Earnings Call: Q2 2019

Jul 31, 2019

Good day, and welcome to the 2nd Quarter 2019 Results Conference Call. For your information, today's conference is being recorded. At this time, I'd like to turn the call over to Director of Treasury And Capital Markets Management. Please go ahead, sir. Thank you, Ellis. Hello, everyone. Welcome to Turkcell's second quarter 2019 results call. Today's speakers are our CEO, Mr. Murad Econ. And our CFO, Mr. Osman Johan. We have a brief presentation and afterwards, we will be taking your questions. Before we start, I would like to remind you to review the disclaimer of our presentation. Now I hand over to Mr. Erica. Good morning, and good afternoon, everyone. Welcome to Turkcell's second quarter 2019 results call. On behalf of Tushar family, I am glad Thomas, another solid set of results made possible by the effort of our dedicated team. We can focus on our customers and innovate solution. We continued strong double digit growth in this quarter. We recorded 21 percent annual top line growth and 2,600,000,000 TR EBITDA with a 41.2% EBITDA margin record high ARPU growth both in postpaid mobile and fiber residential Also high usage of data and digital services supported these strong results. Our next strategic focus Digital Business Services contributed strongly to both the corporate segment and overall group results. Including both recurring and one off projects, its 1st 6 month performance was up 62%. Solving operational performance coupled with effective cost management has led us to revise our full year EBITDA margin guidance up to 39% to 41%. Moreover, we have further strengthened our balance sheet with proven finance management and cash generation capability. As of 10th June, our net debt to EBITDA ratio has improved by 0.2 times year on year to 1.2. And today, our Board of Directors has taken the decision to hold general assembly on September throughout 2019. Also, proposed new dividend distribution dates keeping the total dividend amounted the same at 1,000,000,000. Moving to next slide. Now some further detail on our financial performance. We recorded a TRY 6,200,000,000 top line on 21% growth and 2,600,000,000 EBITDA and roughly 20% growth. Our image reached 1,300,000,000 with a 20.8% margin. Going forward, we will monitor and communicate EBIT performance as an additional metric. We believe EBIT is more transparent by eliminating the impact of new IFRS standards. We registered a net income of 465,000,000 on a 12% rise. Net income before the 1 off provisional rose 27% year on year. These provisions are related with the past CACSA transaction. Capital expenditure remain under control with 15% operational CapEx of sales ratio. In the first half, revenue rose 20 percent to 11,900,000,000 with a 40.7% EBITDA margin. EBIT reached 2,400,000,000 with a 20.1% margin. Moving to next slide. As outlined in the first quarter results call, we have determined 3 strategic focus area. Our digital services, digital business solutions, and our texting platform. Let me say a favor on our action in each of these with quantitative data in the upcoming slides. For digital services, operational performance indicators are in line with our plans. Having gained considerable popularity, we have begun monetizing them through advertising, brand collaboration, and others. As we already do with subscriptions. In Digital Business Solution, we are working on new projects through which will serve both private and public sectors. With this strong pipeline, we expect this segment to grow and increase its contribution to group financials. Regarding texting, it has been a busy quarter with several new products and services launched on the Payside platform. We are committed to capitalizing on this well established payment platform leveraging our technology. Moving to next slide. And now we turn to our digital services. We have continued to the user experience with exciting new features. Our digital communication and experience platform deep since daily message traffic of $300,000,000, up 4 fold in a year. The innovative instant translated service Eachin BIP is offered in over 100 languages. Our digital music platform approximately 3,700,000 active users. We intend to increase our interaction with PC user by offering them Vijik Trivia on a platform in the near future. Furthermore, Pizzi R Digital Public Education AppDARIGLAS offer personalized content recommendation using AI Technology. We expect this feature to boost customer loyalty. Next slide. Now a few words about our new folks area aimed at digitizing the economy. Digital Business Solution, we offer tailor made and fair digital solution to both private and public sectors. These include cloud, cybersecurity, IoT, data center, and digital integration. Our aim is to become market leader in trees driven by our wide range of solution, strong infrastructure and ecosystem. This year, we have added new customers and projects as well as strong digital partners to our portfolio. As a result, the solid first half performance of this business line was reflected in 63% drop. We are confident this business is set to grow further and increase its contribution to group financials. Moving to next slide. In the texting area, we have recently launched a number of new products and features