Prepared remarks
Ladies and gentlemen, thank you for standing by. I'm Paulina, your Chorus Call operator. Welcome, and thank you for joining Turkcell's conference call and live webcast to present and discuss Turkcell's First Quarter 2026 Financial Results. The conference is being recorded. At this time, I would like to turn the conference over to Mrs. Ozlem Yardim, Investor Relations and Corporate Finance Director. Mrs. Yardim, you may now proceed.
Thank you, Paulina. Hello, everyone, and welcome to Turkcell's 2026 first quarter earnings call. On the call today we have our CEO, Ali Taha Koç; and CFO, Kamil Kalyon. They will provide an overview of our operational and financial results for the quarter, followed by a Q&A session. Before we begin, I would like to kindly remind you to review our safe harbor statement, which is available at the end of our presentation. With that, I will now turn the call over to Mr. Ali Taha.
Thank you very much, Yardim. Good afternoon, everyone. We delivered a phenomenal quarter. We successfully launched 5G nationwide on March 31. This landmark launch reinforces our clear leadership in mobile. We executed with precision at every stage of the 5G deployment from spectrum acquisition to network rollout, from network rollout to marketing. In all aspects, Turkcell is the leader. Our spectrum acquisition was both strategic and efficient. We secured 25% more capacity than our closest competitor, creating a network of superior scale and positioning it for long-term demand. Our launch was supported by a powerful go-to-market strategy. To accelerate 5G adoption, we expanded data package allowances fivefold and introduced compelling smartphone campaigns. Our ads featuring global celebrity Shaquille O'Neal resonate strongly with customers. We proved the real-world power of our network through high-impact use cases. We successfully tested remote driving of a TOGG 10F over 150 kilometers distance. At the same time, we conducted live speed tests across Türkiye. Türkiye has 81 different cities and live from all the cities, we have 5G and with 5G speeds exceeding 2,000 megabits per second, which means more than 2 gigabits. No one has that kind of capability. No one has that kind of speed other than Turkcell. We secured the best frequencies, delivered superior network quality and executed the strongest launch campaign. Our market is now more solid and resilient than ever. Next page, please. We started the year with flawless execution across all our domains. We have been the leader in mobile. We are the leader today, and we will continue to lead the future. By securing 40% of the 5G spectrum in the tender, we further reinforced our long-term capacity dominance. On the fixed side, we are driving value-led growth by promoting multi-gigabit-per-second fiber offerings. Currently, 20% of our customers are on 1 gigabit-per-second, meaning 1,000 megabits per second and above plans. Digital Business Service delivered robust growth through corporate digitization, supported by sustained momentum in data center and cloud services. We further strengthened our balance sheet by securing $1 billion in Murabaha financing. This preserves our investment capacity while supporting a healthy leverage profile. Finally, we continue to expand our strategic partnerships. We introduced up to 50% discounts on Samsung smartphones to support 5G penetration. We also secured a managed service collaboration with ASFAT in the defense industry and a strategic cooperation with HBO Max to strengthen our TV platform strategy. Next page, please. In the first quarter of 2026, our revenues grew by 9% year-on-year, exceeding TRY 68 billion. This robust top-line performance was driven by a combination of operational discipline and strategic execution. Key contributors included strong momentum in digital business services, the scaling of our Techfin segment and high-quality subscriber acquisition across both mobile and fixed segments. Group EBITDA increased to TRY 28 billion with a margin of 41.4%. Our bottom-line performance strengthened further with net income increasing by 15% to TRY 4.6 billion with disciplined financial management. On the subscriber side, we have 661,000 postpaid net additions. We achieved a great quarter in the mobile number portability market, driven by targeted and segment-based offers. We continue to prioritize subscriber quality and rich content packages to strengthen our leadership. Our data center and cloud business maintained its strong trajectory with revenues increasing by 20.8% as we continue to scale our digital infrastructure. Overall, these results once again proved our ability to monetize the broader digital ecosystem. Next page, please. Now let's look at the operational drivers behind our performance this quarter. Market competition remained relatively stable. We have 661,000 postpaid net additions in this quarter, our strongest total mobile net additions in the past 14 quarters. This performance reflects the success of our targeted offers and our focus on high-value subscriber growth. The share of postpaid subscribers rose by 4.6 points year-on-year to 81%. Mobile ARPU remained broadly flat year-on-year. This reflects the lagged impact of last year's competitive pricing, our contract-based structure as well as the rapid increase in inflation in the first quarter. As we transition to 5G, we are taking a