Ladies and gentlemen, thank you for standing by. I am Konstantinos Jacouras, call operator. Welcome and thank you for joining the Türk Telekom conference call and live webcast to present and discuss the Q3 2026 and financial and operational results. All participants will be in 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 0 on your telephone. We are here with the management team, and today's speaker is Ömer Karademir, CFO. 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. Ömer Karademir, CFO. Sir, you may now proceed.
Thank you, operator, and hello, everyone. This is Ömer Karademir, Türk Telekom CFO. Welcome to our 2026 third quarter results conference call. Thank you for joining us today. Let's go to slide three, financial and operational review. Türk Telekom Group closed the third quarter of 2026 with strong revenue growth and profitability. Building on this strong foundation, we are excited about the rest of 2026 and 2027 prospects. As you all know, geopolitical tensions continue to impact global markets, resulting in higher energy prices and inflation risk. US Fed left its policy rate unchanged at its October meeting. In Türkiye, annual CPI edged up slightly to 29.77% in October from 29.73% in September. Central Bank cut its policy rate by 100 basis points to 36% in October. Turkish markets experienced market volatility and investment fund issues recently. Markets started to recover as regulators are taking the necessary measures.
As Türk Telekom, we have robust financial risk management and capital allocation practices. We are glad to report that we had no exposure or risk related to the fund issues. As the leader in the Turkish telecommunications market and a proud member of the Borsa Istanbul BIST 30 Corporate Governance and Sustainability Leaders Indices and many other global indices, Türk Telekom continues to leverage global best practice to protect and improve its operational and financial position and deliver long-term value for all stakeholders. We have seen our business performing well over the third quarter and much stronger than we observed in the first half. We haven't seen any material shifts in demand or subscriber behavior, apart from those driven by usual seasonality that fell into the third quarter. Mobile data consumption growth remained robust, supported by high-quota 5G plans. Rational competition continued in the mobile sector.
In fixed internet, activity was relatively stronger in high season. Now on the group financial results. Consolidated revenues increased by 12% to TRY 86 billion. Excluding the IFRIC 12 accounting impact, revenue growth was 11%. EBITDA grew by 7% to TRY 37 billion, with 43% EBITDA margin. EBITDA margin declined by 30 basis points year-on-year in first nine months of 2026. Excluding IFRIC 12 accounting impact, our EBITDA margin improved by 40 basis points year-on-year. We recorded TRY 7.7 billion net profit in the quarter, down by 42% year-on-year due to higher net financial and depreciation expenses. CAPEX, excluding solar investments and license, stood at TRY 28 billion. It was higher in year-on-year terms due to 5G rollout and strong progress in fiber investments. Unlevered free cash flow stood at TRY 10 billion, up by 39%.
Net leverage comfortably remains flat on a quarter-on-quarter basis and stood at 0.95 times compared to 0.6 times at 2025 year-end. Let's move to slide number 4 for Türk Telekom Group subscriber additions. Our total subscriber base reached almost 58.5 million with 905,000 net addition quarter-on-quarter. Excluding 121,000 losses in the fixed voice segment, quarterly net additions would have exceeded 1 million. Fixed broadband subscriber base expanded by 26,000 quarter-on-quarter. Retail broadband subscriber base expanded by 83,000 quarter-on-quarter. Our retail churn rate for the third quarter was the lowest recorded. Mobile segment added 670,000 subscribers on a net basis. Activation and churn volumes were lower on a year-on-year basis, driven by a rational competitive environment. Let's move to fixed broadband business performance, slide number 5. We continued our strong revenue and ARPU growth in fixed internet. Due to high base impact, fixed internet revenue growth normalized in the third quarter as expected.
Nevertheless, revenue expanded by a solid 7% year-on-year. We had introduced retail price revisions for new acquisitions in January and June. Subsequently, we introduced a wholesale price revision effective from July 1st. We have seen other ISPs adjusting their prices in June and July. Next wholesale adjustment is to be implemented in January 2027. ARPU growth remains solid at 7% year-on-year, thanks to a combination of solid upsell and recontracting performance, along with price revisions. We expect normalization to continue in the fourth quarter, while full-year ARPU trajectory to remain strong. Average package speed of our subscriber base increased by 59% year-on-year to 137 Mbps. 45% of our subscribers now use 100 Mbps and higher speed packets compared to 30% a year ago, showing customers' preferences for higher packets. Moving on to next slide number six, mobile business performance.
