Turkcell Misses - Analyst Blog

Turkcell (TKC) reported earnings per share from continuing operations of 31 cents for the second quarter of 2010, below the Zacks Consensus Estimate of 36 cents. Total revenue grew by 1.7% to TRY2,241.2 million ($1,468 million) due to robust contributions from acquisitions.

An improving subscriber mix in favor of the higher margin postpaid segment along with implementing the TRY-based pricing has offset the impact of the sharp reduction in Mobile Termination Rates and regulation-driven maximum price cap cuts. However, mobile data and services revenues increased 29.0% year over year.

In the second quarter, blended minutes of usage per subscriber increased by 33.7% to 171.0 minutes compared with the prior-year quarter, driven by insightful campaigns.

Blended average revenue per user in TRY terms increased 4.3% year over year to TRY19.4 mainly due to a larger usage of data and increased proportion of postpaid customers.

Churn refers to voluntarily and involuntarily disconnected subscribers. In the most recent quarter, churn rate increased to 9.8%, from 9.0% in the corresponding quarter of 2009 as postpaid subscribers switched operators in a competitive environment. This has been facilitated by the presence of mobile number portability in Turkey.

Direct costs increased to 54.5% of sales, from 53.0% in the corresponding quarter of 2009. This increase was due to the higher depreciation and amortization expenses, network-related expenses wages and salaries.

Selling and marketing expenses increased by 2.1% of sales due to campaigns and higher selling expenses compared with the prior quarter.

General and administrative expenses increased by 1.6% year over year to 6.1%, primarily due to higher bad debt provisioning. 

In the most recent quarter, the company’s share in the net income of unconsolidated investees, consisting of Fintur and A-Tel, increased by 88.7% to TRY45.1 million ($29.5 million) mainly due to the improved performance of Fintur's operations in Kazakhstan.

Consolidated debt amounted to TRY2,664.4 million ($1,745.3 million) as of June 30, 2010, TRY970.8 million ($635.9 million) of which was related to Turkcell's Ukrainian operations. Capital expenditures in the second quarter of 2010 amounted to TRY360.5 million ($236 million).

Total cash and equivalents at the end of the quarter were TRY4,193 million ($2,746 million), a reduction of 4.3% compared with the prior quarter due to dividend payment. 

Turkcell Iletisim Hizmetleri A.S. engages in establishing and operating a global system for a mobile communications network in Turkey. The company provides mobile voice and data services over its mobile communications network; voice services, which include wireless telephone services on a prepaid and postpaid basis; mobile data and services, including mobile Internet and content services; and interactive voice and video response services.