balanced approach. We are carefully managing pricing to protect our subscriber base while sustaining our clear leadership in the revenue market share. Our strategy is also reflected in lower churn rates, supported by an effective churn policy. Next page, please. Moving on to our fixed broadband operations. We achieved a strong quarter in fixed broadband, supported by solid subscriber growth. We recorded 36,000 net fiber subscriber additions, including 21,000 from Turkcell fiber domain. Residential fiber ARPU increased by 9.7% year-on-year, supported by active upselling, pricing actions and the growing contributions of our IPTV offering. We expanded our Turkcell fiber home passes by 138,000 in the first quarter, reaching a total of 6.5 million home passes in 30 different cities. Our take-up rate reached 41.8%, reflecting effective monetization of our infrastructure investments and the strength of our fiber growth strategy. Next page, please. Digital Business Services had a strong start to 2026, with revenues increasing by 64% year-on-year. This performance was driven by higher hardware revenues from large-scale end-to-end corporate projects. We also delivered robust 21% growth in our data center and cloud business. Our system integration backlog remains strong, exceeding TRY 10 billion. Our cumulative data center investments have reached close to EUR 600 million. We are on track to finalize our fifth module in Ankara. Our Google Cloud hyperscale partnership is on track as we planned. Next page, please. Paycell, the growth engine of this segment. In this quarter, Paycell revenues increased by 15%, fueled by strong momentum in our POS and Pay Later businesses. Active users of Pay Later increased by 16%, exceeding 3 million. On the financial side, revenues declined primarily due to ongoing installment limitations. Looking ahead, we see 5G penetration as a natural growth catalyst. A more supportive regulatory environment for installment limits would unlock the full expansion potential of this business. Despite revenue pressure, Financell's net interest margin expanded significantly by 3.6 percentage points to 8.3%, supported by lower funding costs. Balance sheet risk management remained disciplined with cost of risk at 3.3%. I will now hand over to our CFO, Kamil Kalyon, to walk you through our financial highlights. Thank you.
Thank you very much, Ali Taha bey. Let me walk you through our financial results. We are very pleased with our solid first quarter performance with a 9% increase; our top line exceeded TRY 68 billion. This growth was primarily driven by Turkcell Türkiye, which rose 8.6% year-on-year. Our non-telco revenues were instrumental in this performance, particularly Digital Business Services. Accounting for 12% of our revenue this quarter, Digital Business Services delivered strong momentum through managed services. Our expanded postpaid base and fixed broadband services also provided a robust foundation for expansion. Additionally, our other segments contributed TRY 0.5 billion to the top line, fueled by the robust performance of call centers and Belarus subsidiaries. The EBITDA margin was 41.4%. The increasing share of hardware sales from large-scale integration projects made a significant contribution to top-line growth, but weighed on the overall margin mix. This impact was partially mitigated by disciplined cost management, favorable energy prices and reduced funding costs at Financell. Next slide, please. Net income rose 15% to TRY 4.6 billion, primarily supported by strong operational performance and robust EBITDA generation. Another key driver was the monetary gain, which benefited from the capitalization of the 5G license and contributed TRY 4.2 billion year-on-year. This year, we are scheduled to make several major payments. We have proactively positioned ourselves to manage them effectively. The payment of the first installment of the 5G license in January amounting to USD 653 million, together with the recognition of future installments and higher swap transactions led to an increase in FX expenses. In addition, the redemption of the USD 500 million Eurobond last October and the license payment in the first quarter resulted in a slight increase in net interest expense. TOGG delivered a significantly stronger contribution compared to last year. This improvement was supported by effective cost management and pricing policies, while relatively stable Euro/TRY parity also helped constrain FX funding costs and the cost of goods sold. Finally, the effective tax rate increased this quarter. This was driven by higher corporate tax expense and deferred tax impact stemming from the absence of inflation accounting in statutory financials. Next slide, please. Now let's move on to CapEx management. In the first quarter of 2026, our CapEx to sales ratio stood at 21.5%. 