Prevailing improvement in mobile revenue growth became more visible in the third quarter. Mobile revenues expanded by 2% year-on-year in the third quarter, compared to flattish in year-to-date terms. Rational competitive environment visible by the end of 2025 prevailed throughout 2026. Mobile ARPU, excluding M2M, declined by 1% year-on-year in the third quarter. ARPU growth, excluding M2M, turned positive year-on-year in September. We expect this improvement to continue at an increasing pace going forward. As our 5G tariffs continue to perform strongly, we observe that they contribute to ARPU growth by supporting upsell in the recontracting process. We implemented postpaid price revisions in January, April, and July. Ratio of postpaid subscribers rose by 2.4 percentage points in year-on-year terms and reached over 80%. Now we can go to slide number eight for revenue performance. We recorded real growth in all our business lines except fixed voice in the third quarter.
Operational revenues exceeded TRY 79 billion, up by 11%, thanks to strong growth in ICT projects, fixed internet, and corporate data. Driven by the acceleration in fiber investments, IFRIC 12 revenues rose by 24%. Fixed internet and mobile revenues together accounted for 73% of operational revenue. They added TRY 2.3 billion in year-on-year terms. Other segments, including ICT solutions and equipment sales, made the largest contribution to growth with TRY 4.6 billion higher revenues in year-on-year terms. As the technology master partner, Türk Telekom will provide the end-to-end communication and technology infrastructure of COP31, which will take place in Antalya next week. This is a major example of many private and public sector digital projects that Türk Telekom Group is undertaking. Corporate data and international revenues added a further TRY 1 billion. Despite macro developments and upward revisions in inflation expectations, we continued our strong growth in Q3.
We sustain our growth expectation for the last quarter and maintain our full-year 2026 operating revenue growth guidance at approximately 8% as previously shared. Let's go to slide number 9, EBITDA performance. Q3 EBITDA increased by 7% year-on-year to TRY 37 billion, with an EBITDA margin of 43%. EBITDA margin impacted by higher revenues from relatively low-margin projects and IFRIC 12. Excluding the IFRIC 12 accounting impact, EBITDA margin is 46% in the quarter. Direct costs rose 33% year-on-year, mainly due to increase in cost of equipment and technology sales, in line with increase in ICT solutions and equipment sales. Commercial costs rose 16% year-on-year, while other costs increased by 4% year-on-year. Increase in commercial cost was driven by corporate communication expenses supporting our brand and visibility, especially in international areas and projects such as COP31 and NATO summits, et cetera.
Within other costs, network expense increased by 14% year-on-year on higher technology maintenance and repair costs. 2% year-on-year decline in personnel costs can be explained mostly by reduction in headcounts at our call center subsidiary due to project completions in the second half of 2025. The increase in interconnection cost was driven by higher international voice revenues. Overall, EBITDA margin in first nine months remained within the 41%-42% guidance range that we shared earlier. We maintain our 2026 EBITDA margin guidance. Let's go to next slide, number 10, net profit performance. We recorded a net income of TRY 7.7 billion for the period, which is an increase of 22% quarter-on-quarter. Overall, our strong operational and financial performance resulted in robust profitability. However, year-over-year movement impacted by acquisitional long-term assets and related net debt, mainly 5G license and concession renewal and related investments, partly offset by monetary gains.
Our total FX and hedge expenses slightly declined quarter-on-quarter, and total net financial expenses slightly increased quarter-on-quarter, impacted by currency movements and relatively lower returns on financial market instruments. Hedging expenses declined in parallel with quarter-on-quarter decrease in hedging costs and volume, while this effect was largely offset by higher FX expenses. The decline in interest income, on the other hand, resulted in higher net interest expenses quarter-on-quarter, while booked TRY 1.5 billion net interest expense in the third quarter compared to TRY 447 million in the second quarter. Monetary gain declined by 18% quarter-on-quarter to TRY 14 billion due to lower inflation rate compared to the previous quarter, while our asset base remained at similar levels. Moving to slide number 11 for CAPEX.
CAPEX spending rose to TRY 28 billion in the third quarter compared with TRY 23 billion of last year on the back of 5G rollout expenditures and strong progress in fiber investments. As usual, fixed line CAPEX, most importantly, the fiber access and core network investments, took the higher share in total with 50% weight. 31% of spending went to mobile, while another 7% went to IT and project investment, and the rest goes to other investments. In summary, our CAPEX intensity for the first nine months realized as 30.3%. With the expected increase in CAPEX in the final quarter, we expect this ratio to reach a level in line with our year-end guidance, 34%. Moving on to next slide, we have debt profile. Türk Telekom Group's cash and cash equivalents totaled TRY 30.4 billion.