on PASER platform. To share customer can easily top up the public transportation card in Istanbul on their mobile phones via the Pacer application. With this option of paying through the phone bills. Paycellcard now has a pocket manufacturer designed for a convenience of talents. Further, we introduced cash card to the pay sell card currently, it's not possible to withdraw cash on the card from any ATMs. Also, 24x7 Maritransfer with just that phone number is now possible with the Paycell app. Separately, Paycell has been part of local new car initiative. This partnership has launched fire card, which will be put in use initially by Turkcell Employer as of 1st August. Hyacart inherits both public transportation Istanbul card and Milacart's future, and it it is accepted at a steadily growing number of sales points. Going forward, we will launch additional service on pay which we expect to grow a nearly 50% per annum in the medium term. Moving to next slide. Let's look into our operational performance. Our value proposition at Innovative Customer Focus Campaign on the pinned to strong rise of postpaid, fiber, and digital services subscriber during the quarter. Postpaid mobile subscriber, which generates more than 3 times the ARPU of prepaid rose by 215,000. The monthly average churn rate has largely remained stable at 2% on a yearly basis. Landed mobile ARPU rose to 40.7 TL, which upsell to higher tariffs and continuing FFO price adjustments, adjustments. Increasing 16.6% year on year on a like for like basis, growth reached 20.5%. On the fixed broadband front, our fiber subscriber continued to grow by 15,000 net addition. Residential Fiber ARPU posted record growth of 17.2% year on year. This reflects strong upsell performance. The continued effect of price adjustment and rising demand for our TV services. Superbacks, our fixed wireless access product provides fiber like speeds at location not covered by the fiber network. Strong demand for this product available on net chipset has continued its pace. Superbox is now used by approximately 130,000 Households, up from 50,000 in Q1. Next slide. We have continued our smart marketing campaign which contributes to customer loyalty and appreciation. Our subscriber participation in both the Du campaign and the Shaikan campaign seeing on a quarterly basis. Starting from this quarter, we have begun to offer comfortable Tarex in the first quarter With these hybrid powers, our customer can subscribe as postpaid and yet consume as if they were prepaid. This solution has seriously become popular. Half of the subscription to the stars don't need to All in all, customers have continued to recommend Turkcell to a significantly higher degree than the competition as seen in our net promoter score. Next slide. And now an update on data and porosity subscription plan. Average mobile data usage draws totaled 2% in a year to 6.6 gigabytes per user. The main driver of this increase is a higher number of greater consumption of foreign house users at 8.2 gigabytes per user. Also, 31,400,000 customers signed up for for our housegene services, 19,000,000 have power outage compatible smartphones offering room for growth. To be reached vendors, we frequently hold attractive smartphone campaign that increased demand, mitigating the effects of the regulatory limitation on a installment and higher taxes and retail prices. Accordingly, there were half a 1,000,000 net additional for announced compatible smartphone in the second quarter. Next slide. Let's look at our performance in international markets. Turcell international generates 8% of group revenue. Our operation generates top line growth of 16% year over year in local currency terms on a back of strong ARPU. This rises to 15% in TL turns with the impact of currency movements. EBITDA margin improves on a like for like basis was 1.2 percentage point. This analyst is mainly elements the impact of radio frequency usage costs. Capitalization started as of Q4 2018 in accordance with IFRS 16. In Ukraine, long awaited mobile number portability was launched in May. This is a major step towards a fair competitive environment. Our subsidiary lifestyle continue its focus on expanding 4G penetration and the use of digital services. If 3 months active 4G users reach 40% of total mobile data users who consumes 8.2 gigabytes per month on average. Next slide. Now a few words on our sustainability initiatives. Our digital services and solution corporate practices and business processes evolve around sustainability. We take all steps track and reduce on carbon footprint and disclose our platforms regularly. We have also been listed on horses stumbled, sustainable to index since its launch. Our sustainable effort have an MSCI ESC rating of A. Our technology support to value replaced on human life. With our social project focused on technology based education and entrepreneurship for women, children, and disabled and refugees. We aim to make tangible difference on their lives. This quarter, we have extended our sustainability effort to our financing activities. We have signed a 3 year term sustainable team link loan agreement of 1,000,000 with the EMP Palmas. With this loan, we will continue to sustainable growth by reducing our carbon footprint further, while lowering our financial costs and condition of meeting certain targets. We will lead the market in purchasing a greater use of such a product to support sustainable. Next slide. In the light of our 6 month financial and operational performance, we are confident of exceeding our previous guidance. Accordingly, we revised our 2019 EBITDA margin guidance upward from 38% 40% to 39% to 41%. We reiterate our revenue growth and operational CapEx to save our share guidance. Looking ahead, we are confident of delivering on this guidance without the need further revision. I will now leave the floor to Ospam for financial overview. Thank you, Murat. Now let's take a closer look into the financials. In the second quarter, group revenues rose 21.3% year on year corresponding to an incremental TRY 1,100,000,000. 