85% of our operational CapEx was allocated to connectivity businesses, naturally reflecting our intensive preparations for the 5G rollout. On the fixed side, we continued our fiber expansion, adding 138,000 new home passes this quarter. Our base station fiberization has now reached 47%, significantly enhancing our overall network quality and 5G readiness. Data center investments accounted for approximately 5% of our CapEx with construction currently underway for the fifth module in Ankara data center. Seasonally, we experienced lower CapEx intensity in the first quarter. However, we expect higher figures in the upcoming quarters, driven by our ongoing investments in renewable energy and data center expansions for Google Cloud. Next slide, please. Moving to our well-positioned balance sheet. The first quarter ended with a cash position of TRY 96 billion. In January, we completed the first installment payment for the 5G license and paid TRY 3.2 billion wireless usage fee. However, our cash position was significantly bolstered by the successful Murabaha syndication. Considering both cash and financial assets as part of our overall liquidity, we maintained a stable position quarter-on-quarter. Our current liquidity remains robust, providing full coverage for both the upcoming 5G payments and all debt maturities over the next four years. Driven by the new line utilization and the impact of significant regulatory payments on our cash reserves, our net debt increased to TRY 49 billion. Consequently, and as expected, our net leverage ratio rose to 0.42x. We expect leverage to remain below the 1x threshold despite this being a high investment year. Next slide, please. Lastly, foreign currency risk management. We proactively balance hedging costs supported by our strong natural hedge position. Currently, 77% of our cash is held in hard currencies, while 88% of our total FX-denominated debt is in hard currencies. To avoid excessive hedging costs during periods of relatively stable FX levels, we have strategically opted to maintain a higher short FX position. Supported by USD 2.8 billion in FX assets and a USD 1.3 billion derivatives portfolio against USD 4.4 billion in FX debt, our net short FX position has now risen to USD 1.2 billion. This position reflects cash outflows related to 5G license, FX-denominated CapEx and our optimized use of hedging instruments. Moving forward, we target an FX position of approximately USD 1.5 billion to support our ongoing investments and 5G obligations while maintaining the flexibility to adjust our strategy in line with market conditions. That concludes our presentation. We would now be happy to take your questions.
Questions and answers
The first question is from the line of Maddy Singh with HSBC.
My first question is on the consumer segment. I think your release states consumer revenue growth was about 3%. Can you talk about the context there? Your overall revenue growth is high single digit in line with guidance, but consumer growth is much slower, so what are the drivers? Secondly, regarding pricing actions within the mobile segment, how many times have you revised prices year-to-date, how large were the price hikes, what periods did they cover, and what are your future plans around pricing? And finally, have you seen any impact on your operating costs from higher fuel and energy prices, and if so, what is the potential impact?
Let me start with the price adjustments. In 2026, segment-based dynamic pricing and offer strategy will be maintained. We're going to closely follow up the competition and act upon it. So we utilize AI-powered tools to provide dynamic and customer-specific offers. Therefore we cannot have a mass change in the pricing. But from a segment-by-segment level, we are doing changes in price differentiation. On the mobile side, this year, we applied a 26% price adjustment in January and 16% in April to restore pricing to the expected baseline. These changes happened this year. On the fixed side as well, we applied price adjustments broadly in line with the incumbent's pricing actions. Accordingly, we implemented approximately a 12% price increase on the shared infrastructure and around 18% on our fiber products in February. Regarding the first question, this quarter we have lots of great news with Digital Business Services. Our Digital Business Services and Paycell have huge growth. Currently, we are the biggest digital integrator in Türkiye, and we are working very closely with industry and the public sector. We gained lots of momentum on that perspective. So that's the reason that our growth is higher. Secondly, data center and cloud businesses grew around 21% year-over-year. So that's also helping our growth. And Paycell also remained a strong contributor; it grew 15%. So we have a balanced book right now. We have multiple options for growth. The consumer segment is still the biggest one, but we have other options that can deliver higher growth.
For the third question, we are closely monitoring the volatility in the global energy market, especially fuel prices. While high fuel prices put upward pressure on costs, the actual impact will depend on the conflict situation and the intensity. Currently, it's a little bit early to provide an exact estimate for the future, but it depends on the duration of the conflict.
The next question is from the line of Cemal Demirtas with Ata Invest.
My first question is about the ARPU side. We see a real-term contraction quarter-over-quarter and year-over-year. Could you further elaborate how this trend should go in the following quarters? And the other question is about the TOGG side, your participation. We see that it turned to positive net income, around TRY 305 million contribution to your side. What do you expect for the following quarters, at least? And the last question is about the tax rate, effective taxes. How should we assume this for the rest of the year?
