U.S. Markets closed

Edited Transcript of TTKOM.IS earnings conference call or presentation 13-Feb-20 12:00pm GMT

Q4 2019 Turk Telekomunikasyon AS Earnings Call

Feb 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Turk Telekomunikasyon AS earnings conference call or presentation Thursday, February 13, 2020 at 12:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Kaan Aktan

Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance

* Sabriye Gözde Çullas

Türk Telekomünikasyon Anonim Sirketi - IR Director

* Ümit Önal

Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care

================================================================================

Conference Call Participants

================================================================================

* Cemal Demirtas

Ata Invest Co., Research Division - Head of Research

* Ece Mandaci Baysal

Unlu & Co., Research Division - Research Analyst

* Ivan Kim

* John-Paul Davids

JP Morgan Chase & Co, Research Division - Head of South African TMT Equity Research

* Ondrej Cabejšek

UBS Investment Bank, Research Division - Director

* S. Rishad Ahmed

GoldenTree Asset Management, LP - Emerging Markets Credit & Equities Investment Professional

* Vyacheslav Degtyarev

Goldman Sachs Group Inc., Research Division - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by. I am Gaily, your Chorus call operator. Welcome, and thank you for joining the Türk Telekom conference call for the fourth quarter 2019 financial and operational results. (Operator Instructions) And the conference is being recorded. (Operator Instructions).

At this time, I would like to turn the conference over to Ms. Gozde Cullas, Head of Investor Relations. Mr. Ümit Önal, CEO; and Mr. Kaan Aktan, CFO of Turk Telekom. Madam and gentlemen, you may now proceed.

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [2]

--------------------------------------------------------------------------------

Hello, welcome to the Turk Telekom 2019 Fourth Quarter Results Conference. We are here with the management team and today's speakers are our CEO, Umit Önal; and our CFO, Kaan Aktan.

Before we start, I kindly remind you to review the notice on our earnings presentation. Mr. Umit, please.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [3]

--------------------------------------------------------------------------------

Hello, everyone, and I hope all is well. First of all, we would like to thank you for joining our teleconference. 2019 has been a prime year when we delivered the highest growth in EBITDA and revenue since IPO. We will share the details of our results with you. But before that, let me talk you through our core strategy. Our strategic focuses are increasing Internet penetration, better customer experience, accelerating the digital journey and sustainable subscriber and ARPU growth.

In 2020, in both fixed broadband and mobile, we will increase capacity and improve customer experience while focusing on investments with shorter return periods. Moreover, we are starting to position our CapEx on the way to 5G accordingly. In this framework, we are getting our core network ready for 5G.

We have recently adopted a more agile top management structure, which will boost our synergy. We have consolidated the digital and strategic departments. With this structure -- infrastructure we have made our digital strategy more feasible to implement. Moreover, we have also restructured our sales department as corporate sales and consumer sales in order to increase the value we offer for our customers. This way, we increased our focus on the corporate segment.

With our service approach of not only for some, but to everyone, we have provided fiber Internet to all towns of our 81 cities. Through the support of our Internet Bizden campaign, we have increased the household broadband penetration in Turkey from 48% to 58% in 2 years. Our efforts will continue to increase Internet penetration in Turkey to 70% level.

In 2020, we will make each of our customers feel more valuable. We will strengthen the customer experience through digital transformation and more effective use of our self-service application, Online Islemler. In order to provide the best experience on holistic channels to our customers, we will integrate our physical and online channels.

Offering the next-generation technologies in the best way is one of the most important focus point of Türk Telekom. Within the scope of fiber net -- access network virtualization project, Argela continues its developments on SEBA architectural. We have completed the live site installations of SEBA on Türk Telekom network and started to provide service to live subscribers.

Although we continue our endeavors with all next-generation technologies on our 5G live test network. With the speed test we made on our network, we broke a world record of speed. Moreover, recently, we enabled the experience of Turkey's first 5G live match via VR technology.

Especially with the contributions of Argela's subsidiary in U.S. Netsia, which owns 31 patents on 5G, we aim to contribute more on 5G area. Considering the necessity to cover the 5G sites with fiber network for the best customer experience, we see ourselves as the readiest operating for 5G.

With the solutions in digital and ICT area, we are working to add value to our customers. We have taken a new step forward in digital payments area and we received electronic money license. With this license, we will offer safe, easy and innovative digital payment service to millions of people in Turkey. With our applications, we aim to make our retail subscribers payment system users as well. Meanwhile, in order to provide faster connection to digital platforms and to minimize the latency, we are concentrated on bringing data traffic going abroad to Turkey. For that, we work with global OTTs and we signed contracts to host their chase servers in Türk Telekom switches.

Apart from all this, we are also working to expand the use of next-generation technologies in energy, agriculture, industry, transportation, health care and urban areas. By doing so, we aim to serve to a sustainable society. Our initiatives on smart city, which started in 2015 and has given the most mature example in Antalya province. Within the scope of our efforts with Ministry of Environment and Urbanization and municipalities, we are leading the largest smart city projects of Turkey. In order to show our determination on sustainable development, we have committed to support 10 fundamental principle of UN Global Compact. On evaluation of CDP, we achieved level B score, which is the highest level among the telecom operators in Turkey. We aim higher levels in this field. On these words, I would like to thank all our employees who work for this company. Following this introduction, I am proceeding with the presentation without taking your time more.

