Ladies and gentlemen, thank you for standing by. I'm Constantinos, your call operator. Welcome, thank you for joining the Türk Telekom conference call and live webcast to present and discuss the first quarter 2026 financial and operational results. All participants will be in listen-only mode, 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 zero on your telephone. We are here with the management team, today's speaker is Ömer Karademir, CFO. Before starting, I kindly remind you to review the disclaimer on the earnings presentation. I would like to turn the conference over to Mr. Ömer Karademir, CFO. Sir, you may now proceed.
Hello, everyone. Welcome to our 2026 first quarter results conference call. Thank you for joining us today. Let's go to slide number three. I will start with a quick update on markets and our leading position. Global markets in Q1 2026 were shaped by rising geopolitical tensions and the Fed's cautious stance. The Fed kept its guidance that further easing will be approached carefully, pending a sustained improvement in inflation. Regional tension in the Gulf and geopolitical developments triggered a spike in energy prices and volatility in global risk appetite. In Türkiye, the central bank cut its policy rate by 100 basis points in January, but kept it on hold in March and April in response to heightened global uncertainties and risks to the inflation outlook. The year-end inflation expectation in the April 2026 market participant survey stood at 27.53%.
Amid this environment, as Türk Telekom Group, we remain focused on sustaining our strong operational and financial performance through our disciplined and proactive approach. We started the year with our strategic long-term investments and strong operational and financial results in the first quarter. I would like to emphasize our key investments in our major business, fixed line and mobile, which together represent significant majority of our group revenues and profits. On the fixed line side, we continue to capitalize on our fiber network exceeding 550,000 km as the fixed line concession has been renewed for 24 years. Fixed Internet delivered robust KPIs beyond our expectations, and along with corporate data, contributes to solid revenue growth and healthy margin improvement. Fixed subscribers opts for higher speeds. On the mobile side, as of April, 5G was launched successfully across all provinces in Türkiye.
We offer high speed, low latency and superior mobile network performance, supported by our number one fiber position. Rational competition environment prevails in the mobile market. Operators took pricing actions in January and April. Subscriber acquisition momentum remains strong. Overall, as Türk Telekom Group, we are in a unique leading position in Türkiye to provide integrated digital services to our millions of customers across the country. We are excited about our company's future vision and growth opportunities and remain focused on delivering strong financial results. Let's move next slide number four for financial and operational overview. Consolidated revenues increased by 9% to TRY 65 billion, supported by both fixed and mobile segments, including the IFRS 12 accounting impact, revenue growth was 6% in line with our full year guidance.
70% year-on-year EBITDA growth was well ahead of the revenue growth, pushing our EBITDA to TRY 27.4 billion, along with a solid 300 basis points margin expansion year-on-year to 42.3%. Our net profit increased by a solid 56% to TRY 10.5 billion, supported by strong operational performance. CapEx, excluding solar investments and license, stood at TRY 17 billion. It was higher in year-on-year terms due to our long-term 5G investments. Excluding concession and 5G license related payments, unlevered free cash flow stood at positive TRY 1.7 billion. This figure indicate a decline from TRY 10 billion in first quarter of last year as a result of higher CapEx and one-off base impact in last year from change in net working capital.
Net leverage stood at 0.99 x compared to 0.6 xs at 2025 year-end. Excluding payments of $1.1 billion in first quarter related to concession renewal and 5G license, net leverage would have remained constant. Moving to slide number five, I will provide update on our net subscriber additions. Our total subscriber base exceeded 57 million with 613,000 net additions QoQ. Excluding the 163,000 loss in the fixed voice segment, quarterly net additions were 776,000. Fixed broadband subscribers slightly declined by 19,000 QoQ to 15.4 million.
Despite the retail price action we took in January, the activation volume was similar to what we have seen in the first quarter of last year. Q1 churn increased modestly in year-on-year terms while decline Qo Q under the impact of accelerating contract expirations. Both retail activation and churn performance are positively impacted by the acceleration in our greenfield fiber investments. Retail net additions exceeded our expectations thanks to lower churn, who lesale subscriber base didn't change materially. Mobile segment added 712,000 subscribers on net basis, pushing up the total base to 32.2 million. Both activation and churn volume remained higher in year-on-year basis, driven by the postpaid segment. Mobile net additions were supported by 571,000 of M2M additions by the corporate segment. Subscriber growth remained on a strong track with 87,000 net postpaid additions, excluding M2M.
Postpaid and prepaid segments added 500- , sorry, 658,000 and 54,000 subscribers. If you can go to slide number six, let's look at our fixed broadband performance. We had a very strong performance in fixed broadband. We introduced a retail price revision for new acquisitions in January as most players in the market followed our price adjustments. Price parities have rebalanced in favor of our retail activations by the end of the quarter. Subsequently, we adjusted retail segment price for existing customers in March. The contracting volume scored significantly higher year-on-year. ARPU growth remained strong at 18% year-on-year in Q1, despite the last year's high base of 19%. The combination of solid upsell and sustained recontracting performance along with successful price implementation enabled us to maintain high growth.
