Turkcell Iletisim Hizmetleri AS (TKC) 2016 Q3 法說會逐字稿

Good day and welcome to the Third Quarter 2016 Results Conference Call. For your information, today's conference is being recorded. At this time, I would like to turn the call over to Mr. Nihat Narin, Director of Investor Relations and Business Development. Please go ahead, Sir.

Thank you, [Gale]. Good morning and good afternoon. I would like to say welcome to our call on behalf of the management team here. We will start today with the presentation by our CEO, Kaan Terzioglu, then followed by CFO, Bulent Aksu. And our last session will be the Q&A session.

Before we start the presentation, I would like to remind you of the brief legal notice. In this presentation, we will make statements that are forward-looking about our future targets and expectations. These are based on our current views and assumptions, which may change in the future and our actual results may be different.

Mr. Terzioglu, please go ahead, Sir.

Thank you, Nihat. Good afternoon, good evening everyone, welcome to Turkcell's third quarter 2016 results call. Before I start, I want to thank Nihat for his role as the Investments Relations Director for so many years as he takes on the new challenge as the CEO of Global Tower, our new regional tower company. And I want to welcome Korhan Bilek as our new leader of Investor Relations.

I'm joined by our full executive team and I would like to basically start by telling you how happy I am that the first results of the Q3 and first nine months, we have closed this quarter and the first nine months on record high revenue and EBITDA, both at Turkcell Turkey and Group levels, despite the fact that Turkey has overcome a major challenge to its democracy by successfully averting a coup attempt. And during these worrying times, we have fulfilled as telecoms industry, our duty of enabling the general public the accurate and timely information platform. We have also provided free emergency communication packages to our customers during this time and I will elaborate on its financial implications as well shortly.

Looking to our numbers, our Group revenues rose 8.8% to TRY3.7 billion and our EBITDA by 4.9% year-on-year to TRY1.2 billion. While the EBITDA margin was at 33.3% in the third quarter, both of these figures are all-time high third quarter prints for the Group. Excluding the impact of the aforementioned emergency packages of this quarter, Group revenues would have risen by 10.4% and the EBITDA margin would have been 34.4%. Group net income as per IFRS was TRY163 million, mainly due to several one-off items, which Bulent, our CFO, will expand on later. Excluding these impacts, our pro forma net income rose 4.2% year-on-year to TRY705 million.

For the first nine months, we performed in line with our expectations. Group revenues rose by 8.6% and EBITDA by 5.4%, resulting in a 31.7% EBITDA margin. Group net income as per IFRS was down to TRY1.1 billion, while pro forma net income rose to TRY1.8 billion.

In the first nine months, we continued our 4.5G investments at full speed. Our operational CapEx to sales ratio was at 21.5 percentage points. We have achieved our targets over the past nine months and are quite confident of maintaining our full-year guidance, despite prevailing macroeconomic and geopolitical challenges as they are. Indeed we are set for a strong start to 2017.

In this regard, as part of our focus on maximizing the value of our strategic assets, we are evaluating all our options accordingly. Among these assets, Fintur, in which we own a 41.45% stake, is currently evaluated for numerous options among which is its potential sale following the inconclusive negotiations with Telia Company.

Global Tower is another strategic asset on our balance sheet, with view to a more focused management of Global Tower and transforming it to a regional tower company, the first planned step was its initial public offering, now postponed to 2017. Investor interest shown has only strengthened our confidence in our tower business model.

Moving on to the next page. Turkcell Turkey remained our key growth driver. Revenues rose 7.9% and EBITDA increased by 3.2% year-on-year with a margin of 33.4%. Excluding the impact of free emergency communication packages, revenue and EBITDA growth would have been 9.7% and 8.9%, respectively, with an EBITDA margin of 34.7%. Turkcell Turkey's pro forma net income rose 1.9% year-on-year to TRY662 million. In the first nine months, Turkcell Turkey revenues rose 8.6% to TRY9.2 billion and EBITDA ramped up 4.7% with an EBITDA margin of 31.9%. Pro forma net income for the first nine months reached TRY1.7 billion on a 1.6% year-on-year increase.