Slide #3. Operational performance and subscriber acquisition. We raised the number of our subscribers to 47.8 million with 1.8 million year-on-year growth. Excluding the impact of canceling 600,000 subscribers for one-off reasons, our new subscriber net additions was 2.4 million. Our initiatives to increase fixed broadband penetration and our mobile market share and our cross-sell strategy contributed to this growth.

The ratio of our customers providing consent to share their information across Türk Telekom increased to 79%. Moreover, our multi-product ownership reached 63%. In the last quarter of the year, our net subscriber addition is around 160,000 level. As you may remember, ICTA issued a regulation for the cancellation of the subscribers without ID numbers. In order to comply with this regulation, we canceled 169,000 mobile customers, 21,000 fixed broadband customers and 29,000 fixed voice customers in the last quarter. In addition to that, with the daily inactive 80,000 net tariff portfolio subscribers from our fixed broadband customer base. Excluding these effects, our net subscriber addition in Q4 was 460,000. I will discuss the details of our subscriber metrics in the coming slides.

Slide #4. On this slide, I will briefly inform you through our financials, then Kaan will share the details in the coming slides.

In 2019, our consolidated sales revenues reached TRY 23.7 billion with 16% year-on-year increase. And this is the highest annual growth since the IPO. We upgraded our EBITDA guidance 2x within the year. Our TRY 11.2 billion EBITDA exceeded TRY 11 billion guidance we provided in October. EBITDA grew 32% year-on-year with a 47% EBITDA margin. Excluding the impact of IFRS 16, 44% EBITDA margin implies 2.7% year-on-year increase on a comparable basis. Strong revenue growth and efficiencies on OpEx management contributed to that performance.

With that, our net profit in 2019 reached the highest level of the last 7 years to TRY 2.4 billion. In Q4, our sales revenues increased 16% year-on-year. While our consolidated EBITDA increased 27%, our EBITDA margin was 45%. We reported TRY 545 million net profit in the last quarter of the year. As of the end of the year, our short FX position came down further, and this helped reducing the sensitivity of income to FX.

Slide #5. Fixed broadband performance. We picked 39,000 net subscriber additions in the last quarter. We added 460,000 net subscribers in 2019. We increased our subscribers to 11.4 million. Our penetration-focused offers our partnerships with electricity companies and our offer addressing different speed needs supported this growth. With the penetration focus, the number of our Internet Bizden subscribers exceeded 1.1 million. We increased our broadband ARPU 13% annually, which is the highest growth since 2011.

In 2019, we lifted fair usage quota unlimited tariffs. By benefiting from our power to offer high capacity, we provide a wide range of offers to our customers. Excluding Internet Bizden, around 90% of our new subscribers preferred unlimited packages. And more than 60% of our current customers preferred unlimited packages on recontracting.

Our Internet Bizden side. Around 50% of Internet Bizden subscribers have upgraded their packages since the start of the campaign. In order to address the increased data needs of customers, we start to present 4x 60 gigabyte package on top of 4x 40 gigabyte package. The (inaudible) performance Internet Bizden shows that our strategy is on the right track.

We're also focused on synergy offers. We expect our recent cross-sale campaign of fixed broadband and TV products to contribute to both our subscriber and ARPU growth. 2019 has been an important year in terms of our investments as well. We delivered a record number of Fiber Homepass, with an increase of 3.2 million the highest annual growth ever. We raised our Fiber Homepass to 21.9 million. In 2020, with our penetration-oriented approach, we aim to ensure higher broadband subscriber increase than in 2019. Through speed up sales and with more effective use of our fiber network commercially, we target double-digit ARPU increase.

Slide #6, mobile performance. As Turk Telecom, we increased our balanced approach between subscriber and ARPU growth. Blended ARPU increased 8% year-on-year despite a more competitive quarter. We increased our mobile customer base by 186,000 in the last quarter. Excluding the impact of the new ICT regulation, the net adds was strong with 356,000, and the whole year number was 1.9 million.

Our mobile subscriber market share has reached 28% witha 5% increase in the last 5 years. As such, we have come closer to our target of reaching above 30% market share in a very profitable way. We have successful partnerships in mobile segment such as BIMcell, Pttcell and Teknosacell. By expanding these, we launched Vestelcell in December. Vestel customers will be able to access Vestelcell tariffs from more than 1,000 Vestel dealers. We aim this type of partnerships to strengthen our subscriber acquisition. With our mobile investments and the advantage of our new frequencies, we increased our 3G indoor coverage by over 30% in 4 years. We also increased our LTE coverage to 92% level. Meanwhile, we have taken up a good acceleration in mobile EBITDA margin. We will increase our service quality with a focused CapEx plan. As such, we will obtain a better value and ARPU from our customers. At the same time, we will continue our momentum in customer acquisition.

