Ladies and gentlemen, thank you for standing by. I'm Constantinos, your Chorus Call operator. Welcome, and thank you for joining the Türk Telekom conference call and live webcast to present and discuss the first quarter 2023 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, Kaan Aktan. 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 2023 first quarter results conference call. Thank you for joining us today. Global markets and the business world were unnerved by the banking crisis on both sides of the Atlantic in the first quarter. While the inflation rates and recession debates continued within both the global and domestic context, Türkiye was shattered by a disaster unseen for nearly a century. The twin quakes centered at southeastern Türkiye affected 11 provinces where 14 million people lived. Ministry of Treasury and Finance estimated the total cost of the quakes around $ 104 billion, approximately 9% of Türkiye's expected 2023 GDP. Obviously, an event of such scale required our immediate attention to so many issues all at once. Yet accurate allocation of resources and efficient coordination of logistics, as well as our superior know-how in customer experience, have assured swift and targeted solutions in a super challenging environment.
Customer behavior was also defined by the quakes, with sudden change in urgencies. With too many moving parts in a mixed quarter, the read-through for different lines of businesses varied. But generally speaking, in both month-on-month and year-on-year comparisons, daily average number of activations dropped in February across Türkiye, but more so in the quake region, of course, while cancellations accelerated in fixed services. Mobile enjoyed historic low churn rate in the quarter in lack of customers' appetite to act at that front. New mobile line sales started gradually peaking up in March, but still fell short of January or prior year's same period levels in broad sense. Cancellations in March maintained February pace or even accelerated in some segments due to postponed activity in February.
Line cancellation or freezing requests were heavy in fixed broadband as we expected, but demand for new connections was also better than we anticipated across all the regions. We have started the year with some positive surprise in revenue growth, demonstrating the customers' growing need and attachment to our products and services. Data usage remains on a robust trend with 11% year-on-year increase in fixed broadband. On the mobile side, data consumption grew by 25% annually to 13.1 GB. Starting with slide number three on our presentation, net subscriber additions. Total number of subscribers declined to 52.5 million, with a net loss of 254,000 during the quarter, largely due to the impact of the quakes on net addition performance across all segments, but also to the ongoing contraction in the fixed voice customer base.
Fixed broadband base remained flat Q-on-Q at 14.8 million, losing 26,000 subscribers on net basis and recording a contraction first time for more than a decade. Fiber subscribers rose to 11.8 million, with 293,000 quarterly net additions. The share of fiber subscribers in our fixed broadband base increased to 80%. Mobile portfolio slightly grew to 25.6 million by adding 112,000 net subscribers in first quarter, thanks to a robust performance in the postpaid segment, which gained 294,000 new customers, while prepaid segment lost 182,000 subscribers owing both to quake and competition-related dynamics. The ongoing decline in the number of fixed voice subscribers has deepened by the quake hit activation and churn activity, reaching 344,000 on net basis during the quarter. Slide number four, financial and operational overview. Revenue growth maintained its accelerating pace on quarterly basis. Consolidated revenues increased by 61% year-on-year, while operational revenues grew 59%.
Consolidated EBITDA rose 16% to TRY 4.8 billion, with an EBITDA margin of 31%. Ongoing OpEx inflation and several one-offs weighed on the margin. Net income of TRY 645 million was 15% higher year-on-year, but 36% lower Q-on-Q, largely owing to a pressured operating performance by the quakes and continued OpEx increase. CapEx was TRY 3.3 billion in first quarter 2023, TRY 42 million of which was quake-related spending. Net debt to EBITDA increased to 1.63x from 1.47x a quarter ago. We expect the impact of the quakes on our subscriber base, revenues, and costs to continue over the coming quarters. On the other hand, we expect to take planned pricing actions both in mobile and fixed services in the remainder of the year. Summer months and tourism season will be important for the mobile business performance, while fixed operations should enjoy some normalization and a stronger footing in the back-to-school period.
Upselling and recontracting remains resilient despite the disruption caused by the earthquakes. Therefore, we expect to see more contribution of those to our revenues in the upcoming periods. Slide number five, fixed broadband performance. In retail fixed internet activations, we observed a better-than-expected activity owing both to last year's low base and more pricing actions coming from the other ISPs in January. Accordingly, demand for new connections was stronger than we anticipated despite the earthquake impact. Churn rate was higher year-on-year, but still flattish Q-on-Q due to a relatively high base in fourth quarter triggered by the October price revisions. With similar dynamics in wholesale business, total number of new activations also improved annually. Churn rate for the quarter came higher year-on-year, but slightly lower Q-on-Q. As a result, fixed internet business finished Q1 with 14.8 million subscribers after recording a quarterly net loss.