895,000,000 of this increase is from Turkey on the back of strong ARPU and higher contribution from corporate segments. Moreover, International subsidiaries contributed TRY 160,000,000 to increase data consumption in Ukraine as well as the positive impact of currency movements. The incremental contribution of ARCON finance company was almost flat in the quarter, given it's deleveraging. It will likely turn negative in the second half of the year. EBITDA rose by 19.6 percent year on year to 2,600,000,000 with a margin of 41.2%. In a quarterly trend comparison, our EBITDA margin marked a 1 percentage point improvement. This was mainly due to a solid rise in revenues plus lower G and A and S and M expenses. It's worth noting that we achieved a net customer gain while keeping marketing expenses under control. EBIT increased by 18.3% year on year to RUB 1,300,000,000 with a margin of 20.8%. Next slide. Now let's take a closer look at our texting company's performance. Finance SaaS growth has slowed down as expected this year, while Paycell's growth momentum continues. In a market of regulatory limitations and increased retail prices and taxes, Finance Health Consumer loan portfolio decreased to TRY 3,200,000,000. We expect this declining trend to continue until around 2,500,000,000. While this means a lower top line contribution, it is positive for the group cash flow. Cost of risk rose slightly to 2.9%, still below the market average for general purpose loans. Non insurance penetration of 9 7% over the past 1 year will help us reduce this ratio. Pro form a net income of financial, excluding fair value of swap would be 110,000,000 in the first half of the year. Meanwhile, our payment services company, Paycell, continued its momentum on 32 percent year on year revenue growth. Its EBITDA growth was 31% with a 74% EBITDA margin. Having introduced numerous products and services with a strong pipeline, we are confident that this business is set to resume its strong growth in the medium term thereby compensating for the slowdown in finance that contribution. Now some highlights from our balance sheet and leverage. As at the end of the quarter, our net debt position declined to 11,400,000,000 from 11,700,000,000 at March end with a leverage ratio of 1.2 times. Our telco only net debt was 8,200,000,000 with a leverage ratio of 0.9 times. The underlying factors that led to 307 4,000,000 TLs in the net debt balance work or under 60,000,000 TLs through the cash generated from operations and the continued deleveraging of our consumer finance business at the level of 495,000,000 in line with our expectations. On the negative side, currency movements led to a net $340,000,000 increase in net debt, while lease obligations rose around 170,000,000 in the ordinary course of business. Our expected performance and seasonality in the following quarters supports our goal of further reducing leverage to one times. Next slide. Let me give you more color on our consolidated cash position. Our cash position rose by TRY 3,300,000,000 in the first half. Our operations generated TRY 4,800,000,000 of EBITDA. The working capital increase of around RMB1.1 billion in the first half resulted mainly from lower trade payables due to seasonality and frequency usage fee paid for prepaid customers amounting to $330,000,000, offsetting the positive impact of financial deleveraging. In the second half of the year, we expect a positive contribution from working capital due to higher collection and higher payables, thanks to seasonality, in addition to the continued positive impact of finances. Excluding proceeds from the Fintur sale, investing activities led to a cash 2,500,000,000. Of this figure, €90,000,000 $50,000,000 advanced payments help us to fix current rate and benefit from discount on network procurement. In financing activities, we utilized the million equivalent loans from the CDB, vendor financing from AKN of $50,000,000 and the 1,000,000 sustainable to link loan from BNP Paribas in the first half. Together with the repayment, the net impact from financing was around PLN 77,000,000. Next slide. Now I will go into the management of foreign currency. We continue to hold the bulk of our cash in hard currency as a natural hedging tool. In addition, with hedging instruments in place, the share of FX debt declined from 83% to 42%. We are in a long net FX position of $207,000,000 as at the end of second quarter. As stated before, we target a neutral FX position going forward. This concludes