All in all, we aim to preserve our high subscriber and market share increase in mobile segment. We also aim strong ARPU growth through customer value management and plans to increase data usage faster. We want to keep the revenue increase above inflation.

Slide #7. Mobile revenue. The data revenues grew 24% versus last year, increasing its share in service revenues to 61% in Q4. The penetration of LTE-compatible devices increased to 82%. The share of LTE subscribers increased from 46% to 55% in the last year. Transition to LTE and our data-oriented loyalty campaigns supported the increase in consumption habits. Data consumption of our LTE users increased to 8.6 gigabyte from 6.1 gigabyte in last year.

Slide #8. Fixed voice. The number of our fixed voice subscribers increased by 24,000 in the last quarter. We had the effect of the ICTA regulation on fixed voice site as well, and we canceled 29,000 subscribers. Excluding that, we added 125,000 subscribers for the full year. Our entry package in Internet Bizden, our brand partnerships and our synergy offers contributed to that performance. Fixed voice revenues supported the consolidated revenue growth with 3% year-on-year increase.

Now I would like to give to -- give the word to Kaan to talk through the details of our financial performance. Thank you.

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [4]

--------------------------------------------------------------------------------

Well, thank you very much. Ladies and gentlemen, good morning from -- good afternoon from Istanbul. We are on Slide 10 now with financial performance. In the fourth quarter, consolidated revenues recorded 16.4% year-on-year growth to TRY 6.3 billion. When we exclude IFRIC 12, top line growth was close to 15%. Mobile and fixed broadband segments were the main contributors, which gave 19% and 20% growth. We continued our focus on balanced subscriber and ARPU growth in the fourth quarter. On the other hand, we had some one-off impacts in subscriber numbers, which we already discussed.

For the full year, we recorded 16% annual revenue growth, which is the highest growth since IPO. Excluding IFRIC 12, the growth rate was 15%, which is in line with our guidance. Annual growth in mobile and fixed broadband segments were 18% and 20%, respectively. Additionally, fixed voice segment continues to support consolidated revenue increase with 3% annual growth.

Fourth quarter EBITDA increased by 27% year-on-year to TRY 2.8 billion. That comes at the margin of 55%. Excluding IFRS 16 impact, underlying EBITDA margin was 42%. Excluding both IFRS 16 and IFRIC 12 impact, margin was 53%, as IFRIC 12 has dilutive impact on margin. For the full year, we increased our EBITDA by 32% year-on-year to TRY 11.2 billion. This is the highest annual growth since IPO, and at the same time, exceeded our guidance of TRY 11 billion.

This is supported by economies of scale with global customer base, efficiency measures undertaken in OpEx management, including organizational streamlining, integration synergies, digitalization and prudent receivable management. EBITDA margin was realized at 47%, up by 6 percentage points. Adjusted for IFRS 16, margin in this year was at 44%, which is 3 percentage point higher than last year. In 2019, mobile EBITDA margin continued to improve and is realized at 32%, up from 22% of last year. Additionally, we have been delivering positive net income in mobile business for many consecutive quarters now. In the last quarter, operating expenses increased by 9% year-on-year. Excluding IFRS 16 and IFRIC 12, the annual growth in operating expenses was 13%.

Key highlights here are: well, first, full cost of equipment sales increased in line with the increase in equipment sales. We especially had a low, very, very low base in mobile device last -- same quarter last year. And recovery from that level was the main reason for higher doubtful receivable provision. As reflected in the third quarter call, we have increased our spendings in marketing and advertising. Total commercial expenses increased by 9% year-on-year compared to a 21% decline in the first 9 months.

Personnel expense was main driver of the increase in OpEx with an annual growth of 20%. This was 8% in the third quarter. In the fourth quarter, we had provisions for vacations compared to third quarter, in line with the seasonality. We also had some reversals in provisions regarding our unionized personnel in the third quarter. The increase was also partly due to compensation linked to higher performance. One last was addition, we also launched early retirement incentive program. When we exclude these one-off impacts, the increase in personnel expense for the quarter is calculated as 13%.

Network and technology decreased by almost 20% year-on-year. IFRS 16 has an impact in this number. And when we exclude the impact from that adjustment, year-on-year expense increase was just 5%. We see that utility cost, especially here, normalized from its peak in the last quarter of 2018.

For the full year of 2019, operating expenses increased by 4%, again, excluding IFRS and IFRIC, operating expense increase is 9%, which is below the inflation level, and which is, with the support of decrease in provision for doubtful receivable, decrease in commercial expenses on the back of optimized marketing spending. While network and technology expenses decreased by 11% year-on-year, again, excluding IFRS 16, the growth was around 15%. Annual increase in the personnel expense was 14%.