I'm happy to say that 8.8% growth in Group revenues marked the highest revenue growth of the past seven years -- three years, with increasing pace every month and quarter. For instance, in September, topline growth further accelerated to 12% and EBITDA margin to 36%. Turkcell Turkey, which accounts for 90% of our Group revenues increased by 7.9% due to our value-focused customer acquisition and conversion strategy. Including Turkcell consumer finance company, Turkcell Turkey revenues increased 10% year-on-year.

Turkcell International revenues comprising 6% of Group revenues, declined 5.2 percentage points, driven by currency devaluation in Ukraine and Belarus. We will explore International business in the further slides. Other business revenues at 4% of Group revenues ramped up 69.9%, driven mainly by contribution of Turkcell's consumer finance company, which commenced operations in March 2016. Loans utilized through our consumer finance company reached TRY1.8 billion, with an average maturity of 22 months. These are extended to 1.5 million customers, marking the largest customer market share in this sector.

Moving to the next page. Let's look at our growth engines, data and services. Our data and service revenues in total posted 76.5 percentage points year-on-year growth to approximately TRY2 billion. Data and services now constitute 60% of total Turkcell Turkey revenues and are expected to further increase their share in subsequent quarters. Following the launch of 4.5G, today more than 90% of our investments, cost base and customer consumption are data related. Hence, with the annulment of retail price control rule in Turkey, we are now able to reflect this reality in our tariffs and campaigns. Following this change, along with higher smartphone penetration, increased data users, consumption levels, mobile data revenues rose 97 percentage points.

Meanwhile, fixed broadband revenues were up 27% on the increased number of customers and higher usage. Services & solutions revenues ramped up by 54% to TRY273 million, mainly due to increased usage Turkcell TV+, our music platform fizy, personal cloud services and other mobile services.

Moving to the next page. Operationally, we continue to focus our efforts on expanding our value-generating customer base, enriching user experience through our strong mobile and fiber networks, dedicated sales force and customer care. On the mobile side, our total subscriber base rose by 179,000 on a quarterly basis. Our postpaid customer base rose 897,000 year-on-year to TRY17 billion at 52% of the total customer base, further improving the subscriber mix. Supported by our focus on high-value generating customers and increased package penetration, mobile ARPU rose 6.9% year-on-year to TRY27.9. ARPU growth would have been 8.8% excluding the impact of free emergency communication packages.

On the fixed side, total customers exceeded 1.7 million. We have added 296,000 new customers over the past 12 months, of which 140,000 were fiber users. Meanwhile fixed residential ARPU rose 5.1% to TRY51.6 on growth of multi-play customers with TV, as well as price increases.

Moving to the next page. We continue to increase the smartphone penetration of our subscriber base. Now it stands at 62% with TRY3.2 million net additions. Meanwhile, our contracted smartphone sales grew by 15% year-on-year recording a historic high number in the third quarter. This performance was fueled by our consumer finance company. Demand for our 4.5G services continued to increase in the third quarter marking 31% quarterly 4.5G traffic growth.

Mobile data usage per user rose 61% year-on-year to 2.6 gigabytes with the contribution of 4.5G users who consume an average of 4.3 gigabytes per month. The share of 4.5G users in total mobile data users rose 4 percentage points to 27% in September from June. 4.5G users generates almost two times more ARPU than the overall mobile subscribers.

Moving to the next page. As the first and only company in the Turkish market to offer a real converged experience, a major component of our strategy is to focus on increasing penetration of multiplay offers. Accordingly, we achieved the healthy rise of greatest service per customer, both for mobile and fixed segments. We also see higher potential for cross-selling opportunities going forward.

In mobile, the share of triple play offers has been rising steadily, reaching 28% on a 4 percentage point quarterly rise. On the fixed side, our multiplay ratio in total fiber residential subscribers, which includes voice, Internet and TV, rose 1 percentage point on a quarter-on-quarter to 34%.

Moving to the next page. Digital services are key component of our future positioning. While certain services directly generate revenue, others such as My Account play a key role in retaining customer loyalty. By our calculations, among heavy users of these services, we observe a positive impact on both ARPU and the churn rates. This quarter, we continued to see rising demand for all of our core digital services. Total downloads compared to last year rose from 15.2 million to 35.5 million, while the active users increased 1.3 times. Our digital services are all-access services, which are also used and downloaded by competition.