We expect the robust ARPU trajectory to continue in 2026. Average packet speed of both our total and retail subscriber base increased by 61% year-on-year to 111 and 120 MB. 66% of our subscribers now use 50 MB and above packets compared to 51% a year ago. Moving on to mobile performance, let's go to slide number seven. Our strong customer growth continued in mobile segment. The rational competitive environment visible by the end of 2025 prevailed in the first quarter of 2026. Price revisions were made in January and April. MNP market size, which was higher in the first quarter of 2026 in year-on-year terms, declined slightly from its historical height at the end of 2025.
Postpaid segments recorded 658,000 net additions in the first quarter. With that, total net additions surpassed 712,000 in total. The ratio of our postpaid subscribers in total portfolio rose to 80% from 76% a year ago. Excluding M2M, postpaid base added 87,000 subscribers. Mobile ARPU excluding M2M came down by 4% year-on-year over last year's strong 21% base. In the first quarter of 2026, we are seeing a normalization in annual mobile ARPU growth, as already seen in the third and fourth quarters of 2025. Let's go to slide number nine to update you on our summary financial performance. Consolidated revenues increased by 9% to TRY 65 billion from TRY 60 billion in the same period of the period year.
Fixed broadband, corporate data, and ICT projects led growth. IFRS 12 revenues rose strongly in the quarter, driven by the acceleration in fiber investments. Excluding the IFRS 12 accounting impact, Q1 26 revenues reached 61 billion TRY, up 6% year-over-year, including increase of 17.8% in fixed broadband, 15% in TV, and 28.1% in corporate data, while mobile, international, and other revenues declined by 1%, 27.5%, and 0.7% respectively. Fixed voice remained flat year-on-year. Fixed internet and mobile revenues together accounted for 77% of operating revenue. Fixed internet made the largest contribution to growth with TRY 3.2 billion higher revenues in total year-over-year.
Corporate data and ICT solutions added a further TRY 2.3 billion, while call center international revenues and equipment sales declined by a combined TRY 2.1 billion. Mobile revenues were lower by TRY 253 million. ICT solutions recorded significant growth supported by new projects won by our subsidiary İnnova. The decline in call center revenues in line with our expectation was attributable to projects that concluded in the second half of the last year. While our international business was impacted by the decline in international voice revenues, which is kind of a seasonal business with low margins. Moving on to EBITDA. Direct costs fell 3.5% year-over-year. The decline in interconnection cost was driven by contracting international voice revenues. The equipment costs were lower year-over-year as well.
Commercial costs rose 27.7%, while other costs declined 2.5% year-on-year. The increase in commercial costs was driven by higher spending across sales and marketing and advertising line items. Within other costs, network expense increased 1.3% year-on-year. The 4.1% year-on-year decline in personnel costs can be explained by the reduction in headcount at our call center subsidiary due to project completions in the second half of 2025. Excluding the IFRS 12 accounting impact, OpEx to sales ratio improved from 61% in Q1 2025 to 58%, pointing to continued enhancement in operational leverage. Consolidated EBITDA increased by 17.1% year-on-year to TRY 27 billion, while the EBITDA margin improved by 300 basis points year-on-year to 42.3%.
Excluding the effect to our accounting impact, the EBITDA margin expanded by 395 basis points year-on-year to 44.1%. Coming to our net profit. Net financial expenses increased by 27% year-on-year and 66% QoQ. Interest income declined from TRY 2.3 billion to TRY 659 million QoQ as we made a payment of $1.1 billion in the first quarter regarding 5G and concession renewal. Moreover, FX hedging expenses rose 108% year-on-year and 28% QoQ on the back of higher FX liabilities. The average hedge cost remained flat on QoQ basis.
On the balancing side, monetary gains surged by 80% year-on-year to TRY 14 billion, as non-monetary assets of 5G license and fixed concession extension were included in our balance sheet in the first quarter of 2026. These long-term assets revalued each quarter with inflation index. In Q4, a total expense of TRY 7.1 billion was recorded, largely consisting of deferred tax expense. The effective tax rate was 40%, mostly due to inflation accounting. We assess that the deferred tax expense recorded will have a very limited impact on near-term cash flows, with the total effect spread over an extended time horizon. Overall, Türk Telekom Group recorded a net income of TRY 10.5 billion for the period, up by 56% year-on-year, driven by strong operational performance.