CapEx in the fourth quarter was TRY 2.1 billion, which take us to TRY 4.9 billion for the full year. Capacity improvement in mobile, fiber greenfield investments and fiber transformation projects were main drivers. This is in line with our guidance for the full year number. We increased our Fiber Homepass by 3.2 million in the full year of 2019. This is the highest annual growth ever. And we will focus on commercialization of our fiber network throughout the coming periods. In the fourth quarter, net financial expense came at just above TRY 900 million compared to TRY 1.1 billion net financial gain in the fourth quarter of last year, which was the result of opposite trends in FX rates in 2019 and 2018. In this quarter, net income was TRY 545 million compared to TRY 2.2 billion of the same quarter of last year. We recorded to TRY 3.7 billion net financial expense in the year compared to TRY 6.7 billion expense in 2018. This came with a more favorable FX environment. IFRS 16 implementation had TRY 200 million impact on financial expenses in 2019. We reported TRY 2.4 billion net income in the full year of 2019 compared to TRY 1.4 billion loss in 2018. Thanks to strong underlying operating performance and lower financial expenses.

We are now on Slide 11. At the end of fourth quarter, our net debt decreased to TRY 15.9 million from TRY 16.5 million of the third quarter number, and we have 1.41x net debt to EBITDA, which is also down from 1.55 of the prior quarter. This is the lowest level since 2015. In dollar terms, our net financial debt decreased by $500 million, then we exclude the additional debt of around $200 million after capitalization of operational leases under IFRS 16. The decrease is due to deleveraging with strong cash flow and strong EBITDA growth. We expect to see further decline in leverage ratio by getting (inaudible) hitting closer to 1x as we foresee similarly strong unlevered free cash flow in 2020. We have a strong liquidity of TRY 4.9 billion as cash at the end of the quarter, and 91% of our cash is FX based. We also have a committed facility of around EUR 100 million. We are well diversified in terms of funding sources. As we announced, we are planning to issue Turkish lira-denominated debt instrument in the domestic market. It might be a single or multiple tranches, different maturities up to maximum 5 years, and the total size might be up to TRY 1 billion. Depending on the market conditions, we are planning to complete the issues of first tranche in the near term. The issues of (inaudible) based loans will further enhance the diversification and support our program for managing foreign exchange risk. In the meantime, we already started accumulating local currency financial debt, which was 6% of our total debt at the reporting date. We prefer short-term lira loans because of favorable cost and a loan supply. We have around $2 billion equivalent of participating Cross Currency Swaps position and FX-based cash is at $750 million.

We are now on Slide 12. At the end of the quarter, the net FX exposure decreased to USD 370 million, which was $1.2 billion in the last quarter of 2018. With the reduction in short FX position, the sensitivity of P&L to FX movements continued to decrease with 10% depreciation of lira having around TRY 450 million impact on P&L, assuming all else stays constant. Same sensitivity implied more than TRY 1.3 billion loss on December 2018.

Looking at our cash flow generation, our unlevered free cash flow in the full year of 2019 was TRY 6.4 billion, which compares to TRY 3.5 billion of last year, thanks to robust EBITDA performance and improvement in net working capital. Excluding IFRS 16 impact, unlevered cash flow was again extremely strong at TRY 5.6 billion.

We are now on Slide 13 with our 2020 guidance. We are expecting consolidated revenue growth excluding IFRIC 12 to be at 14% year-on-year. EBITDA to be at TRY 12.4 billion level, and CapEx will be at TRY 5.8 billion. As we always do, we start the year with an initial guidance and revise the trends in different business segments and in the OpEx during the year and revise our guidance whenever it's necessary. Our guidance implies the revenue growth to stay above its expected inflation. In broadband, we will continue to have positive impact of the price increases we carried in 2019 with the contract renewals. We will also focus on commercialization of our fiber network and speed upsells. In mobile, we target to keep our mobile subscriber growth trend and continue to increase subscriber market share. Additionally, with the customer value management, we plan to increase data usage and implement price adjustments, potentially leading to a strong ARPU growth in mobile business for the year.

In the OpEx front, we will continue our focus on optimization, while carrying out structural measures, which will enable cost savings. We want to increase the capacity and service quality in the field operations. We are focusing to increase employee efficiency, and it is in -- we already launched early retirement program similar to prior years. This year, commercial spending might accelerate as we are planning to be more active in terms of marketing and to further build on corporate image.

On the other hand, we don't plan to use our online sales channels, including our online customer care platform more effectively. Overall, our guidance implies EBITDA margins to stay very close to 2019 level. On the CapEx front, with our TRY 5.8 billion guidance, we are expecting CapEx to increase by 17%, slightly above our revenue growth guidance. In 2020, we will focus on the investments, which will increase our service quality, improve customer experience as well as increase capacity both in fixed broadband and mobile segments. These investments will enable higher ARPU and subscriber growth and will come with healthy returns.

Moreover, in some regions, we are modernizing our mobile access network with next-generation equipment, this will not only increase service quality and capacity, but will also lead to savings in maintenance and energy expenses. Such modernization effort, which also includes mobile core network investment will also enable us to build a 5G-ready network and reduce future investment for a potential 5G rollout. In 2020, we expect to see accelerated conversion of EBITDA to net income, our guidance of close to mid-teen revenue growth and the fact that deleveraging will continue potentially in an environment of decreasing interest rates will all lead to interest expense to sale ratio to decline. Accordingly, around 4 to 5 percentage point improvement in net income margin seems to be achievable if we assume the continuation of a healthy and predictable macro environment.

