but they pay much lower rate. And it also creates for the mobile market a risk versus internet or future competitors, OTT players and VoIP players. So I think reducing MTRs further would be not good for the market. This is my personal opinion, and I feel strongly by this. And we communicate this to the regulators.

But, unfortunately, what we also understand is some of our competitors are also lobbying to bring these MTR rates further down. So far, regulators have not made the decision, but it doesn't mean that it will not make a decision. So there is some uncertainty there.

But, at the same time, MTR rates have come down pretty far. So the changes should not impact our financials in the short term very significantly.

But I think it would be not the right thing for the market, in my personal opinion.

Okay. On the second question about A-tel and the distribution, the reason why we eliminated A-tel from our distribution network is, basically, because it wasn't adding too much value -- any value, in fact. And it was a financial calculation more than anything. And it will have a positive impact on our bottom line in the midterm.

About our sales channel, we look at our sales channel in different layers. The first layer is distribution. Then we have resellers, let's say, and retailers. A-tel was a distributor, which, as I said, didn't have too much impact. We are very confident that our other distributors will take up the slack, no problem.

In terms of our retailers, we have over 1,200 exclusive retailers in Turkey and over 10,000 non-exclusive retail points. And we are confident that that is more than enough to give us the necessary distribution and retail presence. We are basically working on improving the quality and the customer service and experience in those points rather than increasing the number any further.

I would like to add that we are not concerned about A-tel. In improving the productivity of the system, we thought we initiated this move, and we thought that A-tel wasn't as efficient as it was -- it was serving a purpose years ago, but the conditions have changed, and we felt that our system will be more efficient without them. And, as a result, we nullified our contract. So our distribution network -- we hope to make it more efficient with this change.

Okay. Two quick follow-ups on that. On A-tel, you took a provision, as far as I could see, about TRY100 million. But the losses were about TRY132 million. So we expect again to take more provisions in this year or not?

And, secondly, just going back to MTRs, if there would be a change in MTRs, what is your sense of how big the cut would be? Are we talking about 10% cut, or are we talking about 50% cut? Do you have any sense of, if it comes to that time, a time that you are very much against it and you may have your reasons -- but, if it comes to that, what's your sense of the scope of the cut?

Let's start with A-tel. Murat will respond to that.

It's going to be a quick answer. As a management opinion, we do not anticipate to increase our provisions further regarding the A-tel. The total number represents our fair expectation on the A-tel.

Today, Turkcell's MTR rate is EUR0.11. It is the lowest interconnection fee in Europe. And you know there are a lot -- there are many operators in Europe, and we are receiving the lowest fee. And we make the same investments, and we make even more investments than many of these operators. But we are getting paid the lowest. And European average is EUR0.49. So I think the cut should be zero. There should not be any cut for this reason. I think our regulators could be hurting the Turkish market, Turkish companies versus the other operators in Europe. As I said, it should be, in my opinion, no cut.

If there is one, only if there is one, I think it should be a very small percentage. But I think it should be cut. I think it would be -- we have to think what is going to happen to this market in three years from now, five years from now, ten years from now. And there may be a lot of competition from other operators, VoIP players and Skype and many others.

As a result, this mobile termination rate is very, very important for the operators who are expected to make very large investments and also pay high license fees. For the system to be sustainable and for the investments to continue, I think protecting the market and -- we are already the lowest among all operators, as I mentioned, EUR0.11 versus EUR0.49.

Regarding the first question on the A-tel, I need to clarify the number in order to eliminate any misunderstanding. We have recognized an impairment loss of TRY72 million in the third quarter. And, thereafter, in the last quarter, we recognized a provision of TRY28 million. The number of TRY100 million is [comprised] from the impairment loss of TRY72 million in the third quarter plus TRY28 million for the provision in the last quarter. And we do not anticipate any further provision based on our anticipation.

Very clear. Thank you very much.

Alex Balakhnin.

I have two questions. The first is on your sales and marketing expenses, which you kept quite well under control. Do you think there are further options how to reduce these expenses? Or, given that the competitive environment is still challenging, you may actually be unable to do this?