We believe the residential dynamics are still fluid in the quake region and will shape in the coming periods. Moreover, even if unused, we don't cancel any lines at this point until our subscribers act at that front. Therefore, we think we will be facing more quake-related line cancellation and freezing requests in the coming quarters and preserve our view that we will incur a slight net subscriber loss over 2023 in our total fixed broadband business. That said, we believe our fixed internet subscriber base will resume its growth in the medium term thanks to further room for penetration increase and ongoing digitalization trends. Although we paused our proactive marketing activities across Türkiye following the quakes, recontracting and upsell performance remained pretty strong under conditions. 35 Mb and above packages made 32% of new acquisitions. Continued focus on high-speed packages in new sales led ARPA 6% higher Q-on-Q.
Annual ARPU growth moved up to 41% from 38% in Q4 . Average package speed of our subscriber base continued rising despite disruption by the quakes on activations, recontracting, and upsells exceeding 35 Mbps as of Q1 with 35% increase year-on-year. Nearly 40% of our subscribers are now on 35 Mbps and above packages. Obviously, the free benefits we provided to our subscribers in the quake region, either to comply with regulators' guidance or through our own initiatives, had and will continue to have an impact on our ARPU and revenue growth. Moving on to mobile performance. Slide number six. All operators revised their prepaid and postpaid tariff prices in December and January. As usual, we have seen promotional activities in January in efforts to support activations in transition to new price levels.
However, in the aftermath of February 6 earthquakes, promotions intensified across the board, but more so in the prepaid segment with prolonged durations. Therefore, it would be fair to say that the December, January tariff revisions were less in effect over the quarter compared to prior rounds of pricing in the mobile segment. Still, all operators remain loyal to inflationary pricing and try to maintain a rational mobile market as proven by another renewal of prepaid and postpaid tariffs in April. Also hit by the quakes, the MNP market, which had recorded its first Q-on-Q growth in five quarters in Q4 2022, made it back to contraction territory in Q1 2023. We preserved our top position in net ports for sixth consecutive quarters despite a stiffer competitive environment. Postpaid managed to record strong 294,000 net adds following the strongest quarterly performance of 2022 in the final quarter.
Although new sales were visibly disrupted in the quake region, they were fairly strong elsewhere. Yet the real helper in postpaid performance was the historic low churn. Accordingly, the ratio of postpaid subscribers in our total mobile base peaked above 67%. We believe the increase in activation taxes at the beginning of the year, at a rate of 122%, might have triggered postpaid to some extent. Though churn rate declined in the prepaid segment Q-on-Q, lower than expected tourist acquisitions and intensified promotions in the market limited new sales performance, hence leading to a net loss. The postpaid trend also played a role we think. We maintain our ARPU growth and controlled base management focusing Prime. Early in the year, we pushed Prime entry level to 25 + 5 GB packages in new sales. We have also started optimizing our existing Prime base to condense it to users of higher content packages.
As such, Prime base contracted to 5.1 million. Accordingly, we expect Prime's contribution to ARPU growth to remain strong in the coming period. Respective 56% and 92% increases in postpaid and prepaid ARPU led 66% rise in blended ARPU. While several free benefits we provided to our subscribers in the quake region adversely affected revenues, additional data package sales, over bundle fees, and significant pickup in top-ups provided robust support. The former is an effect to continue in the coming quarters, but the latter is partly related to boosted social media usage and temporarily increase in need for communication for a few weeks after the earthquakes. The number of additional data packages sold grew by 28% year-on-year, while average top-up amount per prepaid subscriber surged 118%. We are proud to have proven once again our resilience to extreme shocks thanks to our distinguished execution capabilities.
With still above 50% inflation by the end of the first quarter, the ongoing pressure from the macro environment on our financials has been amplified by the impact of the massive quakes. Yet our first quarter performance stayed on track in this most difficult period. We believe our 2023 guidance remains attainable at this point. Finally, I am delighted to share with you that in line with Türk Telekom Group's strategic investment plans and sustainability agenda, we plan to accelerate solar power plant investments in the near future in order to reduce our carbon footprint, contribute to climate risk management, and create financial value. As part of this agenda, Turkish Electricity Transmission Corporation has approved our applications for a total installation capacity of 318 MW electricity. The allocated capacity corresponds to nearly 50% of our current total electricity consumption.