Our new generation communication platform BiP continues to attract interest all over the world, including Europe and the USA. BiP has [recently] become a major success surpassing 10.3 million downloads in 192 countries. Today, it has become a global brand with 1 million downloads from countries outside of Turkey. BiP has also marked a global first with its fax service through the BiP messaging platform.

Our My Account application has been downloaded 9.3 million times to date. My Account provides TRY2.3 incremental ARPU and decreases return by 0.1 percentage points. Our leading music platform, fizy integrated with video clips and live concerts, broadcasts Open Air Concerts to 1 million people having become Turkey's largest digital concert provider with 7.4 million downloads. Through fizy, more than 2.2 million songs are being listened on a daily basis.

Our widely used personal cloud service recently rebranded as Lifebox has ramped up to 3.4 million downloads, while the best sports app in the sector, goes on your mobile, has been downloaded 2.7 million times. As of today, 2.3 million Turkcell TV mobile downloads have been made and I will elaborate more on TV on the next slide to come. Meanwhile, our online education platform, Turkcell Academy, has been downloaded by 1.1 million users and our digital publishing service has exceeded 0.6 million downloads.

Both mobile and IPTV are important components of our convergence strategy. And the number of subscribers actively using both platforms has been rising steadily. In particular, on the back of our strong mobile network and largest spectrum assets, our customers, mobile TV watching duration has increased to 27 minutes from 7 minutes and is set to further increase.

In the third quarter, Turkcell TV+ became the official broadcaster of UK's Premier League, which is considered the world's most -- one of the most prestigious football leagues. The Premier League is available exclusively on mobile devices through Turkcell TV+. Along with the English Premier League, Turkcell TV+ providing privilege coverage to sports fans, also holds the broadcasting rights for the Bundesliga of Germany, NBA and Formula 1. In continuing to provide diversity to our customers on our 4.5G platform, we are keen about -- for the upcoming tender for Turkish Football Super League and the possibility of broadcasting it through our mobile TV platform, bringing football content to even more people.

Moving to the next page, Turkey's first and only integrated game platform, Gamecell made a swift entry into a TRY2 billion game market in Turkey. The platform, which currently offers approximately 2,000 games will also enable its users to build their teams and participate in tournaments, as well as follow the latest industry developments. Gamecell users will benefit from our mobile payment service to make payments in installments. Turkcell fiber customers can download games without having a quota or speed limit.

In the first month of its launch, we have reached more than 100,000 players, exceeding our expectations. We believe that the online gaming platform has the potential for further growth in the years to come.

Moving to the next page. At Turkcell, we believe that nations and economy strengthens with migration and Turkey has long shifted the conversation on Syrian refugees from basic survival to integration. We have been a pioneer in mobilizing the power of communication in one of the biggest humanitarian challenges of our time. Today, we try to accelerate the integration of Syrian immigrants in Turkey taking steps to meet the communication needs of our Syrian customers. As of today, we have more than 1.2 million Syrian customers with a 70% market share in Turkey.

Our Hello Hope application was developed to meet the communication needs of Syrian people and make their lives easier through language assistance, language education and assistance to government services. This app, again, operational on all-access has exceeded 100,000 active users in just one month.

Next page is about Turkcell International. Turkcell International revenues comprising 6% of our group revenues were at TRY222 million, impacted by currency devaluation, whereby, the EBITDA margin decreased 2.4 percentage points to 27.2%. Lifecell is the major component of our International business with a 66% share in business overall. Lifecell revenues rose 4.7% in local currency terms with higher use of data packages on the back of the 3G services and higher terminal sales. The EBITDA margin fell 8 percentage points to 26.9%. This was mainly due to higher network-related costs, due to 3G rollout, tower rent expenses and higher marketing costs.

In Belarus, revenues rose 11% year-on-year with the expansion of the subscriber base along with increased voice revenues and terminal revenues through higher smartphone sales. The EBITDA margin improved 2.5 percentage points, mainly driven by top-line growth and better operational expense management. Our operation in Northern Cyprus comprising 15% of our International revenues, recorded 2.7% year-on-year growth and the EBITDA margin rose 2.1 percentage points to 40.1%.