our presentation. We are now ready to take your questions. Thank you. Thank you. 1. Thank you for holding until we have our first question. Our first question comes from J. B. David from JPMorgan. Please go ahead. Hi, thank you for the opportunity. A couple of questions on Paycell. And then just one on the financials. So firstly, on Paycell, I just wondered if you could confirm whether this is a very CapEx light model, like most mobile finance or services, I. E. That the CapEx to sales would be quite low around this business. And also around pay sell, you mentioned a number of new features that you're introducing over the medium term. I wondered if you could give a little bit of color around how price sensitive customers are in using Paycell as an application? Are they more interested in features? Are they more interested in price? And then just switching gear and for car location. I just wanted to understand why in your net financial gains and losses, you incurred a loss both before hedging and after hedging, I would have thought that, the hedging element would have gone the other way and provide a little bit a little bit of an offset. So just wondering if that's a sort of a one off thing. Okay. Thank you very much for the question. First of all, our peso actually, our tech team solution, it's quite low CapEx solution, actually, you know, a very, very, very limited CapEx around it, which is, I mean, very usual in this type of business. So I would confirm that the CapEx part is not too high. Obviously, the the the IT tools and softwares investment happening around it, but this is more or less this is it. So I can I think the CapEx part is quite low? And also customer acquisition cost is also low for us because No. We are utilizing our existing resources. Our, shops, our online channels, and set the digital channels. So in in in this side, this is our advantage, actually. On the on the customer type of pay cell, in Turkey, as far as I know, there are 20,000,000 unbank, people in in in Turkey. So if you if you think that at least more or less 40% to 50% of them are customer, then it shows our opportunity. What was always our technical solution and Payside solution, not just others in our just Turkcell customer also our other customers as well. So, quite variety of customer base, obviously, the addressable market is this unbanked customer. For the financial part, let me give the go to Osman to answer this loan position and short position. Actually, the increasing financial expenses was a result of increased cost of hedging, on a quarterly basis our hedging cost is around 1,700,000 Turkish share. This is mainly a result of increasing, Turkish via swap base. Also, Turkish rates were quite volatile during the course of first half of the year. The rates went from 100 percent to 15% and this resulted in volatility in our financial expenses. And this mainly comes from the derivatives, which are not subject to hedge accounting, the fair value, deviations between the first quarter 2nd quarter resulted in an increased cost of increased financial expenses for the second quarter. We can say that this is a one off because we will not we are not, supposed to see another live swing in the interest rate given the current existing levels of interest rate, the March April events were kind of one off events. So we might deem it to be a one off event. Thank you. Our next question comes from Igor Tigran Bank of America Merrill Lynch. Please go ahead. For the opportunity to ask questions. I have three questions, if I may. The first one would be on the stronger EBITDA margin less pressure on what we've seen in Q1. Can you please explain again the key drivers what the efficiencies have been realized versus, versus Q1? A quick question on taxes, which is, implemented on the activation of, of handsets, which are not purchasing Turkey. Can you do you expect any impact on the business as a result? And then third question would be on the 5G licensing, is there the Cherokee at this stage. Thank you so much. Okay, Igor. Thank you very much. For the first question, regarding our EBITDA margin improvements, The quarter over quarter EBITDA margin improvement was a reflection of our successful platforms involving our ARPU resulting in higher margin service revenue and managing our costs effectively, especially on sales and marketing side, we we we had heavy cost control regarding second question, about 5G and 5G expectation and roadmap. Actually, we don't expect any in the short term horizon for 5G. We have a successful 4.5G infrastructure ready for software upgrade anyway. And it is not that fixed wireless access in one of our technologies that will be vice spread of the 5 gs I'm proud to state that, we have wide spectrum resources. We are already using in this technology. So we don't see any difficulty on this side. So but we'll see the regulation authority decision anyway. Could you repeat your second question? Yes, sure. The second question was more on the, of handsets, which are both, both abroad. I mean, do you think there's going to be any impact on the business? And just sorry, following up on the first question on the on the EBITDA margin, it wasn't a question versus the on the Q on Q, but more on the year on year, I mean, if you look at the year on year