Let's go to next slide number 10 to review our CapEx numbers. CapEx spending rose to TRY 17 billion in the first quarter, compared with TRY 10 billion of last year on the back of higher 5G rollout expenditures. As usual, fixed line CapEx, most importantly, the fiber access and core network investments took higher share in total with 51% weight. 23% of spending went to mobile, while another 50% went to IT and project investments, and rest to other investments. Moving on to slide number 11, you can see our debt profile. Türk Telekom Group had total TRY 30.4 billion cash and cash equivalents, of which 56% is FX based.
The FX exposure includes U.S. dollar equivalents of $3.3 billion of FX-denominated debt, $2.7 billion concession and mobile license liabilities, $3.1 billion of total hedge position, and $382 million of hard currency cash. Net debt over EBITDA increased to 1x from 0.6x as of 2025 end on the back of 5G and concession renewal payments. Net debt over EBITDA would have remained flat QoQ excluding those payments. In January, we paid the first installment of 5G license, namely $365 million and + $215 million VAT, and the VAT amount of concession extension worth of $500 million. By the end of the year, we will have also paid the second installment of 5G license and the first installment of concession extension.
We prepared detailed schedule of payments and income statement and balance sheet impact for your easy reference. You can find it in the appendix of this presentation. I want to emphasize that increase in FX liabilities is due to our longer-term investment in 5G spectrum and concession. Our future payments are extended over a long-term period until 2035. The payments will be in Turkish lira equivalent. We also actively manage our FX exposure risk through hedges. While concession and 5G liabilities bring additional FX exposure, on the asset side, they are revalued under inflation accounting and hence creating monetary gains, which as a result balance P&L impact overall. Let's go to slide number 12, where we compared to $102 million as of year-end due to booking of $2.7 billion 5G and concession renewal liabilities.
Excluding those payments, our net FX loan position is + $162 million. We generated + TRY 1.7 billion of unlevered free cash flow in Q1, excluding 5G and concession renewal payments, compared to TRY 3 billion in Q4 and TRY 10 billion in the same quarter last year. Annual decline is mostly due to higher CapEx. Moving on slide number 13. We provide update on 2026 full year guidance. Our business performance as a whole was in line with our expectations in Q1. We expect operational revenue growth to accelerate in the remaining quarters of 2026. First quarter inflation came in slightly higher due to regional geopolitical developments, putting pressure on real growth.
We will update our revenue growth guidance if necessary based on the performance of our business line in first half and the course of inflation. We currently do not see major downside risk to our 41%-42% EBITDA margin guidance. As Türk Telekom Group, we remain cautious, especially regarding inflation expectations and prudently monitoring regional geopolitical developments and taking necessary actions. This concludes my presentation. Thank you for your listening, Now we can open up the Q&A session.
Ladies and gentlemen, at this time we will begin the question and answer 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 Cemal Demirtaş with Ata Invest. Please go ahead.
Thank you for the presentation, and congratulations for good results. My first question is about your FX position, short FX position. It's TRY 2.5 billion. Could you further elaborate this in terms of risks going forward? Most of the, you know, possibly it's gonna be critical for the next two to three years. What are the plans on your side? I would like to understand the hedging costs. Did you see any increase in the hedging costs in April compared to March? Do you see any risk on your guidance for CapEx considering the, you know, the risks on the FX side? This could be very helpful from the CapEx and FX position side. The other question is about the business side.
We see some decline in the mobile side. Could you also further elaborate that? Connected with this, how do you see the outlook so far for the second quarter in terms of the business lines? Thank you.
Thank you. For your first question of the FX position, actually we have, we don't have a short position. We have long position if we exclude our future 5G and concession payments. So that means, for our, let's say financial debt, financial payments, we are securing our FX position. When this payment happens, the next schedule is the December of this year. I am referring our huge payments, the installments of the 5G and the concession payments that will be made in December. After we have made these payments, we will also hedge this open position. We are planning to hedge this open position.
Right now, our main strategy is to hedge our financial debt. Based on the hedging cost, actually, we are using the cost declining instruments for our hedging policy. We have access to onshore, offshore, and also, central bank NDF channel. We are using the lowest cost for these hedging transactions. The average cost of hedge didn't change compared to last quarter of 2025. It was, I mean, it was similar for the first quarter. In April, we have seen some, in April, I mean, from the payment side, from the cost side.
In April, we have witnessed slightly an increase for hedging costs. The main factor of our expenditure for this hedging transactions comes from the hedge volume. The payments for 5G and concession in the first quarter with their VATs, as a total, it is $1.1 billion. That's increased our total hedge amount. The main difference comes from this hedge volume. With the help of the disinflation program of central bank and the government, as we have witnessed in the second half of the last year, the hedging cost, we are expecting to decline in the hedging cost, but hedging volume will be similar till the end of this year.