The FX exposure included USD equivalents of $3.3 billion of FX-denominated debt, $2.8 billion concession and mobile license liabilities, $2.5 billion of total hedge position, and $307 million of hard currency cash. Net debt over EBITDA increased to 0.95 times from 0.6 as of 2025 ends on the back of 5G and concession renewal payments. Net debt over EBITDA remained flat on quarter-on-quarter basis. Just to remind you previous payments, in January, we paid the first installment of 5G license, $365 million plus $219 million VAT, and the VAT amount of concession extension worth of $500 million. By the end of the year, we will pay the second installment of 5G license and the first installment of concession extension. Let me also remind you that VAT payments will be net off eventually, and we already started netting off majority of the payments.
Let me highlight that the increased FX liabilities are driven by long-term investment and 5G spectrum and concessions. For concession extension, future payments are extended over a long-term horizon until 2035, and all settlements will be made in Turkish lira equivalents. Additionally, we actively mitigate our currency risk exposure through targeted hedges in line with our financial risk management policy. Please also note that concession and 5G assets are revalued under inflation accounting and hence result in monetary gains, which as a result balances P&L impact overall. Most recently, Türk Telekom signed $1 billion long-term club loan agreement with the participation of 14 global banks on October 26th, 2026, coordinated by Türk Telekom. This transaction came after the Q3 closing.
This successful financing represents one of the most successful financing transaction in our sector and in Türkiye, in line with our track record, and it supports our strong financing structure and liquidity position. We are now on slide 13, our cash flow and FX exposure. We recorded $3.3 billion short FX position compared to $100 million as of year-end due to booking of $2.8 billion 5G and concession renewal liabilities. Excluding those liabilities, our net short FX position would have been $508 million. Finally, we generated TRY 10 billion of unlevered cash last year. Year-over-year expansion is mostly attributable to higher operational cash flow generation in third quarter of 2026. This concludes my presentation. We can now 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 the good results. My question is about your, of course, the FX position, and your hedging strategy on that front, and the outlook for fourth quarter and also 2027. What kind of a picture should be facing next year, at least in association with the inflation trend? What are the key risks ahead for you? Thank you.
Thank you, Cemal Bey. Excluding our concession and 5G license payments, in Q2, we were in a long position at $300 million. For the Q3, we have, again, excluding 5G and concession payments, the future payments I'm referring, our position is $508 million for Q3. With geopolitical risks subsiding, we expect the confidence environment established by the CBRT's monetary policy framework to remain in place for not just this year, and also we are expecting it to continue in next year. The CBRT will continue this inflation policy. For this year, there is a diversion from the Central Bank's year-end target. That is mainly because of the tension, the conflict in the region. As they stated, it diverts from their original year-end target almost 7% points for inflation target.
Although this diversion from their year-end target, we are not changing our guidance, both not our revenue guidance, not we are changing, not EBITDA. So we are very confident with the current macroeconomic policy and strategy. If I come to our FX position and hedging policy, we anticipate, with the help of this government's economic policy, a gradual and orderly depreciation of the TRY in line with its natural trajectory, alongside a continued decline in hedging costs. We are thinking that for the next quarter, as we have also seen, witnessing in this quarter, the hedging costs are declining. So based on our hedging costs, and we are also declining our hedging volume, we are seeing the hedging cost is declined compared to last quarter. If the current level are continue to decline, we can expect more decline in our hedging costs.
Let me give you our hedging transaction cost levels. It was 33%-34% in second quarter. But now it is, sorry, not now. It was in 30%-31% in Q3. As I stated, by reducing our hedging volume, it will decline. We can expect it will decline. In addition to that, we are also extending our hedging transactions maturity. Now we are targeting our long-term cross-currency swap. By the way, we have started to make cross-currency swaps in our long-term maturity. We have initiated these transactions, and it will also help to decline the cost of new hedging transactions, of course, based on market conditions. So that's the situation for that.
As a follow-up about the, you know, how much did you pay for the concession so far as a cash outflow? You know, we had some numbers, planning numbers, but like, say, for concession plus 5G licenses overall so far, how much we paid and how much we are going to pay in the last quarter? Thank you.