Now, let me hand over to Bulent for the financial review in more detail. Bulent?

Thank you Kaan. Good afternoon and good evening to all participants. I will now talk in more detail about our financial results. In the third quarter, our business in Turkey with 19% share in revenues, was the main revenue and EBITDA growth driver. Turkcell Turkey's incremental contribution to our top line was TRY241 million, mainly stemming from data and services. Despite 5.7% organic growth, the revenue contribution of our international business was negatively impacted by the regulation in Ukraine and Belarus. Other subsidiaries' contribution rose by TRY66 million. This was mainly driven by the Turkcell consumer financing company, which with the largest market-sharing sector, has to date, financed approximately 1.5 million smart device purchases.

Consolidated EBITDA rose by 4.9% year-on-year to TRY1.2 billion, with an EBITDA margin of 33.3%. This was mainly due to a solid rise in revenues, although partially offset by the higher direct cost of revenues. The rise in direct cost of revenues was mainly due to higher 4.5G network-related expenses, and the cost of (inaudible) sales through our dealer channels. Excluding impact of free-of-charge emergency packages, revenue would have grown by 10.4%, while the EBITDA margin would have been 34.4%. To sum up, in the third quarter, Turkcell Group achieved the highest growth level of the past three years, while in the first nine months, registering record high revenue and EBITDA, both at the Turkcell Turkey and Turkcell Group level.

Moving on to the next page. In the third quarter, net income as per IFRS declined to TRY163 million, whereas pro forma net income rose 4.2% to TRY705 million. One-off items had an adverse impact on this quarter. These items were TRY193 million foreign exchange loss, including tax and minority share; TRY39 million net interest expense, including the valuation of derivative instruments; TRY138 million provision for the application to the tax authorities to benefit from the tax amnesty mainly relating to the special communication tax dispute; TRY81 million 4.5G license amortization; TRY48 million free emergency communication packages; and TRY43 million (inaudible) one-off items; and to add a negative contribution of TRY5 million to Group net income in the third quarter, driven by weak performance, currency devaluation and impairments. Thus in the first nine months, Fintur's contribution was TRY2 million compared to [TRY261 million] in the same period of last year, negatively impacting our bottom line.

I will now talk about our balance sheet and cash flow items on the next page. Our balance sheet remains robust on healthy growth and prudent financial policy. Our net debt position compared to last quarter declined to TRY2.5 billion from TRY3.5 billion and our consolidated debt at TRY8.1 billion. Our cash position increased by TRY1.9 billion to TRY5.6 billion on a strong drive in EBITDA, including working capital and higher interest income of our consumer finance company. The main factors behind the improved working capital were TRY210 million decrease in advances given for fixed asset purchases, TRY168 million decrease in prepaid expenses, TRY431 million of other working capital, mainly consist of decrease in default VAT and increase in trade payables. During the quarter, the major cash outflow item was capital expenditure of TRY743 million of which TRY687 million was related to Turkcell Turkey.

Moving on to next page. Now I would like to briefly discuss the foreign currency breakdown of our cash debt and CapEx. We set a balanced foreign currency cash and debt position in order to reduce currency exposure. Against the 79% foreign exchange and M&A effect, we have 82% FX cash reached to a certain extent for (inaudible) natural hedging. The entire foreign currency debt position is related to the Turkcell Turkey, a portion of which was hedged in the second and third quarters, which I will explain in detail.

Our net debt to EBITDA ratio decreased slightly to 0.6 times as of September 30, 2016. Turkcell is the only company in Turkey to sustain three investment grade ratings from major rating agencies. Despite the recent actions of these rating agencies on some of the ratings, all of these rating agencies have affirmed Turkcell's investment grade ratings on the back of our strong financial profile.

Moving on to the next page. And the hedge against foreign currency risk, we aim to [halt] almost all of our free cash in US dollar and/or Euro which improves our net foreign currency short position and reduce our exposure. Further in July, (inaudible) we engage in a participating cross currency swap transaction at favorable rates. With this transaction, Turkcell has swapped additional $250 million loan to Turkish (inaudible) liability in the third quarter to mitigate currency risk.