And my second question is on your CapEx level. The last three years, you were able to keep the CapEx under control as well. And I was just wondering if you feel the network quality and capacity you have in place is all ready for the ongoing exponential growth of data. Probably, can you, please, elaborate on how you feel about the capacity in place, the connectivity of base stations, and things like that, these things which are vital for capturing the growth in data, and whether you think it is possible to accommodate with the CapEx plans you have for the medium term? Thank you.

On the sales and marketing side, I'll make some general comments. In our plan, we think that we can keep them at similar levels. But, at the same time, we need to be prepared for attacks by competition as well. So, under the normal circumstances, we think that we have improved our efficiency and productivity. And it's an effort for us across not only sales and marketing but across the Company. We are always trying to use innovation to improve our productivity and be more efficient. And we will continue to focus on this in 2013.

I want to make sure that we explain to everybody that our main strategy is to get closer to our customers, to increase our focus on our customers, both for corporate customers and also for consumer customers, through segmentation. And we are doing things that no other operator is doing because we see our business slowly evolving into -- from a GSM company into a communications and technology company. And we are partnering with our customers to deliver innovative mobile and fixed fiber solutions.

And we are a value -- we are focused on delivering higher value to our customers. But, at the same time, we are focused on -- through this increasing focus on our customers but increasing also our customer experience satisfaction rates. And this starts in all layers, from fiber to 2G network, to 3G network, to terminal, internal IT systems, our sales and marketing, our call centers, our sales organization, our pricing, our advertising. All of this impacts our customer experience. And we focused in 2012 -- we increased our focus on operational excellence and also innovation to bring new mobile services that add significant value to our customers.

So this strategy will continue. We are not cutting everything so that there is no innovation that can be done in the Company. Completely the opposite. We are increasing our focus on productivity increases but, at the same time, investing into new technologies, mobile services, so that we can deliver innovative solutions in a segmented manner.

On the CapEx side, it has been a priority for us for the last three years, having learned or having seen how some, especially US operators, got into trouble with unlimited data plans. So, from the very beginning, we were controlled in our data plans and in our data tariffs. And, when we do benchmarks with other operators, we feel comfortable about the profitability levels of our data business model.

And, at the same time, this is a new business and we need to bring new customers and we need to entice them with introductory offers. So we do have campaigns. But our pricing model for data is about increasing revenues and increasing profitability because there is no question that the future of this industry is about data. And even voice will be marketed or will be delivered on data at some future date.

As a result, it's a very important focus area for our Company that our data business model is not only accommodating fast growth, but, at the same time, it is enabling profitability. And we feel comfortable about the data traffic increase and our revenue increase. They are moving in parallel. And we are not -- it will continue to be a focus for us in the future.

Thank you.

Atinc Ozkan.

Two questions, please. The first one is regarding your CapEx guidance. This 15% revenues figure implies roughly around TRY1.7 billion, I believe. Does that include the TRY300 million universal services agreement with the ministry regarding the coverage of remote regions?

And the second question is on your distribution. Could you let us know how much of your sales were generated by your related party, KDK handset distributor, in 2012? Thank you.

Okay. The first question about the CapEx. The latest tenders that we won from the communications ministry is not included in our regular CapEx investments, which was, as you mentioned, around 15% of revenues, close to TRY1.7 billion. It is not included.

On the KDK distribution side, Emre will respond.

KDK is one of our biggest distributors. But this question is very detailed, and we do not disclose this kind of information. Thank you.

Sorry. Are you sure? I have seen this information on your Form 20-F in the past. If not, it's my mistake. Apologies.

I'm pretty sure that wouldn't be there. We don't disclose --

Let's look. (Inaudible). Thank you very much. In our disclosure, we have the number regarding the contracted handset sales. The number has been disclosed in general, not the whole business with KDK, about the distributor. That's why Emre has stated in general terms all the details. But, regarding the handset bundled transaction, that is a number that you have seen. (Inaudible) in Turkish lira has been executed in the year 2012.

That's only part of the business. Right?

Yes.

Thank you.

(Operator Instructions). Ivan Kim.

I have just one question with regards to potential global bids. Can you, please, elaborate what's behind the rationale to expand and where you think the international expansion would be value accretive, because, I guess we're seeing some examples of that being sort of value destructive. Thank you.