pressure, it significantly less, especially on the, on the Turkish margin versus in Q1. So, just wanted if you could elaborate a little bit on the, on the cost side and what has been kept more under control than in Q1. Thank you so much. Actually, more or less the answer is more or less same because, you know, we have inflation, inflationary pricing on the ARPU side, but the impact will come, with a period of time. So versus Q1 to Q2. We see that, impact will hit more than Q1. So this is mainly ARPU, ARPU result. And regarding handset part, obviously, this is government decision and they try to increase the taxation, but we haven't seen a dramatic impact on our, terminal sales and then device sales in Q2. And obviously, we had some heat from last year's, the installment part But other than that, we see quite steady and steady performance on the terminal side. Thank you so much. Very clear. Thank you. Our next question comes from Parby Drone, HSBC. Please go ahead. Yes, good afternoon. Thank you for the presentations. Couple of questions from my side as well. Firstly, in terms of the new additions you managed to bring, are you happy with current trend in terms of new additions you are getting in the mobile segments? And do you think your sales and marketing cost control will remain on the same trend as we've seen in H1, looking in H2. 2nd question is back to this FX loss fund, especially this 1,000,000 loss you put in 2 on your fair value of the hedging and derivatives. I was wondering could you give us a bit more clarity on how that has been calculated? I mean, you mentioned interest rate. I was wondering is it short term Turkish interest rate here you are talking about or long term 10 year Treasury Bonds Driven Movement. And finally, on maybe the content. I mean, there's been some issues with right issues, you know, on the football right in Turkey, between, you know, digital and the football federation. I was wondering, could potentially, still in getting more and more involved with premium content such as Turkish Football Rights? Okay. Let us start with the first question regarding net addition of a mobile subscriber. Actually, we took several action targeting price sensitive customer holding innovative customer focused campaigns and offering additional value proposition, which had a positive impact on customer acquisition. We started to see positive trend starting from March and continue this trend in the second quarter. Actually, we stated this as Q1 conference call as well. We have observed that considerable portion of the customer that churn in Q4 twenty eighteen and Q1 twenty nineteen return back to subsur quality in Q2 twenty nineteen as well. We have continued our inflation and pricing practice in 2019 as well as by enhancing the value that we have been able to enrich our services and provide more to our customers. Regarding sales and marketing part, obviously, we'll continue to control our sales and marketing costs, during the, rest of the year. Regarding second question, loss in Q2, fair value, I think was one can answer the discussion and we'll come back to the 3rd question. Actually, we have 2 types of hedges on our balance sheet, long term hedges and short term hedges. Long term hedges are typically for hedging are, long term foreign currency liability. And also, we have short term, hedges on our balance sheet from over 9 to 3 months, maturities And the short time, short term hedges are typically for liquidity management and also for hedging our FX liabilities in our consumer finance company. Most of our long term hedges, are subject to hedge accounting. So they do not create, much savings on our, fair value calculations. But, you know, the swings in the interest rates were more fierce in the short end of the yield curve. The yield curve moved sharply, up to 1, 1000 percent, back to 30% in only a couple of days. So it's and it also coincided with the quadrant. So it's created swings, on our fair value calculations So we can say that it is mainly driven by the volatility in short term rates. The long term hedges do not create a volatility since they are subject to Regarding 3rd question, content of football, right? I think our, our TV platform is doing very well in terms of revenue, in terms of subscriber on both IPTV side and OTP side. For the football ride, I think this is, quite expensive for us to capture just one one body And I don't know. Digital, it seems we are hearing from news like you're hearing, but I think we need to involve more, customer and go deeper into the segment so that we can, we can, I should say that anybody can get this, return back? And and, as of today, I cannot comment on, are we interested in that or not because they have another 2 years contract the federation. So we'll see what's going to happen. All right. Thank you very much. Amit. Our next question comes from Andrej Covingjet, UBS. Please go ahead. Hi, thank you. So a couple of questions for me, please. And mostly on the tax and, efforts. So, first of all, on Paycell, if you just give some light on whether you're facing any regulatory hurdles or or banking industry pushback here with with the initiatives that you are launching. And, if, for example, you'd think some licenses for products that you currently cannot provide. Whether there