Turkcell, with 68.9mn subscribers and revenues of TRY12.8bn (€4bn) possess a footprint in nine countries across Southeastern Europe and the CIS. The company recently acquired the largest spectrum in Turkey’s 4.5G auctions and their subsidiary, lifecell became the first GSM operator to launch 3G in the Ukraine. We speak to Turkcell Chief Strategy Officer, Ilter Terzioglu to discuss the company’s plans for infrastructure expansion, their offer for TeliaSonera’s stake in FINTUR and what the future has in store for their infraco Global Tower including the recently announced IPO.
TowerXchange: Please can you introduce Turkcell’s footprint and market share in the countries in which it operates.
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
Turkcell was founded in 1994 as Turkey’s first GSM company. Today we are a converged communication and technology services provider. Our offerings vary from mobile telecommunication to fixed, cloud, TV and OTT services.
In addition to our home country Turkey, we operate in eight countries through subsidiaries and partnerships. In the Ukraine, our wholly-owned subsidiary lifecell is the first GSM operator to have introduced 3G to the market. We are the majority owner of life:) in Belarus, sole owner of KKTCell in Northern Cyprus, and partner of Deutsche Telekom in Turkcell Europe. Through our subsidiary FINTUR, in which we partner with TeliaSonera, we operate in four countries in the CIS region: Azerbaijan, Georgia, Moldova and Kazakhstan.
TowerXchange: We understand Turkcell acquired the largest spectrum in the recent 4.5G auctions. What level of new infrastructure build out is required to deliver this? What level of infrastructure expansion is required in other markets that Turkcell operates?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
For the past few years, Turkcell Turkey invested in its network with the vision that technology evolves constantly and that Turkey would eventually move into LTE era. With the spectrum auction held on August 26th, we acquired 172 Mhz, 47% of all spectrum auctioned, reaching 234 Mhz. Following the auction, we accelerated the network upgrade to deliver LTE in Turkey on April 1st – with our infrastructure investments including spectrum, we have secured the next ten years of Turkcell as a converged company that delivers technology in the highest standards. The fact that the spectrum auction was technology-agnostic gives us greater flexibility as we plan ahead.
Another big step for infrastructure expansion in the Turkcell Group was the launching of 3G in Ukraine following a long-anticipated auction. Our subsidiary lifecell became the first GSM operator to launch 3G, on 19th May 2015 in Lviv and on 4th June 2015 in a number of other cities including Kiev. We are going through a very speedy roll-out, and have covered 16 regional centres and 300 settlements as of 1st April. lifecell offers 3G+ with its 3-carrier technology, which adds a further dimension to its technology leadership as the Ukraine’s communication landscape goes through a major change.
TowerXchange: Turkcell’s towers are managed by their wholly owned subsidiary Global Tower. What was the rationale behind the creation of Global Tower and what do you see as the advantages of having Turkcell’s infrastructure managed by such an entity?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
Global Tower was established in 2006. It serves not only Turkcell but other telecommunications operators (including Turkcell’s competitors), TV & Radio broadcasters, ISPs and public institutions as well. We always look for new tenants on our existing towers which enable efficiency for us and for our customers.
The main goal of Global Tower is to increase cost efficiency by sharing sites and services. Global Tower’s site sharing business model eliminates the initial investment costs of its clients, decreases environmental impacts and promotes efficient use of resources. In other words, it provides an independent platform for the telecoms industry and adjacent sectors to optimise costs through passive infrastructure sharing.
Global Tower also helps Turkcell manage its tower business more efficiently, while having a more realistic view of its core business as an operator that provides connectivity and services built on top of that layer.
Global Tower also helps Turkcell manage its tower business more efficiently, while having a more realistic view of its core business as an operator that provides connectivity and services built on top of that layer
TowerXchange: Do Turkcell use any third party towers? Is there generally a culture of infrastructure sharing in the markets that Turkcell operates or are they relatively new to the concept?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
A small amount of the towers used by Turkcell Turkey are from third parties. We could say that in Turkey, the Ukraine, Belarus and Northern Cyprus, passive infrastructure sharing strategies are generally well-established.