Finally, we expect unlevered free cash flow to remain strong and support deleveraging. Thank you for listening, and I will now hand over the call to Gozde for the Q&A session.

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [5]

--------------------------------------------------------------------------------

We shall now open the Q&A session. Before that, I would like to inform you that we will have translation during the Q&A session. Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question comes from the line of Davids JP with Jpmorgan.

--------------------------------------------------------------------------------

John-Paul Davids, JP Morgan Chase & Co, Research Division - Head of South African TMT Equity Research [2]

--------------------------------------------------------------------------------

Congratulations on the results. Two questions from my side. Firstly, on guidance. Following on from the upgrades in 2019 and then beat of 2019 guidance, how would you frame your 2020 guidance? Would you frame it as realistic or conservative or potentially as a stretch? That will be question one.

Question two,relates to the introductory remarks around Netsia and the 31 5G patents pending. Can you provide some high-level -- sort of a high-level overview of what those patents relate to? Do they relate to improved use cases for 5G? Or is it more around efficient deployment of 5G services?

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [3]

--------------------------------------------------------------------------------

Well, this is Kaan. In terms of the guidance, we see -- this time of the year, we see it as a realistic guidance. But we are commonly known as more conservative, especially when it comes to providing beginning of the year guidance numbers. But we still stick to the same set of numbers until we see, we feel that we will may need a revision in the guidance going forward.

For the second part of the question.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [4]

--------------------------------------------------------------------------------

With the -- the Argela of the -- U.S. subsidiary Netsia, we have work in 2 domain, actually. One of the -- is the fixed domain is the several projects, which is actually related with the 5G backhaul projects, actually. The second one, we run, especially the slicing properties to prepare the 5G time. We are working very closely, actually with the Netsia and the Argela. All those in (inaudible), we have already user priority, about 50 users now is working on it. And of course, we have still time for the -- I mean we need still time for the pricing project actually.

--------------------------------------------------------------------------------

Operator [5]

--------------------------------------------------------------------------------

The next question comes from the line of Kim, Ivan with Xtellus Capital.

--------------------------------------------------------------------------------

Ivan Kim, [6]

--------------------------------------------------------------------------------

Two questions -- actually three. One small, one -- So the first one on the cost inflation. Just to go back to the guidance. So your guidance implies a 17% cost inflation ahead of the 14% revenue growth that you expect. So why would you think it would be 3 percentage point higher with inflation in Turkey actually moderating quite a bit? That's the first question.

The second question on the fixed network concession. Any news on that? Any discussions with the government? And maybe like anything on the time line, when we'll hear on the fixed network concession extension? And lastly, when to expect the dividend announcement from 2019 earnings, please?

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [7]

--------------------------------------------------------------------------------

Well, thank you for the question. For the first part. Well, when you look at the different components in our OpEx base. So especially, I think we are very clear that there will be an increase of -- in real time above inflation in terms of commercial spending in order to support revenue growth. And this is also a part in our OpEx space, which is directly driven by the increase in the revenue, which is the direct cost but -- so mid-teen -- close to mid-teen revenue growth is also triggering a similar increase in that part.

Another important cost item is the headcount-related cost. And although we see that maybe it's a single-digit inflation for the full year of 2020, the salary adjustment is mainly driven by the past inflation, which is double-digit number for 2019. And when we combine altogether, we saw it as an OpEx increase, which is higher than the revenue.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [8]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [9]

--------------------------------------------------------------------------------

[Interpreted]

I would like to answer your second question. Concessions are the effect of the cash fluctuations in Turkey.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [10]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [11]

--------------------------------------------------------------------------------

[Interpreted]

The fixed concession is not different from what is called licensing in the Turkish mobile sector in terms of its economy.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [12]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [13]

--------------------------------------------------------------------------------

[Interpreted]

4G licensing will expire in 2023 for Turkcell and Vodafone, and in 2026, for us.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [14]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [15]

--------------------------------------------------------------------------------

[Interpreted]

And 3G and 4G licenses and authorizations will expire in 2029 for all players.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [16]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [17]

--------------------------------------------------------------------------------

[Interpreted]

Let's say, if the licenses and optimizations are not resumed upon the expiry, all operators are required to return infrastructures to the regulator as it is.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [18]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [19]

--------------------------------------------------------------------------------

[Interpreted]

Moreover, 900 megahertz 2G license, which is highly critical for the other operations will also expire in 2023.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [20]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [21]

--------------------------------------------------------------------------------

[Interpreted]

We open this subject to public debate throughout the week.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [22]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [23]

--------------------------------------------------------------------------------

[Interpreted]

This renewal should be addressed by a sector-wise approach including mobile, and we believe these discussions are critical for the visibility of the fixed line.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [24]

--------------------------------------------------------------------------------

[Foreign Language

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [25]

