Ladies and gentlemen, thank you for standing by. I am Gülte Yokuru, call operator. Welcome and thank you for joining the Türk Telekom conference call and live webcast to present and discuss the second quarter 2025 financial and operational results. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. We are here with the management team, and today's speakers are CEO Ümit Önal and CFO Ömer Karademir. Before starting, I kindly remind you to review the disclaimer on the earnings presentation. Now, I would like to turn the conference over to Mr. Ümit Önal, CEO. Sir, you may now proceed.
Hello, everyone. Welcome to our 2025 second quarter results conference call. Thank you for joining us today. The U.S. President's announcement of Liberation Day tariffs and brokered deals between the U.S. and other countries since have shaped the macro global scene and financial markets. Geopolitical tension between Israel, Iran, and the U.S. has subsided in a reasonably short period of time. Tense relationship between Fed and White House kept financial markets worried. At home, the CBRT stayed put in May-June meetings but resumed its easing cycle in July by cutting policy rate 300 basis points to 43%, alongside an accommodative disinflation process which has placed June CPI to 35% and July to 33.5%. We have seen our businesses performing well over the second quarter in continuation of the strength we observed in the prior one.
We have not observed any material shifts in demand or subscriber behavior apart from those driven by usual seasonality and holidays that fell into the second quarter. In a similar trend to the first quarter, both revenue and EBITDA growth beat our expectations. In the mobile sector, MNP markets saw a record level of activity as competition turned fiercer. In fixed internet, activity was relatively milder in low season. Data consumption remained solid in the quarter. Now, starting with the financial and operational overview on slide number three. Consolidated revenues increased by 13% to TRY 50 billion. Excluding the effective accounting impact, revenue growth was also 12%. Once again, 23% of EBITDA growth year-on-year was well ahead of the revenue growth, pushing the EBITDA to TRY 21 billion, along with a solid 340 basis points margin expansion year-on-year to 42%. Net profit for the period came in at TRY 5 billion.
CapEx stood at TRY13 billion. Unlevered free cash flow was TRY 7 billion compared to TRY 4 billion in the second quarter of last year. Net leverage improved 2.7 x. Slide number four, net subscriber additions. Our total subscriber base reached 54.2 million, 573,000 net additions Q-on- Q. Excluding the 165,000 loss in the fixed voice segment, quarterly net additions were 738,000, significantly higher both Q-on- Q and year-on-year. All our segments performed better than we expected during the period, but mobile once again led the pack with an extraordinary contribution. Fixed broadband base rose to 15.5 million. Subscriber dynamics were not materially different from the first quarter in the FBB market. Holiday season and seasonality overall dominated the activity in the reporting period.
We recorded 39,000 net subscriber additions in the second quarter, a tad ahead of our expectations in the lead of the retail segment where both activations and churn scored better. Overall churn rate slightly dropped Q-on- Q and year-on-year, a significant achievement despite increased recontracting volumes, underlining our superior position as a wholesaler and retailer in the fixed internet domain. Mobile segment added 678,000 subscribers on net basis in its highest performance since Q3 2022, pushing up the total base to 28.5 million. While the postpaid segment added 810,000 subscribers, reaching the historically highest figure, the prepaid segment posted a 132,000 net loss, both performing better than we expected. Second quarter activation volume exceeded our expectations and reached its historically highest quarterly score. This was driven by the postpaid segment, but prepaid acquisitions were also higher compared to the same period last year.
Similarly, subscriber churn was higher than in the same period last year and above our expectations due to increased competition. Slide number five, fixed broadband performance. We posted pricing actions in the second quarter following our first revision in retail prices in March. Yet, we have introduced the first price revisions in the wholesale segment starting from July 1. Subsequent to that, we adjusted the retail segment prices for the second time on July 11. So far, we have seen only a few ISPs adjusting their prices accordingly. A broader attendance should be on its way in our view, although the alignment seems to be taking longer than we expected despite changes in wholesale pricing. The latest actions and the competitors' behavior will likely shape both the subscriber dynamics and ARPU evolution in the coming periods. Both recontracting and upselling volumes scored higher Q-on- Q and year-on-year.