Our actions to decrease our short position to converting our cash to foreign currency continued in October. Accordingly, we have decreased our short position to $700 million compared to $1 billion as of fourth quarter of 2015, branding our balance sheet more immune to financials shocks. Our short position has further fallen below $650 million in October.

This brings us to the end of our presentation today. Thank you very much for being with us and now we are ready to take your questions.

(Operator Instructions) Roman Arbuzov, UBS.

Thank you so much. It's Roman Arbuzov from UBS. My first question is on Fintur. I was wondering if you could please give us -- maybe a little bit more color where exactly you disagreed with Telia, and was it price or was it something else? So something if you would, that would be very helpful. And also on the Fintur as well, you've mentioned the possibility of selling it has been one of the options. But could you perhaps comment on the way that you see any actual interest from third parties already today, and whether that is what maybe prompted some change in your thinking?

That's on Fintur. I was also wondering on the operational side. Is there a chance that you will start over-achieving on your guidance of high single-digit revenue growth and perhaps tap into the double-digit territory, given how strong the underlying performance was, once you allow for the one-off that was roaming, that was for usage in the quarter? And going forward, hopefully 4G will start to have more impact as well as the competitive environment improves, et cetera. So what do you think, do you think we can sustain a double-digit topline growth territory from now? That would be very helpful. Thank you.

Thank you very much. First of all, let me start by answering your first question about Fintur, Roman. Actually what I can tell you is exactly what Johan has said in his conference last week. We have agreed (technical difficulty) that the talks were inconclusive. We could not find middle ground in terms of making an agreement on buying the shares. And we will be jointly looking for different options, including selling our stake with regard to Fintur. That's what I can tell you, and therefore, you know selling, yes, is one option. I will keep it there and not to make anymore harder speculations.

With regard to the operational side, we're very comfortable with our growth rate. As you know, at the beginning of the year, we have said 8% to 10% in terms of growth, both in Turkey and group level and we are on the higher end of that where we see. Looking to the performance of the last month, actually I see that the penetration rate of smartphones, 4.5G customers spending basically more time on TV, on their mobiles, spending more time on browsing the Internet, gives me confidence that the double-digit growth will be actually sustainable and we will make our targets of 8% to 10% guidance of the year, probably towards the higher end of it.

Herve Drouet, HSBC.

Yes, good afternoon. Two question as well on my side. First one, coming back on the scene to when you are talking about different options, does it automatically look at option of selling to potentially strategic investors, or can it be potentially a listing that you may contemplate as well at one stage in a similar way that you are planning to do potentially, you know, next year (inaudible).

And the second question on the operations, during the summer and during the event that happened in Turkey, I understand you had also free emergency package being put in place, but I was wondering as well with those events, if you have seen a surge in the traffic due to the event, and if you compared on the consumption of the usage, for instance, compared with other years, if there is -- has been as well you know a boost due to the event on the usage, which was, obviously, partially offset from monetization from the free emergency package?

Okay. As I mentioned, I don't want to speculate on the Fintur case. I can tell you that we have been -- agreed in an inconclusive way in terms of -- for us to buy the stake of Telia, and we will look into other options. This could be sales or any other thing, and we will be in touch with Telia in terms of the options as well. With regard to the coup attempts, telecommunications infrastructure in Turkey has been alive through the entire stage. And naturally, there has been an increase in the traffic during that week, particularly. And we have provided for about a month free emergency communication packages, both 3G, 4.5G and WiFi options to the public. I don't think it has had a major impact in terms of a traffic surge for the entire quarter. But of course, during the period of the event, there has been an increase in the utilization and the industry has been very successful in keeping up with that.

(Operator Instructions) Mehmet Agyuz, YapiKredi.

Hi, thanks for the presentation. My question is about the regulatory change in mid-August, the removal of -- on net price cap. And also I see in the presentation the significant increase in data, mobile data revenues were up around almost doubling year-over-year, whether in this quarter you made any reclassification on the revenue front.