Okay. We have looked at the Bulgarian market for the last four or five years. And our international business development team and our financial organization and myself -- we are analyzing this sale of global company. We have another month to do a little bit more research. And I think we will make -- we plan to make a decision that is going to increase the value for our shareholders.

Right now, I cannot comment on our bid or if we are going to make a bid or what it is going to be. But I can assure you that we'll be very careful about the analysis. And, for us, it is very important to be careful with the investments. And we have learned from the past transactions. I think, having operations in nine countries, we do understand the challenges and also the opportunities.

And there are some pluses, as well, for this Bulgarian market. It's very close proximity to us. It's our neighbor country. Our governments have good relations. This country is in the European Union. But, at the same time, they have a decreasing population. The economy growth is not very fast. And there are two operators there, pretty good EBITDA margin, profitability.

So we'll weigh all of this and make a decision. But you can be sure that we are not going to go crazy.

Thank you very much.

There appear to be no further questions. Please, continue.

Well, then, at this point, we'd like to thank you on behalf of the management for participation. I'll give to Sureyya for the last word. And then we'll close the conference call. And, for follow-up questions you may have, as you always do, please, call the Investor Relations team.

I have a few points to make. Number one, I am happy about the results, but I want to report to our investors, our shareholders, the analyst community that this is the result of a long-term vision, and it is the result of very hard work by a great team of people, Turkcell employees and Turkcell partners, and our connection with our customers and our position in the marketplace.

For many years, Turkcell has been recognized as the premium vendor, quality service providers and technology leaders. We have passion in the team to use the best technologies, deliver unique value to our customers. And we are -- and the team is working across all fronts in a great teamwork. Our main mission is to make our customers delighted, make our customers say Turkcell is the one and only, the best choice for us. So, across companies, every employee, we are focused on our customers.

And everybody is working together, driving operational excellence, driving productivity, and, most importantly, driving innovation. We are moving this Company from just a GSM company mobile service, mobile voice, and mobile SMS to fiber, internet, mobile broadband, and also mobile services, cloud computing, machine to machine, Turkcell TV for mobile in fiber, and Turkcell T-series, Turkcell tablet, Turkcell smartphones, all of this coming together in delivering a great customer experience. This is our main competitive advantage. So this is, as I mentioned, the result of the right strategy and great execution by a very passionate Turkcell team.

A second point is we think we have huge contribution to make to the communities we operate in Turkey and also in Ukraine and in other countries as well. And what I ask from our -- each subsidiary is to focus on their customers and their communities and to be number one, a great part of that community, which creates value for that community.

I think, in today's world, telecommunication companies and technology companies have significant value to deliver to individuals and also businesses. And, by partnering with our corporate customers, we make them more competitive. We are in the consumer business. Through mobile services, like mobile finance, mobile education, mobile health, we can deliver great, new services.

And, in Turkey, in the middle of Anatolia, in Malatya, we have hospitals using our technologies, connecting doctors to patients in the villages. And we are bringing equal opportunity for students who live in Urfa. We have an advertisement saying anyone from Harran University in Urfa has equal opportunity to access information and knowledge like international students.

But all of this contribution requires very large telecom investments. And, as a result, we have responsibility to run a profitable business. And it is very important for other operators, as well, to act responsible and make sure that the pricing is at the level that justifies, that enables reasonable profit for our services. This is why we are a value player. And we have seen that our strategy and our execution has been successful. We will continue to be a value player.

But, as I mentioned various times, our number-one priority is our customer base, customer share. And, like in 2012, in 2013, we are also going to be really focused on our customers. And we will not let people steal our customers with free offers or anything like that. So, if other operators discount heavily to take our customers away, we will match any competitive offer. Defending our customer base, for me as the CEO, is the highest priority.

And I also thank you for all of the investing community, analyst community, for our support. And we feel good about the successful 2012 behind us. But, at the same time, we feel that we have a lot of work ahead. We have a lot of innovation to do to deliver great, innovative services to our customers.

Thank you very much.

Thank you. This concludes the yearend 2012 results conference call. Thank you for participating. You may now disconnect.