ARPU growth has proven our ability to turn higher volume of contract renewals into an advantage through recontracting and upselling, a performance we expect to maintain in the second half, together with the recently introduced pricing actions. 50 megabits and above packages made 73% of new sales and 64% of recontracting. Average package speed of our subscriber base increased by 51% year-on-year to 83 megabits. 55% of our subscribers now use 50 megabits and above packages compared to 41% a year ago. The share of fiber subscribers in our total fixed broadband base increased to 91% from 87% a year ago. ARPU growth remained very strong in the second quarter at 17%. That has driven overall FBB revenue increase to 19% year-on-year, together with a 1.5% expansion in average subscriber base over the reporting period. Moving on to mobile performance, slide number six.
In the mobile sector, competition picked up to levels we are not used to seeing in the second quarter and resembled last year's peak in December. The MNP market volume surged to a level unseen before in lack of pricing actions but abandoned all quarter-round promotional activity across the board, inducing subscribers to shop around. In this backdrop, we see that our three years-long net port leadership in the MNP market prioritizes the fine balance we carefully maintain between subscriber and ARPU growth. Within these dynamics, surpassing 2.5 million, total postpaid additions over the last 12 months also reached a new record. The ratio of postpaid subscribers in total portfolio peaked to 77% as of Q2 compared to 74% a year ago. Mobile ARPU stayed on a healthy trend with 8% growth year-on-year, where postpaid ARPU expanded 11% but prepaid ARPU contracted 13%.
That, together with a steep 7% growth in average subscriber base, led to a 15% increase in mobile revenues. On slide number seven, let's take a look at the full-year outlook. Second quarter performance boosted our half-year figures to levels that necessitate an upward revision to our 2025 full-year guidance. ARPU performances were strong throughout the first half. We expect robust ARPU performances to continue in the second half of the year, along with the fresh pricing actions taken in fixed internet and mobile in July and August, respectively. As of the first half, we are looking into 15% operating revenue growth and 41% EBITDA margin, comparing favorably to our earlier expectations in respective ranges of 8%- 9%, 8%- 9%, and 38% - 40%.
We now expect to record around 10% operating revenue growth and around 41% EBITDA margin for the full year 2025, taking into account the high base in revenue growth in the second half, low seasonality in EBITDA margin in the final quarters, and some pickup in certain OpEx items in the second half. Also, we now expect the CapEx intensity ratio to be around 29% versus 28%- 29% before. While the change in our revenue and EBITDA margin guidance reflects better-than-expected performance both in revenue generation and cost management, the change in CapEx intensity ratio is driven by minor upward revisions to our year-end macroeconomic assumptions, as well as upscaling of certain projects in mobile investments. Slide number eight. We are taking a strategic step to broaden our regional footprint.
We achieved a significant milestone by launching our first-in-kind international fiber infrastructure initiative in the Turkish Republic of Northern Cyprus. Following a bilateral protocol signed between the governments of Türkiye and TRNC, Türk Telekom will undertake the fiber transformation in the country. We will deploy fiber infrastructure and offer retail broadband services across the country, aiming for high-speed connectivity and the highest possible customer experience for households and businesses. The expansion is set to build upon our existing role as the sole operator, providing international internet access to Northern Cyprus via two submarine fiber routes from Türkiye. Currently, broadband services in TRNC are largely based on low-speed wireless connections, with over 80% of fixed broadband subscribers relying on wireless technologies and around 1/2 of subscribers receiving speeds below 10 megabits. Fiber penetration remains extremely low.
With this project, Türk Telekom aims to serve the full broadband value chain in the country and unlock the potential to lead a digital transformation in TRNC's connectivity landscape. This initiative marks our first international expansion as an infrastructure developer and a retail fixed internet provider, allowing us to showcase our strength in both, as well as paving the way for further opportunities in regions within close proximity. Before I conclude my presentation, I would like to make a few remarks. We are extremely pleased with the second quarter performance of our business segments. We have recently been mandated to transform TRNC's infrastructure. We are on the verge of renewing our fixed-line concession agreement for about two and a half decades, which should enable us to strategically act on a clear path where we are destined to strengthen Türkiye's digitalization.