And actually, I want to ask about profitability implications in terms of savings on the cost front, as well as my second leg of my question is about the strategic implications of the change in the regulation, whether the saving from this would be used to stave off competition or maybe to be closer to gain some market share, if you can give color on that, that would be great.

Sure. Mehmet. Thank you very much for the question. As you have rightly stated, mid of August saw an important change in the regulatory front for our company and the retail price controls were basically removed. Well, if we look at where we invest and where our costs are and where our customers actually consume our services, it's -- we invest 96% of the time for data, 91% of our costs are related to data, and our customers also consume 91% almost of for data services.

And I think the change gives us a new leveled ground that we reflect in our pricing, the services that we really provide. In addition to that, as you know, we are significantly shifting from selling raw data to processed data in the form of digital services -- TV, music, magazines, and all sorts of things our customers actually are really looking for. So all these things are reflected in our new value propositions to the customers and they have an impact on the growth of our digital services revenue potential, as well as the revenue growth from data services. Currently, if you look, I think our last quarter, 52% was the range of data revenues. Now we move to 60% and I would basically see in the market that this trend will continue in terms of more percentage of revenues will come from data services and digital services not only raw data, but really digital services.

Clearly, this move has given us more competitive edge, as well as more chances to provide profitable services. And we have seen a portion of this, a little portion of that coming from in Q3 and we will see this continuing in the next quarters as well.

Maybe just to clarify on the cost front, this reallocation of the mix, I understand that you are allocating (inaudible) data given that the business is growing, but I was wondering whether this shift by itself, just because of the taxes on data versus voice by my estimate should have around 200 bps, 250 bps EBITDA margin impact. Whether you recognize this in a -- on the close from this quarter because already -- is there any other -- in the other parts of the business, I understand there are some one-offs, but any cost escalation that's been offsetting this, I mean how should we think about going forward in the next couple of quarters maybe?

Now, of course, this quarter, only a portion of our new value propositions are reflected. Naturally, there will be a change due to the different taxation regimes here. We are just in the process of basically putting the value propositions and the right prices of the value propositions to the customers, and the new regulatory environment basically is giving us this chance.

Now looking to the impact, the changes are not only about the relocation of the revenues to data, but sustained and continued growth of data consumption. As we have indicated in the notes, your average 4.5G customers are expanding 4.6 gigabytes compared to 2.3 gigabytes of regular customers. And the base of 4.5G customers are continuously increasing. So we would see the impact of more smartphones, more consumption of data and more consumption of value-added services and digital services such as TV and music, which actually are all accretive to our ARPU and also decretive to the churn rates. So we will see impact of all these and that's actually reflected in the guidance that I have provided for not only this year, but also for the three years. I would like to mention that we will reiterate the guidance for the mid-term, which we had provided a year ago giving the indication that we would be sustainably growing the business at 10% to 15% and we will be increasing our EBITDA margins towards 34 percentage points, 35 percentage points.

That's very helpful. Thank you.

Ivan Kim, VTB Capital.

Firstly, if you look at the mobile revenue, excluding the emergency package tariffs and probably also excluding the net negative impact from roaming, there was an acceleration and growth in the third quarter. What would you attribute that acceleration more to -- is it inflation pass-through or you would say it's more driven by the higher consumption?

That's my first question. The second question is related to your services and solutions kind of revenue, in music, personal cloud and all other process data as you call it. Where do you stand against your competition? Does the competition emerge at all in those segments, is it more of the global players, are there any local players competing with you and what's your targets within all of those verticals? Do you want to probably be eventually (inaudible) -- hopefully within those -- how do you see yourself within those verticals in a three, five-year maybe? Thank you.

Thank you very much, Ivan. So with regard to the first question, in Q3, when we launched the 4.5G services, we have fueled the launch with certain campaigns, including developing the quarters, as well as some special campaigns for roaming, as well as quarter surpluses. As we retired those campaigns and as the consumption levels of 4.5G increases, as well as the number of 4.5G customers, we actually see a healthy growth rate kicking in. So it is in line with our inflationary pricing policy, but also proven by the levels of consumption increases.