In our view, this development represents a turning point that enhances our company's potential in areas such as contributing to environmental protection, creating energy efficiency, and increasing the use of renewable energy. We believe we will make significant progress towards achieving Türk Telekom Group's sustainability goals with the initiatives that we will implement in the coming periods. Now I will hand over the call to Kaan to discuss our financial performance in detail. Thank you.
Thank you very much. We are now on slide eight with financial performance. The positive momentum consolidated revenue moved into 2023, placing the first quarter growth rate at 61% versus 55% of last quarter. Fixed internet and mobile ARPUs continued their climb despite the dilutive impact caused by several free benefits granted to subscribers affected by the quakes. It trend to remain in the coming quarters.
Moreover, we paused all our proactive marketing activities across Türkiye immediately after the quakes and resumed normalcy only gradually. On the positive front, upsell and recontracting strongly supported ARPU growth both in fixed internet and postpaid.
Data packet sales and top ups was boosted by increased need for communication in the aftermath of the quakes. Finally, the ongoing repricing of existing subscriber bases with our dynamic strategy remained a key driver. Mobile revenue growth reached 74% year-over-year. This continued expansion of the subscriber base, low churn, and January price revisions. 46% fixed broadband revenue growth, on the other hand, lagged with muted pricing actions by the quakes and slower repricing of the base due to long-term or longer-term contract periods. All core businesses fell short of realizing their full potential in revenue generation due to slow reactivation, recontracting, and upselling activity, but faster churn in some segments in the aftermath of the quakes.
Our fixed internet base lost 26,000 net subscribers by recording a negative number, first time for more than a decade, with mobile managed to add 112,000 subscribers quarter-over-quarter, driven by a strong postpaid performance. With robust 50% ARPU increase, fixed voice revenue expanded 34% alongside the ongoing gradual erosion in subscriber base. With a similar 33% increase, TV revenue was largely shaped by near 40% home ARPU rise. Growth in corporate data picked up to 61% thanks to contract renewals at revised prices at the beginning of the year. Other revenues grew 106% in need of rental revenues from other GSM operators, equipment sales, ICT project revenues, and call center revenues. International revenue expanded by 30% over last year's high base amid a relatively stable FX rate environment in the first quarter. Consolidated EBITDA grew by 16% year-over-year to TRY 4.8 billion, with a margin of 31%.
Ongoing OpEx inflation, most importantly, the wage increases in January, one-off costs of the new pension scheme, earthquake-related losses were the main factors pulling the margin down both quarter-over-quarter and year-over-year. In Q1, operating expenses increased by 96% year-over-year to TRY 10.5 billion. Annual increase was 74% in the prior quarter. Excluding IFRIC 12 costs, growth in operating expenses was 95% year-over-year. When we come to the bottom line, both dollar and euro rates increased by 3.5% quarter-over-quarter on average. While a relatively stable currency led lower FX losses, higher market interest rates pushed net interest expense towards north quarter-over-quarter. TRY 260 million net tax income included deferred tax income, largely driven by the revaluation of assets and R&D incentives, the current period tax expense and one-off quake-related tax expense. Net income of TRY 645 million was 15% higher year-over-year.
But it was 36% lower quarter-over-quarter, largely owing to a pressured operating performance by the quakes and continuous OpEx increase. Now let's look at the earthquake-related and other one-off items impact on our first quarter financials on the next slide, which is slide nine. We incurred a total of TRY 250 million quake-related revenue losses and additional OpEx. While the former was driven by the benefits we provided to the customers in quake regions, the latter reflected varying items, including quake-related employee benefits, humanitarian aid, logistic expenses, and more. Also, we recorded a one-off cost of TRY 150 million for newly introduced pension structure by the government. Adjusted for these items, EBITDA and EBITDA margins will be TRY 5.2 billion and near 34%, respectively. At the operating profit level, the impact was around TRY 570 million in total when we included an earthquake-related impairment cost of TRY 170 million .
So djusted operating profit will be TRY 2.7 billion instead of the reported 2.1 billion, with a 17% growth annually. To adjust for the net income, we account for one-off quake tax of TRY 90 million, the implied deferred tax, and the current period tax. Accordingly, net income will stand at TRY 1.2 billion with an increase of 120% year-over-year. Finally, inclusive of the TRY 42 million quake-related CapEx, first quarter investment spending was TRY 3.3 billion. We maintain our guidance that we'll be incurring $50 million-$60 million of quake-related CapEx within 2023. Moving on to slide 10 with debt profile. Net debt to EBITDA increased to 1.63x multiple from 1.47x multiple a quarter ago, driven both by limited EBITDA growth and higher net debt quarter-over-quarter. Cash and cash equivalents were TRY 6.8 billion, of which around 33% is FX based.