We are well prepared for the soon expected 5G tender with a subsequent rollout plan. Clearly, we are about to step into a whole new and exciting era for the sector and for Türk Telekom, and we are truly fascinated by the abundance of the opportunities ahead of us. We remain committed to financial discipline and sustainable growth and meeting our stakeholders' expectations at the highest possible standards. Thank you. Ömer. The floor is yours now.
Thank you. Good morning and good afternoon, everyone. We are now on slide number nine: financial performance. In Q2, solid revenues increased above 13% year-on-year to TRY 50 billion compared to TRY 45 billion in the same period of last year. As a result, total revenues for the first half reached TRY 99 billion, up to 16% on an annual basis.
Excluding the effective accounting impact, Q2 revenue was TRY 47.5 billion, up nearly 12% year-on-year, including increases of 19% in fixed broadband, 15% in mobile, 20% in TV, 24% in corporate data, and 1% in fixed voice, as well as contractions of 13% in international and 17% in other segments. Fixed internet and mobile have continued to lead growth, together making 78% of operating revenue in Q2. The two lines of business made the largest contribution to growth, with more than TRY 5 billion higher revenues in total year-on-year. The strong performance was maintained thanks to proactive base management, pricing behavior, and robust recontracting and upselling performance. We expect the strength in fixed and mobile revenues to continue in the second half of the year, with similar drivers in place in addition to the upcoming high seasonality.
While corporate data added another TRY 0.6 billion, ICT solutions, equipment sales, and international revenues mitigated that contribution with a total of TRY 0.9 billion drop year-on-year. The change in corporate data can largely be explained by the contribution from the pricing of contracts, whereas it is mostly attributable to an unexpectedly milder year in general in ICT solutions. In our international business, the decline is largely owing to current impact. Moving on to EBITDA. Direct costs fell 4% year-on-year. Similar to the previous quarter, the decline in interconnection costs was driven by currency and inflation accounting impact. The drop in equipment and technology sales costs was parallel to contracting revenues from ICT solutions offered by Türk Telekom and its subsidiary Inova in the period. Commercial costs went up by 16% year-on-year and other costs by 9%.
The annual increase in commercial costs was mainly driven by higher spending on marketing, advertising, and brand and corporate communications, in line with the trend observed in the previous quarter. Under other costs, network expense dropped by 7% year-on-year, while personnel costs rose by 16%, largely owing to the regular non-union personnel salary adjustment we take at the beginning of the year. Semi-annual adjustment to union personnel salaries has also taken effect starting from March. In Q2, OPEX to sales ratio dropped to 58% from 61% in the same quarter of the last year and 61% in the previous quarter, thanks to continuously improving operational leverage. As a result, consolidated EBITDA grew by 23% year-on-year in Q2 2025 to TRY 21 billion from TRY 17 billion in the same period of last year, along with a solid year-on-year margin expansion of 340 basis points to 42%.
Excluding the effective accounting impact, EBITDA margin stood at 44%. In the first half, EBITDA rose by 25% year-on-year to TRY 40 billion, while the margin improved by 300 basis points to 41% compared to the same period of last year. Operating profit rose by 68% year-on-year to TRY 11 billion in Q2, bringing the first half's total to TRY 20 billion, up to 78% year-on-year. Coming to the bottom line, TRY 8 billion of net financial expense was 6% lower in annual comparison but 31% higher on a quarterly basis. Annual trend can largely be explained by a 27% increase in USD, Turkish lira, and Euro Turkish lira rates on average behind inflation. Lower net debt aimed at healthy operational performance and free cash flow generation also helped. However, the quarterly change in exchange rates was about 10% ahead of inflation in the same period.
Additionally, the impact of the volatility in financial markets, which was triggered in March, was visible for market interest rates and hedging costs, as expected. We think Q2 net financial expense may look more favorable Q-on- Q as the market restored calm and CBRT resumed its easing cycle in July. We recorded more than TRY 2 billion of tax expense in total, largely driven by current taxes. Effective tax rate decreased to 33% from 41% a quarter ago. As a result, we generated TRY 5 billion of net income in the second quarter, up 14% annually. With that, net income exceeded TRY 10 billion in the first half, up 29% year-on-year. Moving on to slide number 11, Q2 CapEx spending was more than TRY 13 billion, 39% higher year-on-year as investments picked up pace in line with the annual trend.