However, there is always room for improving the efficiency of the models and practices. Technology evolves constantly, and the roll-out of 4.5G in Turkey and 3G in the Ukraine may also provide additional opportunities for more efficient passive infrastructure sharing.
TowerXchange: Would Global Tower look to acquire any third party towers? What degree of new build is being done by the company?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
Currently, Global Tower focuses on the Turkcell Group. However, we are always open to evaluating any viable and profitable opportunities that may arise.
TowerXchange: In February 811 towers were transferred from lifecell to UkrTower, what was the motivation behind the restructuring?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
Our goal is to manage our business in the Ukraine more efficiently by consolidating the tower business under UkrTower. We believe that this consolidation will help create additional synergies in the Ukraine. We are also keen to make sure that our assets are recognised and valued properly by the market – this move is a step that will help UkrTower and its parent company Global Tower realise their real valuation, creating shareholder value in return.
TowerXchange: What is the relationship between Global Tower and UkrTower – how closely do the two management teams work?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
UkrTower is a wholly-owned subsidiary of Global Tower. Business development and sales teams work closely together in order to ensure product and service upgrades and enrich customer portfolio. There is also cooperation in terms of strategy and transfer of know-how: for example, UkrTower has expanded to broadcasting sector soon after the Global Tower experience in the Turkish market.
TowerXchange: We understand Turkcell to be submitting a binding offer for TeliaSonera’s stake in FINTUR – what can you tell us about Turkcell’s reasons for the offer?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
Turkcell owns 41.45% of FINTUR’s shares so we already exist in four of the countries that TeliaSonera intends to withdraw: Kazakhstan, Azerbaijan, Georgia and Moldova. As a result of our partnership, we already have a stake in the outcome of the process and we cannot stay indifferent. We believe that we can create value for our shareholders and customers if we take a bigger role in the management of our subsidiaries in these four countries where we already have a footprint.
TowerXchange: Do you foresee the creation of infrastructure subsidiaries in these markets?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
It is too early to talk specifically about our plans in these countries.
TowerXchange: We understand there are some challenges relating to regulations surround telecoms infrastructure in Turkey, whereby spectrum licenses are attached to specific infrastructure – does this prevent the transfer of assets and is the regulator looking to address this problem?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
As previously mentioned, the latest spectrum auction that was held on 26th August was technology-agnostic. It is a very positive and visionary approach on the part of the government – not necessarily for the “transfer of assets” but more importantly for our investments as it gives us, the operators, the flexibility to plan ahead for future technologies.
The bigger debate, in our view, is the fibre regulation in Turkey. Fibre penetration in Turkey remains at levels lower than half the OECD average. A new model that would encourage investments should be introduced. Our proposal is the establishment of a joint venture which brings together all of the fibre resources of operators and serves everyone. This would remove the current obstacles to investment, improve efficiency and create a new incentive structure. Not only the operators but the national economy as a whole can save billions of dollars while millions of households and businesses get connected.
TowerXchange: We have heard that Turkcell have commenced an IPO of the Global Tower business. What can you tell us about this?
Ilter Terzioglu, Chief Strategy Officer, Turkcell:
Our Board has taken the decision to initiate the process for initial public offering of certain amount of shares of Global Tower. With this decision, our Company’s management is now authorised to perform all actions as required, including amending the existing articles of association of Global Tower.
As you know, we have expressed, on various occasions, our interest in achieving efficient management of our businesses, and in ensuring the correct valuation and positioning of our assets by the market. We have been evaluating the options for creating the highest shareholder value and this decision was taken as a part of those deliberations.
As stated in our announcement, we are now evaluating the possibilities for a potential IPO in Turkey and/or in international markets.