With regard to the services and solutions' revenues and strategy, actually Turkcell is an OTT company who happens to have telecom licenses. So we are very aggressively entering into TV, music and all sorts of instant messaging platform businesses and leveraging our position as a local content and local telco licensed player. So we see our competition as the global players in this arena. And of course, we are ready to protect our national and domestic market in the best way, utilizing our IMS infrastructure and capability to integrate these applications to our telco services.

With regard to our strategy again, all these services, including TV, music, digital media, and instant messaging are all all-access applications. They are not only accessible through the competition in our domestic market, but they're also accessible through anywhere globally. And we see ourselves as a strong player in these fields already today, and also this position will improve in the next three years to five years.

Interesting. Thank you.

Roman Arbuzov, UBS.

Thank you very much. Just a quick follow-up on infrastructure sharing. So, I was wondering what impact do you expect from the end of the fiber holiday? That's one. And then also if you could give us an update on your Vodafone fiber joint venture, that would be very helpful.

Thank you, Roman. Well, as you would remember, we have announced together with Turksat, the cable TV operator in Turkey, Vodafone, [Telco] the association of small ISPs of Turkey, and ourselves to get together and open up our networks for sharing and also create a JV that would do the further deployment of fiber infrastructure of the country.

This project is actually on target and we are discussing about the sharing of the networks as the first phase and immediately followed up by the new company that will be responsible for building up the fiber infrastructure. That will mean, of course, a positive progress towards our asset-light strategy in terms of deploying infrastructure that are sharable domestically with the competition. That is also reflected in our strategy of Global Tower, which actually opens up its towers for sharing with other operators in the country.

As there are no further questions over the phone, I would like to turn the call back to our host for any additional or closing remarks.

Gale, while we are waiting, the next question, there is some online. I would like to actually ask our CFO if I can repeat the question from Berk Ozbek from Global Index. Bulent, could you just give us more details about increasing impact of other cost items to direct cost of revenues and decreasing the impact of depreciation, amortization, fixed rate compared to the last, in the same quarter?

Regarding the first question, (inaudible) are related to the cost devices sold via our retail sales channels. And regarding your second question, our depreciation to revenue rate decreased in Q3 due to the increase in our revenues in Q3.

Thank you. And the second question again from Berk, company's (inaudible) denominated cash and cash equivalent position increased to $1 billion as of Q3 2016 from $0.6 billion as of Q2 is 2016. Is there any specific reason for those?

As I mentioned during my presentation, due to our hedging purposes and hedging policy Turkcell had converted all available cash into the foreign currency and this is the company policy and we continue to have this (inaudible) Q3.

Okay. And the last question again from Berk to our CEO, what would be your new game plan after the postponement of the Global Tower's IPO considering your monetization of assets such as divestment (inaudible)?

Yes, that. Thank you, Berk for the question. I mean I think I have numerous times stated that we would like to progress through an asset-light strategy on our balance sheet. That means, you know, looking into the assets that we have on our balance sheet like towers or fibers, these are exactly the areas where we believe we can create value for the shareholders.

So we believe our tower assets are impeccable in terms of value and we would like to pursue our objective of, you know going through an IPO in 2017 for these assets. Unfortunately, during the times that you are accepting actually offers, which actually showed a very strong demand, we had the events in US basically impacting the Internet access and that also caused us to focus on this issue in the Turkish market as well.

That's why we have postponed it, but our expectations from the monetization of that assets continues in a very strong way. With regard to the Fintur, we believe that these markets are markets of value and we are seeking to create the maximum shareholder value by looking all options we have together with our majority shareholders there at Fintur with Telia Company.

Thank you, Kaan. Gale, I guess that brings us to the end of the session. If there is no -- any questions -- I notice there is not, I would like to ask again my CEO, is there any remarks that you would want to --?

First of all, thank you very much for joining us at this call. I'm looking forward to end year's conference call. Thank you.

Thank you for all participation and please be aware that it will be a video -- audio available for the next (inaudible) period, plus any further questions, please get in touch with Investor Relations. Thank you. Have a good night and have a good day. Bye, bye.

Ladies and gentlemen, that will conclude today's conference call. Thank you very much for your participation. You may now disconnect.