Turkey’s leading mobile operator Turkcell has reported revenues of USD583.7 million for the second quarter of 2003, a rise of almost 20% on the corresponding period of 2002, following a 25% increase in subscribers and an improvement in the value of the Turkish Lira against the US dollar. At 30 June 2003 Turkcell had 17.2 million customers, representing more than two-thirds of the Turkish market, up from 16.3 million at the start of the year and 13.8 million in mid-2002. In the year to June 2003 the number of pre-paid users connected to Turkcell’s GSM-900 network remained virtually static at 4.7 million, but post-paid users rose from 9.2 million to 12.5 million. Despite this trend towards more contract customers, lower monthly tariffs meant the operator’s blended monthly average revenue per user (ARPU) fell from USD12.5 to USD11.5 over the year. EBITDA increased from USD185.6 million to USD217.9 million during the twelve month period, with churn rates rising from 3.3% to 4%, and subscriber acquisition costs increasing by 7% to USD24.7.
Turkcell remains by far the country’s largest operator – its market share stood at a hefty 68.5% at the end of 2002 – and its rivals are finding it difficult to keep the market leader in their sights. The Turkish market has witnessed considerable upheaval in recent years. The licensing and launch of two new operators in 2001, the Telecom Italia Mobile-backed (TIM) Is-TIM and Turk Telekom’s DCS-1800 subsidiary Aycell, coincided with the country’s economic meltdown, which the Ministry of Transport and Communications claims led 1.5 million people to terminate their mobile accounts. The crash saw the rate of new subscriber addition fall and operators were forced to cut off large numbers of customers for unpaid bills, in addition to those who willingly terminated their own contracts. Since 2000, when growth within the sector was buoyant and customer additions reached a record seven million, average revenue per user (ARPU) has declined approximately threefold and billing tariffs have been slashed. The introduction of pre-paid services around this time helped the operators attract new clients and enabled those who were reluctant to sign up for, or retain, contract services because of the state of the economy to own mobile phones, but the addition of lower spending pre-paid customers only exacerbated declining ARPU.
A price war ensued between the operators with particularly aggressive cuts being made in the third quarter of 2002 by Is-Tim, Aycell and the country’s second largest operator Telsim. Turkcell claims that because of its strong market position it avoided being dragged into the fray at this time. Intense price competition continued into 2003 and as a result Turkcell’s rivals have found themselves in a precarious position. With the smaller cellcos finding it difficult to compete, and consequently putting their financial stability in jeopardy through aggressive pricing and heavily discounted offers, rumours of consolidation began to emerge in late 2002. Accordingly in May 2003 it was revealed that Is-TIM and Aycell were to merge. Under the terms of the agreement TIM and Turk Telekom will each own 40% of the new entity, while the remaining 20% will be held by Is Bankasi.