is a upside to this 50 percent CAGR, that you're guiding for. And second question on the consumer finance business, if you could just explain a bit how you are able to achieve 15 percent EBITDA growth on a consumer portfolio that is decreasing year over year by almost maybe even more than the 30%? Thank you. Regarding tax insights, I think To be honest, we are not facing regulatory issue. Actually, we do see, some regulatory changes, which helps texting players to be positioned better in the market. For example, we just have seen that mobile post regulation gets issued. So everybody can, can get mobile post, 1st September which is good news for taking companies. And also, we see that draft the open banking, process and regulation is under under preparation So these are good news for our technical platform. We hope to see these regulations change happen soon so that we can be competitive in the market. For the second question, Osman will answer regarding the financing? Actually, there are 2 main factors driving EBITDA growth on the portfolio. First, the effect of slowdown will be more visible in the second half as the slowdown started in August last year. And the second factor is net interest margin widened on better, cost of funding management. Our net interest margin widened since, the last year's last quarter. So these two factors, results in higher EBITDA growth than expected. But we will see a slowdown going forward. Thank you. And maybe just one follow-up on the device sales, please. So you mentioned on the report that your equipment revenues almost doubled year over year. I assume that these are, and that you've, that you've had a couple of campaigns here. So the question is, are these, completely outside of the, any sort of financing schemes that you might have? And, whether basically you driving this, the device cells outside of this is is, a way to avoid the limitations that have been in place on consumer loans since last year? Yeah. First of all, the revenue increase was coming from digital, digital services business. And these are the project, device sales, which is part of the project. So this is this type of sales has nothing to do with financing or financing company. So this is kind of one time projects, in the in the digital business solution area. All right. That's clear. Thank you very much. Our next question comes from Ivan Jim, Excellus Capital. Please go ahead. Yes, good afternoon. Three questions for me, please. Firstly, just going back to the for a finance company. So the net interest margin widened, as you mentioned, quite significantly, about 250 basis points. If you look at the information that you provide. So I was just wondering whether it's sustainable or we should expect it to compress back to 4%, 5% level. That's the first question. The second question, is just going back to 5G, which remain unanswered. So why should we expect that? What spectrum to be sold and maybe something you can share with us on the cost. And then, the 3rd and last question on the business services. You mentioned some of that growth that you've shown in the first half was one off. So I was just wondering what percent roughly of the growth was one off. Thank you. Okay. Let me let me answer, question 2 and question 3. And then, Osman will respond for question 1. For the, digital business, services, you know, It is not one off anymore because there will be, continuous one off projects, in digital business solution. This is you know, typical business business solution, behavior. Our DBS we offer tailor made an alternative solution to both private and public sectors. This includes hardware, cloud, cyber security, IoT data center, digital integration, etcetera. So this country is strongly to both corporate segment and overall group result. At the end of the day, this is typical behavior of this segment. So we'll continue to see one time project probably every quarter, every month. I hope to see every day to be honest. So this is nature of the business. Regarding 5G, It is difficult to, say about the cost part of it because, you know, everybody things differently because there are different behavior in the market, different behavior different countries, for Turkey said, we we we are preparing ourselves for every option. But on, on the other hand, We already invested heavily on the spectrum of 4a half g. So we want to utilize this 4a half g spectrum as much as we can. So let's come back to the first question regarding a finance company. I give the word to Osman. Net interest margin on consumer finance company widened since last September on the positive duration gap that we are on the balance sheet. And also dynamic repricing off the loans helped us to keep net interest margin high and stable. Actually, we expect net interest margin to remain stable over the course of this year. We are not expecting a contraction in net interest margin going forward given this lower interest rate environment in Turkey. Okay, great. Thank you. And just maybe a follow-up on 5G, please. So there is nothing on both timing and what spectrum will be available? Thank you. Exactly, yes. Our next question comes from Alexander Vincroganovich Renaissance Capital. Please go ahead. Yes. Good evening. I have a couple of questions and the first one is probably a