This excludes the $320 million equivalent of FX protected time deposits that we book under financial investments. The share of local currency borrowings within the total debt portfolio increased to 27% from 16% a quarter ago. The FX exposure included dollar equivalents of $2 billion of FX debt, $2.4 billion of total hedge position, and $120 million of FX cash. As you can see at the bottom right chart, the hedged amounts includes $320 million equivalent of FX protected time deposit, up from $250 million in the fourth quarter of last year. We are now on the final slide 11. Net FX exposure was $450 million long position as of end of the quarter. When we exclude the ineffective portion of the hedge portfolio from this number, which is mainly the existing participating cross-currency contracts, the FX exposure is $370 million short position compared to $460 million a quarter ago.
Obviously, in continued lack of long-term derivative transactions in the hedging market, we kept utilizing short-term instruments, while the net FX exposure contracted came down continuously over the last five quarters as a result of our ongoing effort to narrow down the position. The FX sensitivity analysis we report regularly in our quarterly financials remained broadly unchanged from previous quarter. Assuming all else constant, a 10% increase in FX rates will save around TRY 825 million negative impact on our pre-tax income. On the flip side, the sensitivity analysis produces around TRY 900 million positive impact in case of a similar appreciation in lira. Unlevered free cash flow was TRY -2 billion, owing to subdued EBITDA growth and usual seasonality in cash flow with sizable payments to suppliers related to fourth quarter of last year's CapEx realizations.
This would conclude my presentation, and we can now open up the 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 is from the line of Kennedy-Good, Jonathan with JP Morgan. Please go ahead.
Hi, good afternoon, and thank you for the opportunity to ask questions. First question from me in terms of your commentary around price increases and that you intend to implement some going forward. Now that revenue growth is ahead of inflation, could you give us a sense of what you believe the market will bear in terms of price increases on both the mobile and fixed broadband side? And then, secondly, just trying to get some more color on how you expect the recent OpEx price cost increases on the personnel costs to roll over for the remainder of the year. By that, I mean, should we expect north of 100% increases for the remainder of the year? How does the pension fund scheme affect this kind of cost increase going forward? Thank you.
Thank you very much. In terms of the expected price increases, obviously the trend in the inflation will give us a certain direction, but also the inflation on our OpEx base will be a second parameter to take into account. When we look separately to the business lines, I think it will be fair to expect a sizable price adjustment in mid-year for fixed line, especially for fixed broadband. We have been silent in the last few quarters, and we should expect to catch up with the price adjustment. It should include both retail and wholesale price adjustments which should come together so that our retail price adjustments is more effective and more achievable. For the mobile, we will follow our current dynamic pricing behavior, but also we will look at the competition and try to get the best out of all the pricing opportunities in the market.
As we mentioned, we are on a strong trend in terms of customer acquisition. That also gives us more comfort in getting stronger price adjustments for mobile. Your second part of the question.
Was related to staff costs, which were up over 120%. I was just trying to understand whether that is a likely trajectory for the rest of the year, or how much the one-off pension costs boosted that number.
Well, when we look at the past 12 months, our behaviors or our planning versus what happened in the market, obviously, inflation as well as the government's behavior for adjusting the minimum wage. They were not totally supporting our previous [audio distortion]. Those numbers changed, so we have adjusted our internal decisions accordingly. If you look at our current planning for the rest of the year, we should normally see the year-over-year in each quarter, year-over-year increase in that specific OpEx line item coming down. But with the caveat of [audio distortion] if there is another set of adjustments in mid-year by the government, or we see a totally different trend in the inflation, different than what we are currently expecting, then we may have a different decision. But our current forecast is that it should come down in every quarter, going forward.
There is one addition to the first part of the question that will come from our CEO.
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Hello. I'd like to add some information related to the price increases.
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As you know, we entered 2022 on the fixed broadband side. We entered 2022 with the pricing action we took on December 1st, and then we made follow-up updates on the prices in June and October 1st in 2022.
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According to the price actions we took in the period of March 2022 , 2023, our fixed broadband prices have increased by approximately 70% annually.
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It wouldn't be wrong to say that we will be working on price increase action for the second half of this year.
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So, that is to say, we can say that around mid-year time, as we commence to the second half of the year, we will update our price.
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That is valid for both wholesale and retail.
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Also, we should add that the pricing actions continue for recontracting and upsell efforts.
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On the mobile side, we have achieved an acceleration in pricing as of the second half of 2022.