I hope this answers your first question. For your second question, CapEx guidance. You know, we have our guidance was, our guidance is for this year is 23%-24%. It was realized 33%-34% for this year. The last year realization was somewhere 29%. The main difference was coming from our mobile investments for the 5G rollout. The first quarter realization is 26.3% as we have announced. Based on the FX increase, unexpected FX increase, our budget numbers are in nominal terms.
We try to limit, we try to be in the boundary of this budgetary volume in case of an unexpected FX shock. Right now, we are still stick to our guidance for the CapEx, but we cannot predict easily what will happen since there is a regional conflict, and it will, of course, affect the supply chain. We haven't seen its effects in our CapEx spending at the moment. There will be some effects. We are admitting that. On the other hand, our contracts are not one year term. They are three to four years of term. That fixes the price of our CapEx spending. That will also help us.
For your third question, the business side of mobile. Our revenue growth is, you know, the total revenue growth is almost 6%. The inflation was for the first quarter almost 10%. That was beyond our expectations. That affects the revenue growth, the increase in the inflation, higher than the expectation. We are still in line with our budget targets for the first quarter since the fixed broadband compensated our mobile side. Basically for the mobile, maybe you are referring to our ARPU growth.
Yeah.
Yes.
The mobile parts, there are two main effects we can state. One is base effect. The other is inflation. For the base effects, we have realized very higher ARPU growth in the late 2024 and 2025. That is one reason. Another reason is the competitive environment in 2025. That happens, let's say, in the middle of the year. We saw a rationalization and normalization at the end of the last year. For this year, we are also witnessing the continuation of this normalization. Since we and other operators could be able to make their price revision.
For January, we have 30% of increase in mobile, and for April we have 15%. With the help of this price adjustments and with the help of this normalization in the market, we can expect a recovering revenue growth and ARPU growth. It will be in the second half of the year, I can say.
Yeah.
Uh, and-
Thanks for the answers.
Thank you.
The next question comes from the line of Madhvendra Singh with HSBC. Please go ahead. Thank you.
Yes. Hi. Thanks a lot for taking my question. I have a few quick questions. The first is, maybe I missed it in the comments, but what has been the price actions this year? If you could share that. I think the last price hike was in January, but if you could talk about any further price actions you have seen so far. The second question is on your, you know, energy costs. I understand that most of your network is on grid power. Have you seen any price hikes on the electricity side? If you could share that. Any anticipation of higher electricity prices, that will also be great.
Then the final one is on the, you know, under the new fixed concession and licensing, you know, which we have received for 5G and all, is there any change in the asset ownership clauses or is the asset still owned by the government and you just have the right to operate it? If you could share any color around that. Thank you.
For your last question, is it for fixed or mobile site for the ownership of asset?
For both, fixed and mobile. Thanks.
Thank you. For your first question about our price actions of this year. For the mobile, we have 30% adjustment in January and 13% in April for the mobile. We have two price actions for the mobile site. For the fixed site, in January, for 21% for new activations and 17% in March for the existing customers. These are the our price actions of this year. For energy costs, Yeah, you know, we are both operating in fixed and mobile infrastructure. We have electricity consumption in our business, and we meet the majority of our electricity needs from the free market and national tariffs.
Although we observed increased volatility in the market prices from mid-February onwards, the first quarter results were in line with our expectations. The Energy Market Regulatory Authority increased retail electricity price by 6% for the lower tier and 18% for the highest tier of the public and private services sector subscriber groups. It is effective in fourth of April. I mean, it is lower than our expectations, the increase in the electricity by the government. Our energy expenses, while decreased by 14% year-on-year, constitute almost 5% of our OpEx base in the first quarter of 2026. This rate was 6.3% for the whole year of 2025. Also we have solar power plant. It is now operational.
Installed capacity of 96 MW. It is operational in the beginning of this year. It will meet 15% of our whole consumption. We will have two more power plants. As a total, we are expecting to meet 65% of our whole consumption from this solar power plant. Additionally, for the climate environment of Türkiye for this year, because of the rains, the hydroelectricity plants are fully operational. Their the cost of producing electricity is lower than the than their peers. This is also an advantage for us. In briefly, we haven't witnessed an energy cost up to now.
For your last question, the ownership. For the fixed, the ownership is government. We have the concession for the fixed. For the mobile.
Excuse me.
Okay.
Oh, I'm sorry to interrupt.
For the mobile, all the assets are our own. For the mobile, we will transfer to government at the end of the license period. We have additional comment from our director.
Sure. Madh, as Ömer said, you know, the fixed line concession is a great achievement because as you know, the new concession, they added a new scope. As you know, we have the leading operator, we have all the assets, and as Türk Telekom, we develop the brands, marketing, everything. At the end of the concession, if it is not extended, we have to transfer the assets to the government. Obviously, we always extend it and keep our investments.
It is similar and same, not similar, same for all operators. Thank you.
Thank you.
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 all for joining us today. Have a good evening.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling. Have a good afternoon.