--------------------------------------------------------------------------------

[Interpreted]

All in all, it is still too early to update, to see what has happened. I mentioned that, this is just around Vodafone. The issue of the mobile licenses will have to be discussed, which will give us confidence.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [26]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [27]

--------------------------------------------------------------------------------

[Interpreted]

Because, as I said, fixed concession and mobile licenses, for us, are not topics to be discussed in different platforms.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [28]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [29]

--------------------------------------------------------------------------------

[Interpreted]

For your question related to dividend.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [30]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [31]

--------------------------------------------------------------------------------

[Interpreted]

As you know, the dividend payout ratio is proposed by Board of Directors and the ultimate decision for dividend distribution is undertaken by shareholders at the general assembly.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [32]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [33]

--------------------------------------------------------------------------------

[Interpreted]

Regardless of the distributable amount, there is no change in our dividend policy, it's written in articles of association properly.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [34]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [35]

--------------------------------------------------------------------------------

[Interpreted]

From the management perspective, we are focusing on growth, operational efficiency and strong cash flow to increase the value for all stakeholders.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [36]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [37]

--------------------------------------------------------------------------------

[Interpreted]

In this context, as the management of the company, we believe we are in a position to start paying our dividend in 2020. However, the ultimate decision will be taken by the shareholders.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

The next question comes from the line of Ahmed, Rishad with Golden Tree Asset Management.

--------------------------------------------------------------------------------

S. Rishad Ahmed, GoldenTree Asset Management, LP - Emerging Markets Credit & Equities Investment Professional [39]

--------------------------------------------------------------------------------

Congratulations again on another great set of results. Just following up on that question regarding the dividend. So you're saying that the payout ratio is going to be proposed by the Board of Directors and the decision taken at the shareholder general meeting. Has that payout ratio been -- already been proposed? And when is that general meeting taking place for the decision? That's the first question.

And then the second is just in terms of CapEx. If you could just -- I know you talked about service quality improvements and capacity increases. But if you could just help us understand where that increment is going on? A little more detail around that from the TRY 5 billion to TRY 5.8 billion. That would be helpful.

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [40]

--------------------------------------------------------------------------------

Let me start with the first question on dividends. So as we have mentioned, I mean, there will be a proposal from the Board to the general assembly. That proposal is not made yet. We should expect to have the general assembly sometimes in the second quarter. Obviously, that the decision or proposal from the Board should go out to end of the first quarter of early second quarter. Then we have the final decision or the proposal. Of course we will disclose the information.

In terms of the CapEx, well, it's very important for us to see strong return when we make a decision on a CapEx investment. And last year, a year before, and also for -- regarding the trends of 2020. It's possible that investing a bit more money to the network both in mobile and fixed will give us that return in a short period of time. The obvious reasons are, first, we see we can grow the market for fixed broadband, and we can grab market share in mobile. And all those investments enable us to extract better value from what we do currently, either a bit more subscriber gain or maybe ARPU increase as a result of better quality and better customer service in the network. So that the incremental part will mostly go to the mobile and fixed networks. Some will be sent on mobile core to improve the capacity, increase the capacity and modernization. And the remaining part will be for access networks in both domain.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

The next question comes from the line of Cabejšek Ondrej with UBS.

--------------------------------------------------------------------------------

Ondrej Cabejšek, UBS Investment Bank, Research Division - Director [42]

--------------------------------------------------------------------------------

Congratulations on a very great year. First question or comment that I have is on your growth strategy for 2020. If you could elaborate on the sources of growth in that guidance that you provided? Because if I look at 2019, for example, in the fixed broadband, it seems like you're starting to monetize the increased base again. So now I'm surprised that you're saying that your goal is actually to accelerate net additions in fixed broadband going in 2020. Also in mobile, you've achieved pretty significant market share gains. However, at the same time, your ARPU discounts at Turkcell is probably the highest ever. You also are investing a lot in networks, which indicates that you're focused on service quality and this ARPU growth. So if you could just speak to us a bit about the balance between convergence of pricing and penetration growth, et cetera?

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [43]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [44]

--------------------------------------------------------------------------------

[Interpreted]

First of all, let me reiterate our priority for 2020. Our priorities for 2020 are increasing Internet penetration, aiming for best-in-class customer experience (inaudible) further, accelerating the digitalization journey by using all opportunities followed by risk mitigation and the (inaudible) increase, along with sustainable subscribers added.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [45]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [46]

--------------------------------------------------------------------------------

[Interpreted]

We are adopting this next strategy by using customer analysis more in marketing, in which we will have a higher [loss] customer experience (inaudible) from this strategy.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [47]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [48]

--------------------------------------------------------------------------------

[Interpreted]

As we have mentioned, one of the operators increased their prices for (inaudible) customers through a new contractor. This pricing action, which we considered in compliance, according to our interpretation of the regulation (inaudible).

