License bid process will mean no rollout till mid 2009
Turkcell will not start investment in its 3G network until it has gone fully through the license approvals process, according to Koray Öztürkler, the Turkish operator’s Chief Corporate Affairs Officer.
With the tender process now scheduled to begin on 28th November, and a judicial approvals process that can take up to 90 days, that means that investment in the network will not be begin until well into 2009.
The operator will not divulge its investment plans for 3G rollout until the 6th November, the day after its Q3 results announcement. Its license commitment will be to cover 50% of the country by population within three years. Öztürkler said that the operator can achieve more than this by covering Turkey’s eight largest cities.
The operator will jump straight to HSPA coverage, he said, offering a broadband alternative to fixed line services.
Turkcell bid last year for a license, only to see it withdrawn as it was the only bidder. Vodafone and Avea refused to take part in the bidding process until Mobile Number Portability was enabled.
Last year the company bid €511 million, including tax, for the license. There are four types of license available, offering 40, 35, 30 and 25MHz of spectrum in each license respectively. With the A license (40MHz) this year set at a reserve of €285 million, the operator does not expect to be paying above its previous bid this year.
But Öztürkler said that the company had benefited in one way from the delay, as it was able to benefit from reduced infrastructure costs, as well as improved interoperability.
“There are some significant technical improvements and we have been able to move away from a single vendor model. This year we made the choice to replace our single vendor supplier, Ericsson, with Huawei, especially in the North of the country and he Black Sea region,” he said.
In a wide ranging interview, Öztürkler covered several other areas.
On Number portability:
Turkcell will use the introduction of mobile number portability to its advantage, Öztürkler said, and will aim to use its band power and marketing presence to lever customers away from Turkey’s other two operators. The company held a MNP day internally to make sure its employees understood the ethics around MNP.
On the Competitive situation:
“I don’t believe Vodafone has any advantage in its technology, service offerings or speed of infrastructure investment. Two months ago, Vodafone said it would bring the iPhone to Turkey. At that point Turkcell was not involved in a contact with Apple, but we talkd to them, and Apple realised they could not overlook Turkcell. We explained our strength, and made and agreement for the iPhone. Now you will find it difficult to find an iPhone in one of our stores, because they have proved so popular. This is not a situation you will find with our competitors. Operators can’t differentiate around the iPhone, but we can differentiate around our brand, our marketing power and our PR power. In ten days we sold 15,000 iPhones, and that was in a holiday week.”
On Macro Economic Conditions:
Turkcell has $3 billion net cash resources, making it unusual in having no debt, beyond $600 million consolidated debt from its subsidiary businesses. Only Zain, of its like for like rivals, is not in a negative cash position. It means the company can finance mergers and acquisitions going forward. It is to be hoped the current market conditions don't reach down to the street, but Turkcell is well placed if there is a consumer slowdown.
On the BeST acquisition:
The company will import the Life brand from Ukraine, where it has had great success. Earnings per capita are higher in Belarus than in Ukraine, so there is potential for ARPU growth. The investment required will not be in the multi-billion dollar realm. At purchase, €500 million was floated as a number over ten years to meet its investment need.
On regulation and government:
Parliament is soon to approve a law allowing Turkish companies to buy back their own shares, which could be an attractive investment option for the operator.
The operator is also lobbying for Turkey’s punitive value added sales tax laws to be reformed. Consumers pay 42% tax on value added services items, with operators paying another 15% tax. At the very least the operator wants the tax regime brought level with the fixed operators. It wants Government to understand that if taxes are brought down, not only will it stimulate usage, increasing the overall take, but is more likely to result in less tax avoidance.