Share Square: Turkey

Turkey had a total population of 79.6mn people and 71.4mn mobile subscriptions at the end of 2016, giving a mobile penetration of 90%. Turkey spans two continents, Europe and Asia, however its penetration is significantly below both regions, averaging 135% and 100% respectively. It has the lowest level of penetration in Eastern Europe and is thirteenth (out of 18) in Western Asia. Neighbouring countries Georgia (140%) and Armenia (122%) in Western Asia exhibit greater penetration levels, and Bulgaria (150%) and Romania (142%) in Eastern Europe are also significantly higher.

The mobile market in Turkey comprises three Mobile Network Operators (MNOs) (See figure 1), Turkcell, Vodafone and Türk Telekom (Avea). Turkcell dominates the market with a subscriber base of 31mn (43% market share) at end-2016, followed by Vodafone which services 22.6mn subscribers (32%) and finally the previously state-owned Türk Telekom, which had 17.7mn subscribers (equating to 25% of the market). This situation has been relatively stable for several years now, although both Vodafone and Türk Telekom have been slowly taking market share from Turkcell.

Although 2G is in decline, with subscriber numbers having fallen steadily across recent years, it still represents 51% of all connections. Until recently (with the launch of 4G), 3G was the main growth driver in Turkey, following its launch in 2009 by all three operators. There were 24.8mn 3G connections in Turkey at end-2016, equating to 35% of all connections. The 3G market largely replicates the market share shown in the overall market, with Turkcell serving 45% of the market, followed by Vodafone and Türk Telekom who serve 32% and 22% respectively. 3G population coverage was above 90% for each operator at end-2016.

4G licences were awarded at auction by the Turkish Regulator, the Information Technology and Communications Authority (ICTA, formerly BTK) in August 2015 following a three month period of postponement. The delay was caused by controversial comments from the Turkish President which suggested that the country may skip straight from 3G to 5G. The three existing operators were each successful in acquiring 4G spectrum licences which are valid until the end of April 2029. The auction reportedly included 20 spectrum lots across the 800MHz, 900MHz, 1800MHz, 2100MHz and 2600MHz bands, costing the operators just under EUR 3.4bn.

The auction appeared to take place later than the operators would have liked, with Turkcell, Türk Telekom and Vodafone suggesting that they were already in the position to roll out their own 4G networks much earlier. However, the licences acquired at auction in August 2015 are reportedly cleared for use for 5G technologies also, preventing future delays for the operators.

The three operators simultaneously launched 4G services on 1st April 2016, using LTE-A (which provides higher download speeds than standard LTE). Subscriptions have risen quickly since then, with 10.4mn connections being added in the 9 months to end-2016. This represents 14.5% of connections in the market. Turkcell has been most successful in this space, with 74% of connections (7.6mn). Vodafone has 1.7mn (16%) and Turk Telecom 1.1mn (10%). At end-2016, Türk Telekom had 4G population coverage greater than 66%, whilst Turkcell and Vodafone had more than 60% and 40% respectively. By comparison 3G coverage for Vodafone and Turkcell is in excess of 95%, whilst Türk Telekom is 86%.

In recent years, the three MNOs have been working on 5G developments. Vodafone is reported to have tested 10Gbps ‘E-band’ point-to-point radio network link technology to support its aim of launching 5G commercially by 2020. Vodafone has also recently completed trials of Licensed Assisted Access which combined licensed and unlicensed spectrum to deliver data speeds of up to 370Mbps. Türk Telekom (Avea) has signed a deal with South Korean telco KT Corp, with the intention to bring 5G to Turkey by combining 4.5G services and WiFi connections to enable data speeds of up to 1Gbps. Additionally, Türk Telekom and Nokia signed a Memorandum of Understanding (MoU), where Türk Telekom will make its network infrastructure available to Nokia. The third and largest operator Turkcell, has also signed MoUs with Huawei, Ericsson and ZTE to support in its 5G research and development. Turkcell’s recent 5G tests, in the 15GHz band, with Ericsson, achieved a peak speed of nearly 25Gpbs.

Turkcell launched its mobile service offering in Turkey in 1994 when it launched Turkey’s first GSM network. Turkcell is the first Turkish company to be listed on the New York Stock Exchange and is owned predominantly by holding companies, through which Telia owns around 38%. Around 35% is traded on the stock market. Due to the slowing growth in the Turkish market, Turkcell has suggested that it could look abroad to facilitate company expansion. The Turkish based operator has identified the Balkans, Middle East and Africa as priority markets.