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With our value-added strategy, we can say that we have achieved good results in terms of healthy number of subscribers and churn performance.
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This trend is expected to continue.
Thank you very much. That's helpful.
The next question is from Farazi, Dilawer with Royal London Asset Management. Please go ahead. Mr. Farazi? Mr. Farazi, there's no sound coming from the line. Can you hear us? We will now move to our next question. As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is a follow-up question from the line of Kennedy- Good, Jonathan with JP Morgan. Please go ahead.
Hi again. Just wanted to clarify, I know you've made the comments that it's difficult to assess what kind of insurance reimbursement you may receive due to the quake damage, but you did mention CapEx of about $60 million would be deployed to those regions. Would it be fair to say the insurance that you expect to receive would be about that amount? When would you expect to receive it?
It should be fair to say that it shouldn't be less than that because $50 million-$60 million is not fully recovering our damages in the whole region. We expect some more to come in the next year, especially for fixed line, because there will be several relocations in the region, and we have to take the network to the newly built homes and apartments. But for this year, yes, $50 million-$60 million , that should be in that mathematics, it shouldn't be less than what we will recover through our insurance policies. Normally, I would say that we should expect, starting from the date of the earthquake, we should expect to recover somewhere between 12-18 months period. We are trying to accelerate the process right now. At least have some cash flow coming in this year. Maybe not fully, but partially. But that is still subject to several discussions with the insurance companies.
It is a very large region. It is a very large damage. Even the documentation is not easy to complete, and there will be certain negotiations with the insurance companies. But we are fairly comfortable about the quality of the policy. We expect to recover most of the damages that we already incurred or the CapEx that will be the result of the damages to come next year.
Great. Thank you.
The next question is from the line of Nagy, Nora with Erste Group. Please go ahead.
Good afternoon. Thank you for taking my question. I just have one related to the new tax levied on earthquakes. If I understood it correctly, this is one of tax, but shall we expect it to remain in place after the elections? And does this impact your donation as you have previously announced that you intend to donate to the earthquake relief in Turkey? Thank you.
Let me answer the first questions. I would kindly ask you to repeat the second part. We are not clear about the second part. The additional tax that came is a result of all the markets call it earthquake tax. We prefer to use the same term. This should be a one-off because of the structure of the tax, it totally relates to the tax filing of last year. So, by nature, it is a one-off tax. Normally, it shouldn't repeat. We already incurred the full impact in the first quarter numbers. Can you repeat your second part?
Yeah, sure. Thank you. So, the second part was about the donation that should be decided at your AGM. Does this new tax impact your decision on the amount that you intend to donate?
Those are two separate issues and separate discussions. Financially, since the tax is only relating to 2022 tax filing, so donation numbers shouldn't have any impact in the tax front this year.
Thank you.
The next question is from the line of Farazi, Dilawer with Royal London Asset Management. Please go ahead.
Hi, can you hear me okay this time?
We can, sir. Yes.
Great. Thank you. Sorry about that before. Just wanted to ask you about the FX hedging. Now, my understanding is you've got the FX protected time deposit, which is $320 million. You've got the regular hard currency cash on balance sheet, around $120 million. What about the $2 billion of hedged amount? Is that through cross-currency swaps or forwards, or how do you do that?
I mean, close to half of this amount, less than half, I would say like 40%, the total amount should be around $900 million, comes from participating cross-currency swaps. A large part of it is the ineffective part of our hedge portfolio, since by nature, they only protect us within a certain range in terms of the FX rate. Most of these items lost the effectiveness. In the remaining part, we use several items. We have, as you said, cash, which is $120 million. Which is currency-protected time deposits, more than $300 million, as we mentioned. We also have the remaining part is coming from very straightforward FX forwards contracts or options. This part is by nature, because of the market conditions, is short-term. We are continuously rolling over those contracts in order to protect our current position.
And we are also increasing the numbers, the amount of such short-term contracts. At the same time, since we are repaying the existing debt, the related ineffective cross-currency swaps are also expiring. The end result, we are coming down in terms of the short position for the last five quarters.
That's great. That's great color . Thank you. And in terms of the average sort of duration of your forwards, what is that? Is that sort of six months or three months ?
I mean, we try to get closer to six months, but based on the market conditions, it depends. But you may take it between three to six. If we find the cost attractive, we try to get to six.
Great. Thank you.
Once again, to register for a question, please press star one on your telephone. As a final reminder, to register for a question, please press star and one on your telephone. 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.
Well, thank you everyone for joining us. We appreciate your time and interest. Have a good day. Thank you. 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.