little bit more general, but can you please discuss the competitive advantages you have in the mobile video and pay sell, like, if you compare yourself with your main competitors in the market, Can you please differentiate a little bit, like, you know, why to excel this better than competitors in this segment? And then that's the first question. The second question is more specific on mobile segment. So, I've noticed that over the last your years, the gap of the plan that ARPU, between Turkcell competitors has widened quite substantially. Can you please discuss, like, whether you think this gap will be sustainable and you wanna keep it or you think you might be targeting, sort of a more aggressive behavior in the market and instead of, increasing the ARPU, you might be looking at improvement if you were a subscriber base. So that's That's probably it. Thank you. Okay. Let me start with the question 1, which is regarding PACE and Mobile. First of all, we have quite strong, customer database that we know their payment cycle, their behavior, their location, their, you know, this kind of thing. So, and also We have quite strong sales channel all over the 30 and, we you see that they are visiting our shops, actually digital shops as well as physical shops And we see that 18,000,000, people every month visit our shops. So this is opportunity for us on the pay side side. Regarding mobile ARPU growth, Our program was mainly driven by higher data consumption and digital services usage and upside effort as well as the continued effect on inflation repricing. You know, I cannot count just one probably have 3 or 4 behaviors that help us on the ARPU growth side. So you basically plan to keep pushing the data usage on your tariffs and you don't see any, kind of competitors, like any strong response from your competitors on the tariff side. So basically, the situation of the market is pretty stable. And everybody is just like a push in the tariff, sorry, the data usage right now and not trying compete on the data side, right? Obviously, we are in telecommunication mobile and fixed telecommunication market. We see that response from our competition, but we have quite strong digital services, you know, strong sales channel and a campaign capability and much kitting and brand. So I do see that we will see, response from competition and this is effect of that. This is how we can act and react on the competition side. I think we'll continue executing well on this aspect. Okay. And then maybe just a quick follow-up on video content. So previously discussed, a little bit the, right for football championship. But maybe you can also discuss a little bit for the production of the exclusive, content like TV shows or like movies. Do you think about that? Is that something where you might be engaged in the future or you think the market and your subscribers are not requiring that exclusive video content on your platforms? Yes, to be honest, we would like to be platform provider similar so that, anybody has an interesting content could be exclusive, non exclusive, small bee, whatever, can come to our platform and, provide the solution to, to our customer. So, we don't wanna be exclusive on any shows because we don't see that it's a viable like us. So we will provide giving services to whoever has an interesting content, very welcome to our platform. So we can share the value, share the, you know, profits. So I got the approach are you doing that right now? I mean, do you have any exclusive, like, partnerships with the content, producers? Not necessarily exclusive partnership, but we have partnership with a lot of content providers, in Turkey and outside of the queue. So but it shouldn't be the exclusive agreement with them. Partnership is good. Our next question comes from Jamal Demertas, Ata Invest. Please go ahead. Thank you for the presentation. My question related again to the equipment revenues. Let me look at the figure if you exclude the impact of that growth, equipment revenues, we see around 14.4% growth in Turkey. Substantially. And if you assume that this equipment revenue jump in 2nd quarter is temporary, how would you think you will achieve your growth guidance of 18% to 19% and in the international side, we have less currency appreciation, if you assume that the currency will remain at current level, what are your views about the rest of the year, at least from the current society, the current state at its current levels, the hedging impact and of course, the top line growth, what are your base assumptions for the rest of the year? Regarding equipment revenue, this revenue was always a part of our revenue. So it is not a one time revenue that we faced in Q2. Song will continue, have equipment revenue as part of our business, especially, digital business solution, as well as our term and sales. So, equipment revenue will be there. So I think, this is, this is responsible for this question. So this is not just temporary in our, in our results. So on the, on the second question, It is very difficult to comment on insurance level, but I think, I think the inflation is becoming under control in Turkey. Also, we do see currency decrease after the election. So we don't expect any election next 4 years. So it seems, things should be stable and getting