CapEx rate reached TRY 22 billion, with accelerated spending in the second quarter, carrying the CapEx intensity ratio to 22% in the first half. Moving on to slide number 12, debt profile. Cash and cash equivalents, of which 32% is FX-based, total TRY 10 million. The share of local currency borrowings within the total debt portfolio was 2%. The FX exposure included U.S. dollar equivalents of $1.7 billion of FX denominated debt, $1.4 billion of total hedge position, and $77 million of hard currency cash. FX protected time deposit balance entirely diminished as of April. Net debt EBITDA fell below 0.7x from 1.1 a year ago. Obviously, we have consciously deliberated our balance sheet for some time now in order to comfortably accommodate the upcoming multiple investments, including the 5G tender and rollout, renewal of the fixed-line concession agreement, and fiberization of Northern Cyprus.
At this point, we believe we stand financially fit and sound to attract several financing options for this critical technology transformation project, including but not limited to debt issues in the form of greener sustainable instruments, ESA loans, and asset sales. We are now on slide number 13. We recorded $210 million U.S. dollars short FX position as of Q2. Excluding the ineffective portion of the hedge portfolio, namely the PCCS contracts, our short position was $260 million U.S. dollars. Finally, we generated TRY 7 billion of unlevered free cash flow in Q2 compared to TRY 8 billion in Q1 and TRY 4 billion in the same quarter last year. A 66% annual increase can be explained by strong operating performance, while quarterly decline is owing to prior quarter's high base boosted by the collection of remaining insurance coverage for the 2023 earthquakes.
With that, unlevered free cash flow in the first half has more than doubled to TRY 15 billion compared to the same period of last year. This concludes my presentation. We can open up to Q&A session.
Ladies and gentlemen, at this time, we will begin the question-and- answer session. I would like to inform you that Türk Telekom will have translation during the Q&A session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Evgeniya Bystrova with Barclays. Please go ahead.
Yes. Hello. Good afternoon. Thank you for the presentation and congrats on the results. I have several questions. My first question is related to currency protected deposit. Is it right to assume that the balance was used to repay some part of debt, or how did you spend the cash? My second question is related to potential bond issuance. I know you received an approval from the Capital Markets Board of Türkiye, so just wondering if you have any comments on the timing. Finally, my final question is about a potential new mobile operator coming to the market. If you could please provide any comments on that, it would be very helpful. Thank you.
For the currency protected deposits, the last remaining balance of $20 billion was due in April and closed, leaving no remaining balance on that side. For your second question of financing, yes, we have received the Capital Markets Board of Türkiye approval for Eurobond issuances. That is mostly related to our expected 5G license auction and renewal of concession financing. We are planning to tap the market if needed, but still, we don't have the magnitude and the schedule of these possible payments. You know, we have currently in the market one Eurobond. It is about $500 million, and we see we have still room for additional Eurobond issuances up to, let's say, $1 billion. Yes, we have received this approval, but this does not mean that we will use this limit. This is the upper bound for this limit.
Additionally, we may also consider the Sukuk issuances in the Gulf since there is an appetite from this region. I am sorry I didn't understand your third question.
Yeah. On the third question, there were news of Turkcell potentially coming in 2026 to become like the fourth mobile operator. I just was wondering if you could provide any color on that. Yeah.
[Foreign language]
Allow me to answer your question. Thank you very much for your question, first of all. We haven't yet received any official or definitive information on this matter, and just like you, we are following the risk.
[Foreign language]
However, I can say that when we examine the dynamics, the competitive landscape of the mobile market in Türkiye, we see that the market is currently reasonably competitive. Therefore, clearly, I can say we don't believe the market needs a fourth mobile operator in these respects, and we don't expect this.
Thank you very much. I appreciate the comment.
Thank you.