Vodafone is Turkey’s second largest mobile operator by subscriber numbers and has featured in the mobile market since 2006. Vodafone Turkey was formed when Telsim was acquired by the Vodafone group; Telsim was founded in 1994. A key aim for Vodafone globally is the development and deployment of 5G, and Turkey is no exception given the reported work in 5G that Vodafone Turkey has led. Vodafone Turkey has recently partnered with NEC to develop its small cell strategy for in-building coverage.

Türk Telekom is the formerly state owned MNO; it was privatised in 1995 following the separation of the telecommunication and postal services. Oger Telecom owns 55% and the Turkish Treasury owns 25%, with 5% owned by the Turkish Wealth Fund and 15% traded on the stock market. In 2015 Türk Telekom became the sole owner of its mobile subsidiary Avea. Additionally, Türk Telekom has spent around USD7bn over the last decade on building up its (partly state-owned) fibre network, having laid over 200,000km of fibre.

In addition to the three main MNOs, there more than 20 MVNOs in Turkey. In addition to these, the MNOs have a number of separate ‘sub-brands’, such as FenerCell, in which the MNO delivers a large part of the service and revenue is shared between the MNO and brand owner.

The Information and Communication Technologies Authority (Turkish: Bilgi Teknolojileri ve Iletisim Kurumu (ICTA, formerly BTK)) was formed in January 2000 and at the time was the first sectoral regulatory body of Turkey. While the Ministry of Transportation, Maritime Affairs and Communications is responsible for policy making, the regulation function is given to the ICTA.

In 2008, the Electronic Communications Law came into force to help clarify legislation, lessen the uncertainties for operators and allocate resources to R&D. At the same time the name of the Authority was changed from the BTK to Information and Communication Technologies Authority (ICTA). The authority’s role includes but is not limited to creating and maintaining competition, protecting stakeholder rights, resolving disputes and planning and allocating frequencies.

ICTA made a significant intervention in the market in August 2016, scrapping minimum price regulation that had been imposed on market leader Turkcell since 2009. The regulation outlined a minimum price for retail mobile voice and SMS messaging services, following claims from Turkcell that the regulation had a negative impact on its competitive strength. The regulation was reportedly removed for a number of reasons including: developments in the market, the increasing importance of mobile internet, the excess of services enabling communication via the internet and the declining importance of voice and SMS services.

Turkey has one of the world’s largest government-owned universal service networks, with over 1,100 RAN-shared BTSs deployed in rural areas and Turkey’s three MNOs taking it in turns to control the rural network. The network was designed to target rural areas with a population under 500 people. The arrangement with the MNOs is that they each manage the network for a 3 year period, without any financial payments from the government or other parties.

In 2006, the country’s only towerco, Global Tower was launched. Global Tower is a 100% owned subsidiary of Turkcell and is responsible for managing the operator’s infrastructure across four countries (Turkey, Ukraine, Belarus and the Turkish Republic of Northern Cyprus). Global Tower is reported to have over 10,000 towers, of which around 8,000 are in Turkey. Whilst Turkcell uses a small number of third party towers, Türk Telekom and Vodafone are reported to use around 25% of Turkcell’s towers.

In April 2016, Turkcell launched an IPO for a 25% stake in Global Tower. However, this was postponed in late 2016, with risks around cyber-attacks and the US presidential election stated as reasons. Investors were also reported to have concerns around the internal political situation and possible security risks related to neighbouring Syria. It has been suggested that the IPO will recommence in 2017 although, at the time of writing, there are no signs of plans being put in motion.

Turkey has the largest population in Western Asia and the second largest in Eastern Europe, however it has one of the lowest levels of mobile penetration in the area. There is therefore considerable room for subscriber growth in the market. 4G services have been launched and uptake has been rapid, highlighting the latent demand released following the delays in licence award. 4G coverage is reasonable, however there is room for further development. Each of the three operators has embarked on 5G projects, with two of the operators reaching out to external sources for support in developing their 5G capabilities.

Global Tower is the only towerco in Turkey, with Turkcell’s intentions being to restart its IPO process in the near future. Given the market has growth potential and that there is considerable 4G and even 5G activity, the market holds reasonable potential for towercos in the next few years.

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