more and more stable right now. So I think it's not easy to comment on this one, but, I do see that things are improving. And as a follow-up about the equipment revenue side, could you compare with the profitability of over in the proxy of your overall business, is it does have any dilutive effect or improving FX. Thank you. Actually, I would say, I don't see any improving effect. But, I don't see dilutive effect as well because, you know, we have equipment sales increase, we do keep our, EBITDA and EBIT margin similar levels. So this is not the case. The reason for that, we are utilizing our existing, resources to use multiple functions. So, for instance, we don't have additional sales team for selling equipment. We don't need such a thing. Or our G and A expense also already expanded. So we have very limited G and A expense on the expenses. So these are operating our our margins. And also, we see that not nominal EBITDA part that we see that positive impact as well. So I think this is relatively, quite good business. Okay. And my last question is about the subscriber growth. After fourth quarter, we see some increase in your subscriber base and we see your price are more competitive. Could you give us some clear about your price index and, you know, are you planning to gain further quantity, how do you see the competitive environment for the rest of the year? Thank you. Obviously, you know, on the competition side, we don't see a lot of change We believe in the right pricing, reflecting the value that we generate for our customer. Over the past 3 years, we have been able to enrich our services and provide more to our customer. And we con you'll continue our inflationary pricing practice in 2019 as well as by enhancing the value that we owe to our customer. So, obviously, we do we will see that inflation coming under control. So we'll see our pricing strategy based on this one as well. Okay. Thank you. We have no further audio questions. Dear speakers, we can now switch to the written This is Korhan. We have two questions from the web. Hi. Hi. Hi. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Hi. Good evening. Considering your consolidated revenue growth in the first half of twenty What is the reason behind maintaining a slightly lower than this as your full year guidance? For revenue growth. So what are your expectations in the second half? Let me give you something about it. There are a couple of factors, which will be resulting in a revenue growth slowdown in the second half of the year. The contribution of international revenue will be lower as the positive impact of currency movement will lower the second half of the year. The significant Turkish that a depreciation happened in Q3, twenty eighteen. We have already seen the slowdown in customer finance business revenue in the first half of the year due to regulatory limitation on customer loans post smartphone financing, its revenue will likely to turn negative in the second half of the year due to the contraction of the loan portfolio. According to we also expect the devices in our group revenue to slow down as a result of this regulatory limitation. We will be transferring our sports betting operation to the winning party of sport of the tender as of August. These are the things that we see that our revenue, slowdown, but we expect slowdown in this area We will continue to see the strong service revenue growth based on all time high ARPU trends. Accordingly, we will be maintaining our operational profitable we have signaled, this by upgrading our EBITDA margin guidance this quarter. Regarding EBITDA margin guidance revision in the light of our 6 months financial and operational performance and our expectation for the second half of the year, we are confident of exceeding our previous guidance. We believe that there will be no further revision. One more, from the web also, Murat Ineb, actually, at King, is there a likelihood of reversal of 60,000,000 provisions related to concerns? And what was the reason, for this liability? Actually, there is no likelihood of any reversal of this provision. The main reason for this provision once Casa had to terminate its active sharing contract, with the local operators, this is a change of consulting company. After, acquisition of the shares by, Kazakhstan. So it's a one off event. There's no likelihood for reverse, and we are not expecting further, in payment from this transaction. Another question also from Rajmillan Lynch. Okay. Quarter on quarter, increasing depreciation was 17% what was the driver for such a increase? Actually, Q on Q, increase in depreciation is less than 17%. It is 7%. And the main reason behind the increase in depreciation is increase of network investment as well as capitalized expenses under IFRS 1516. Okay. So for one last time, can you check if there are any further questions? Then you call for it? Do you do you participate? We have no, dear speakers, we have no further audio questions. Okay. Then, thank you very much all. This is the end of our call. We thank our Steve and CFO for their wonderful presentation. And thank you all for taking the time to participate in our call. See you next time. Bye bye. This concludes today's conference call. Thank you for your participation. You may now disconnect.