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [49]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [50]

--------------------------------------------------------------------------------

[Interpreted]

(inaudible) in mobile market, and we can also see the result of the tax bracket on the result of the competitive launch.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [51]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [52]

--------------------------------------------------------------------------------

[Interpreted]

We're also (inaudible) through our (inaudible) partnership. We have a successful partnership on our mobile segment such as (inaudible). And now we have -- we are working with the very important retailers and we aim to offer Vestelcell via more than 1,000 Vestel dealers.

--------------------------------------------------------------------------------

Ondrej Cabejšek, UBS Investment Bank, Research Division - Director [53]

--------------------------------------------------------------------------------

One question that I have on the CapEx. So second question I have on CapEx. Is it rational to expect that given you're today 90% Fiber Homepass in Turkey that you've upgraded the mobile network for indoor coverage quite significantly, et cetera. Is 2020 going to be the sort of peak of CapEx intensity before we go into 5G?

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [54]

--------------------------------------------------------------------------------

So we plan the CapEx for 2020 to effectively improve the network but always our main condition or main priority is to get a decent return for all the incremental investments that we make. So we will closely follow the market conditions and the growth in the market. And further year CapEx levels will be defined with the level of return that we foresee from those investments. But I would agree, it looks like it will be a high number if you compare it to the years to come.

--------------------------------------------------------------------------------

Ondrej Cabejšek, UBS Investment Bank, Research Division - Director [55]

--------------------------------------------------------------------------------

So for example, on the fixed broadband, you're saying yourselves that you have relatively low penetration relative to the network capabilities, so -- on the fixed side, at least. Can you confirm that 2020 is going to be the sort of last big year of fiber CapEx for some time to come?

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [56]

--------------------------------------------------------------------------------

Yes. You're right. I mean, there will be a very healthy penetration of our fiber 2020 when we complete the year the planned investment. And after that, there should be a selective transformation project or some greenfield investments. And we have been coming from a very healthily growing construction sectors, and there were new homes coming into the market and expecting a connectivity. It slowed down in the last 2 years, now -- and we've been effectively connecting the accumulated number of homes in the last few years. And going forward, if you don't see any such trends for them in terms of new homes coming into the market after the construction process, we shouldn't have another high-level CapEx requirements.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

The next question comes from the line of Degtyarev Slava with Goldman Sachs.

--------------------------------------------------------------------------------

Vyacheslav Degtyarev, Goldman Sachs Group Inc., Research Division - Equity Analyst [58]

--------------------------------------------------------------------------------

What would be your outlook on the free cash flow for 2020? Do you envisage further material increase compared to 2019 levels? Or in other words, apart from EBITDA and the CapEx out or any other factors that can materially affect free cash flow generation this year?

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [59]

--------------------------------------------------------------------------------

Well, if you look at the composition of the unlevered free cash flow, obviously, EBITDA and the CapEx are the two big impact factors. The other items on the tax payments and working capital. I can tell you that I wouldn't expect a major change in terms of absolute numbers compared to 2019. So the net growth -- the change in the CapEx and EBITDA should be defining the unlevered free cash flow performance. Having said that, it should still be strong numbers, strong and healthy numbers. About TRY 6 billion, that's simple mathematics that defines that number.

--------------------------------------------------------------------------------

Operator [60]

--------------------------------------------------------------------------------

The next question is from the line of Demirtas Cemal, ATa Invest.

--------------------------------------------------------------------------------

Cemal Demirtas, Ata Invest Co., Research Division - Head of Research [61]

--------------------------------------------------------------------------------

Congratulations for strong operating results. My question is again related to your financial expenses. I think you mentioned at the last part of your presentation about potential, the improvement in debt side and impact on your net income. Could you please repeat that potential improvement as potential improvement in the net income over net sales in your net margin.

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [62]

--------------------------------------------------------------------------------

Yes. A few factors that I can mention here. So first, obviously, the sensitivity is significantly reduced. I'm referring to the sensitivity of financial expenses in case we have a change in the FX rate. So it was TRY 1.3 billion at the end of 2019, whereas it's around TRY 500 million at the end of 2019. So even if we assume some devaluation of the Turkish lira throughout the year, the impact should be much less significant.

The other development we see in the market, the interest rates are coming down. So it is -- local currency interest rates are coming down. This is important for us because we have a large hedging portfolio. And the overall cost of it, especially when it comes to new contracts to sign, the level of the cost is defined by the local interest rates.

Another factor that we see, as I briefly mentioned during the presentation is, we can also access to local currency real borrowing, I mean, commercial loans from local banks. It's a very attractive rate. Currently, we are using that channel in a kind of a tactical way but we see that we can absorb some large amount of funding, but we need funding. We don't need actually the funding but we need local currency exposure. This is why we are using that channel, but also it gives us a lower cost of hedging when it comes to support our currency risk management strategy. And we already -- so the average cost of funding, including all the hedging agreements to come down to close to 10%. So in some quarters -- at some point in the last quarter or the third quarter, we saw a number, which was close to 11%, so we already started getting some benefit from that trend. And I would assume that the strength will be even stronger throughout the year. So these are the factors where we -- that makes us more confidence towards -- terms of giving a lower interest charge or financial expense estimation for the year.