Thank you, Cemal. Thank you very much for the question. I'm going to answer the first one and the TOGG part and the tax part, Kamil is going to answer that. So let me start: our primary objective is to maintain a healthy ARPU growth that aligns with macroeconomic indicators. The mobile market was characterized by intense competition throughout 2025, as you may know. Consequently, our strategic churn management and pricing actions taken last year have had a temporary restrictive impact on our current ARPU growth because we already implemented this strategic churn management last year, so we can see the impact this year. For the full year 2026, our target is to achieve ARPU growth that closely tracks the inflation cycle. However, we must remain mindful that any unexpected shifts in inflation dynamics, as we can see nowadays, will influence our real growth trajectory. Our dynamic pricing model will manage this and continue the migration to higher-value segments; this remains our key strategy to ensure ARPU resilience. We implemented a strategy that will enable us to maintain healthy growth. 2025 also affected this year's growth, as our ARPU growth comes with a lag. We need to always remember that there's a lag between inflation and our ARPU growth because we have many 12-month contracts. So the increasing trend in inflation is also putting pressure on current-year growth. But if you look at the numbers, we have a healthy ARPU for our users. We also avoid distortions from machine-to-machine communication. So our ARPUs are stable and growth is there.
From the TOGG side, TOGG's net loss initially eased starting from the third quarter of 2025, Cemal, mainly supported by a change in the special consumption tax base, which led to higher vehicle prices in the company. The new model TOGG 10F also supported the sales momentum in Q4 2025 and Q1 2026. In light of these factors, in Q1 TOGG registered a net income of TRY 306 million. There are various reasons for this profit on the TOGG side. This improvement was mainly driven by the increased benefit of the current incentive mechanism with higher vehicle sales. This is the first reason. The other is that financial expenses also improved due to relative stability of Euro/TRY parity in Q1. Additionally, TOGG continues to record monetary gains under inflation accounting due to its significant fixed asset base. Therefore, when you combine these three effects, the company declared a good result in Q1. We also expect momentum to continue in the coming periods. For the tax side, as you know, the termination of inflation accounting in accordance with the Turkish Tax Procedural Law led to a tax impact because indexation effects of accounts under capital items are no longer taken into account. In other words, inflation accounting in the local side is canceled or postponed for a three-year period. Therefore, there are some negative effects from this issue on the deferred tax side. Since the taxable nature of the monetary gain calculated on capital items has been eliminated, the effective tax rate has increased naturally. Therefore, higher fixed asset revaluation effects are included at the end of the year. The termination of inflation accounting had a limiting effect from this side. In addition to this, inflation accounting increased the profit for the term in the first quarter. Therefore, this is the second reason why we have a tax expense in our financials in Q1.
And do you expect any upward revision to your revenue growth after around 9% growth in the first quarter, given you previously guided 5% to 7%?
It is really early to say anything about revising guidance because first of all we should see the economic conditions in Türkiye. The other important factor is the duration of the conflict. If the conflict, for example, is extended for many months, it will influence the inflation rate in Türkiye. Therefore, we will look at the position of inflation in the coming months. It is really early to comment on guidance revision. I think we should see Q2 results; maybe by Q3 it would be more feasible or more rational to discuss revising guidance, whether negatively or positively. It's really too early to talk about this now.
One last thing about your promotion: it was very, I think, effective, at least from a consumer perspective — whenever I saw it, it made me smile. I think from my side it was very effective. From your side, do you think it reached crowds in Türkiye? Any reaction on that? It was one of the best commercials I have experienced during the last several years. I just want to appreciate it from the consumer perspective. Do you have any measure that it had any positive effect on your activities all around Turkey?
First of all, thank you very much for the comment. You're making us happy with these comments, and our marketing team is very happy about the impact. Overall, we missed that kind of great ads in Türkiye for a while, and Turkcell has in its DNA to publish great ads. I think it is a return to form. The story is very nice, and we're explaining 5G technology in a humorous and locally resonant way. That's the reason there is huge interest and the 5G speed message aligns well with Turkcell's terminology. It helps a lot. We are seeing interest, and we continue the campaigns, especially on the consumer side, where we have a huge campaign about the fivefold. We are waiting for that to conclude, and this month and next month we will see the real impact. On top of that, we just brought a new market, which is called Fixed Wireless Access. This means we are going to offer a 5G Superbox and we have a new ad about it as well. Overall, we are expecting a positive impact from both the campaign and how we deploy our 5G technology in Türkiye.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Turkcell management for any closing comments. Thank you.
Thank you very much for joining. Hopefully, we're going to see each other in the second quarter results. Thank you.
Thank you for joining us.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.