The next question is from the line of Cenk Adanir with HSBC. Please go ahead.
Yes. Hi. Thanks for taking my question. I have a question on the dividends policy. I remember you said that 41% margin needs to be over 40% for you to consider dividends. Now that your guidance is for 41% for the year, how does that place the dividend policy? The second question is on the competitive environment in the market. It has been quite competitive in the early part of the year and late last year. Has there been any change in the competition? Thank you.
[Foreign language]
I will try to answer your question. Simply, I can put it this way that there is no change in our policy, I mean the dividend policy. As you know, this is a decision that is taken on the shareholder level. We have the 5G auction ahead of us. We have the concession roadmap, which is about to be finalized very soon. We also have many big projects, some of which we have shared within the information that we shared with you. We believe that our shareholders will combine all of them together and take the decision accordingly. As the executive team of this company, we are trying and working to ensure the healthy and financial sustainability of our company, also protect the rights of our shareholders and investors. We propose and the shareholders take the decision as they know.
[Foreign language]
Is it possible for you to repeat your second question?
Just talking about the competition in the market, it was quite competitive towards the end of last year and also early this year. Has there been any change in the competitive behavior in the mobile market especially? Thank you.
[Foreign language]
We can say that it was a very highly competitive quarter, actually a half-year, but the competition environment in the quarter was also very difficult.
[Foreign language]
We can say that in the second quarter, the competition took up its pace even further, and it continued this way in many working areas.
[Foreign language]
Still, with that, I can say that our activation numbers within the quarter were very high, and even the highest among all the quarters.
[Foreign language]
We also intentionally ended our leadership position in the MNP market in the network market. It was a very intentional decision because we don't want to be in a competition solely based on price.
[Foreign language]
Also, I would like to highlight the fact that we had a record level of ARPU increase and also a record level of net subscriber increase.
[Foreign language]
Because it has been our policy for so long so far, you know, it's very important for us to have a go-to-market issue since we want to have a healthy ARPU and subscriber balance, and we follow this policy strictly.
[Foreign language]
We have been gaining market share for three years consecutively, and it's very gratifying to see that it continued the same way in the first half of 2025.
[Foreign language]
We also should say that the ARPU levels are dilating within the competitive.
[Foreign language]
The ARPU levels of our company are not dilating within this competitive environment.
[Foreign language]
Thank you.
As a reminder, if you would like to ask a question, please press star and one on your telephone. We have a question from the line of Cemal Dermitaş with ATA Invest. Please go ahead.
Thank you for the presentation and congratulations for a good result. My question is about the balance sheet side's VCA increase in your FX and financial expenses in the second quarter. Could you further elaborate that? Considering the TL depreciation, it looks more significant than I thought. Is it related to hedging or the volatility? Because after the first quarter, we see volatility in the markets. Does volatility also affect your financial expense generally? Specifically in the second quarter, did we see any impact of that volatility due to your hedge positions? Thank you.
Thank you. For the net financial expenses, we have recorded TRY 7.6 billion, decreased by 5.8% year-on-year and increased by almost 21% quarter-on- quarter. The annual difference is driven by the 27% average increase in USD/TRY and EUR/TRY exchange rates, which remained well below inflation during the period.
Also, strong operational performance and cash flow contribute to this decline. Firstly, I am explaining the first half of our first half net financial expenses. Especially for Q2, what has happened? You know, you will remember the impact of the volatility in financial markets triggered in March affected market interest rates and hedging costs as expected. With the rebalancing of the market and the return of the Central Bank of the Republic of Türkiye to its interest rate cutback in July, we believe that financing costs may exhibit a more positive outlook on a quarterly basis in Q2. The cost of hedging has increased almost 9% - 10% for yearly costs in Q2 after the 18 March turbulence in the market.
We may expect it will decline in the third quarter since the cost is declining and, you know, our leverage is still below 0.7 since the net debt over EBITDA is still declining. We may expect it will decline in the third quarter compared to the second quarter. Thank you. Thank you. Thank you for the comments.
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.
Thank you, everyone, for joining us today. Have a nice day. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling and have a good afternoon.