--------------------------------------------------------------------------------

Cemal Demirtas, Ata Invest Co., Research Division - Head of Research [63]

--------------------------------------------------------------------------------

Sorry, did you mention any improvement in the net margin because my line was not very clear at the last part of the presentation. I don't know if I read it wrong.

--------------------------------------------------------------------------------

Kaan Aktan, Türk Telekomünikasyon Anonim Sirketi - Assistant General Manager of Finance [64]

--------------------------------------------------------------------------------

Yes, that was a line from my presentation. So we should see a lower percentage to revenue in terms of total interest charge, which would also include the FX portion in it.

--------------------------------------------------------------------------------

Operator [65]

--------------------------------------------------------------------------------

Next question is from the line of Mandaci Ece with Unlu & Co.

--------------------------------------------------------------------------------

Ece Mandaci Baysal, Unlu & Co., Research Division - Research Analyst [66]

--------------------------------------------------------------------------------

My question is on the broadband category. Could you please elaborate some on this broadband competition environment. In the last 2 quarters, we have seen around 13% ARPU growth on a year-over-year basis. Is this level sustainable for the first quarter and second quarter as well? I was wondering about it. And now we are seeing the effects of the upselling performance, as you have mentioned and more rational competition environment. Do you think that is it sustainable for the broadband category, particularly?

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [67]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [68]

--------------------------------------------------------------------------------

[Interpreted]

Because of the expected unlimited Internet growth at the end of 2018, the demand was pushed and cumulated at the end of the 2018. That's why there was a big demand (inaudible)

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [69]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [70]

--------------------------------------------------------------------------------

[Interpreted]

And in the first 2 quarters of 2019, there were a bit confused customer profiles because they were getting adapted to the unlimited Internet world.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [71]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [72]

--------------------------------------------------------------------------------

[Interpreted]

And as of the onset of third quarter, the customers adapted to the new environment and there was advantage also on (inaudible) of the customers.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [73]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [74]

--------------------------------------------------------------------------------

[Interpreted]

We have our social packages (inaudible) sectors which we launched at 4x20 and 4x40 in 2017, has given us a big upsell opportunity in the coming years.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [75]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [76]

--------------------------------------------------------------------------------

[Interpreted]

Our upsell ratio increased from 32% in 2018 to 50%.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [77]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [78]

--------------------------------------------------------------------------------

[Interpreted]

Also, as the data needs of our customers increase and they also prefer higher speed, sales offset to data packages.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [79]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [80]

--------------------------------------------------------------------------------

[Interpreted]

We believe the market has sustainable opportunities for both (inaudible) and there is still a long way to go with Internet penetration.

There has been a follow-up to -- on dividends. I believe that there was a problem with the line. Therefore, Umit will address the dividend question once again.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [81]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [82]

--------------------------------------------------------------------------------

[Interpreted]

At Türk Telekom, we generate strong cash flows.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [83]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [84]

--------------------------------------------------------------------------------

[Interpreted]

We generated TRY 6.4 billion unlevered cash flow in 2019.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [85]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [86]

--------------------------------------------------------------------------------

[Interpreted]

Just 1 year ago, in 2018, this number was TRY 3.5 billion.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [87]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [88]

--------------------------------------------------------------------------------

[Interpreted]

And this is now the flexibility in balance sheet management.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [89]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [90]

--------------------------------------------------------------------------------

[Interpreted]

We expect this strong cash flow generation to continue in 2020, and we also expect net-debt-EBITDA ratio to decline further.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [91]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [92]

--------------------------------------------------------------------------------

[Interpreted]

So I have to repeat, in this context, as the management of the company, we believe we will be in a position to furthering our dividend in 2020.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [93]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [94]

--------------------------------------------------------------------------------

[Interpreted]

Professionally it is right to share a ratio for us. We cannot have any with you. But we are focusing on increasing our organization. And for our stakeholders, we want to provide the highest value possible and provide stronger cash flow generation.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [95]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [96]

--------------------------------------------------------------------------------

[Interpreted]

As Kaan mentioned, our general assembly meeting is held either at the end of the first quarter or in the beginning of second quarter.

--------------------------------------------------------------------------------

Ümit Önal, Türk Telekomünikasyon Anonim Sirketi - CEO, GM and Acting Assistant GM of Marketing & Customer Care [97]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [98]

--------------------------------------------------------------------------------

[Interpreted]

And we -- soon, you are going to see the proposal of our Board of Directors in terms of the dividend payout ratio. And then we're going to have our assembly meeting.

--------------------------------------------------------------------------------

Operator [99]

--------------------------------------------------------------------------------

(Operator Instructions)

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Türk Telekom management for any closing comments. Thank you.

--------------------------------------------------------------------------------

Sabriye Gözde Çullas, Türk Telekomünikasyon Anonim Sirketi - IR Director [100]

--------------------------------------------------------------------------------

Thank you for attending this call, and a very good afternoon.

--------------------------------------------------------------------------------

Operator [101]

--------------------------------------------------------------------------------

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.