Okay, thank you. For concession, we have paid just the VAT for concession. It was $500 million. For the 5G, we have paid first installment and also VAT. First installment was $365 million, and for the VAT, it is $219 million. As a total, approximately, we have paid $1.1 billion in the first quarter. For the remaining of the year, we are going to pay the second installment of 5G. It is again $265 million, and we are going to pay the first installment of concession. It is $500 million. As a total, we are going to pay $865 million in December. For this year total, it will come to $2 billion. VAT will net off. In addition, VAT will be net off, and it has started to be net off from our VAT payments.
As a total with 5G and concession VAT, we have paid $719 million, and we started to net off this VAT amount. Thank you.
Mr. Demirtaş, have you finished with your questions?
Yes. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star and one on your telephone. Once again, to register for a question, please press star and one on your telephone. The next question comes from the line of Yasin Sarıhan with Yapı Kredi Yatırım. Please go ahead.
Thank you so much for your presentation. I have two questions. One is that about the mobile ARPU. You noted that excluding M2M mobile ARPU turned positive in September, year-over-year base. How did it trend in October? I know that it is too early for November, but is it the same? Do you see a positive ARPU growth in November as well? My second question will be related to fixed broadband segment. In third quarter of this year, ARPU growth slowed to single digits. Should we view high single-digit growth as the new normal, or do you expect a re-acceleration in the fixed broadband segment? Thank you so much.
Thank you, Yasin Bey. For the mobile ARPU, yes, we have stated that we have recorded positive ARPU growth in September. Although, as you have said, it is too early to speak, we can say that October is also positive. For the last quarter of this year, we are expecting a positive ARPU growth, and it will continue in the next year. As the market became more rational towards the end of 2025, we have pricing actions were taken in August, November, and relatively attractive price portfolios is continued. For this year, we have revised postpaid prices by 30% in January, 13% in April, and 16% in July, respectively. Subscribers continue to high quota data packets, while upsell and recontracting volumes remained strong in the third quarter of 2026.
Our high quota 5G portfolio introduced in March has begun to support ARPU performance. Mobile ARPU growth is improving in line with our expectations. We expect this trend to continue and deliver positive growth in the period ahead. We target a meaningful ARPU growth in 2027, supported by the cumulative impact of pricing actions and strong upsell performance driven by 5G. If I come to fixed broadband, for nearly two years, we have been seeing the positive effects of pricing actions and contract duration change on ARPU growth. As TTNET, we recontract nearly half of our retained subscriber base each year. We recontracted more than half in 2025, and the volume was concentrated in the second half. For this reason, the first half of 2025 provided a low base for ARPU growth, while the second half provided a high base.
In line with our expectations, we are seeing retail ARPU growth normalizing in the second half of 2026. We revised retail activation prices by 21% in January and 29% in June. We revised our wholesale tariffs by 37.6% effective July 1st, 2026. In addition, digitalization and speed upsells continue to be significant ARPU drivers. The average speed also. With all these improvements, we are targeting high single-digit real ARPU growth for 2026 full year, supported by pricing actions implemented through the year, continued speed upsells, and strong recontracting performance. We will continue to take pricing actions in 2027 by taking market conditions and macroeconomic indicators into account. We expect the increasing share of FTTH infrastructure and speed upsells to continue to provide support. In addition, as a consequence of our contracted structure, our recontracting volume will again be higher in 2027, and it will be concentrated in first half.
Supported by these factors, we expect strong real ARPU growth to continue in 2027.
Mr. Sarıhan, are you finished with your questions?
Yes, operator, I finished. Thank you so much for the answer.
Thank you. As a final reminder, to register for a question, please press star and one on your telephone. The next question comes from the line of Madhvendra Singh with HSBC. Please go ahead.
Yes, hi. Thanks a lot for taking my question. I may have missed some part of the presentation, but I am keen to know your view on the current condition of the user behavior in Türkiye, especially given that inflation seems to be ticking up again. Do you think they have the capacity, let us say, to keep increasing uses or paying up for the same uses when you increase prices? That is the first question. The second question is on your 5G rollout. What is the response so far, and what kind of coverage have you already reached? What percentage of, let us say, the user base is already on 5G and percentage of traffic on 5G? Thank you.
Thank you. For your first question, we have seen our business performing well over the third quarter and much stronger than we observed in the first half. We have not seen any material shifts in demand or subscriber behavior, apart from those driven by usual seasonality that fell into the third quarter. Mobile data consumption and growth remained robust, supported by high quota 5G plans. Rational competition continued in the mobile sector, and in fixed internet, activity was relatively stronger in high season. For your second question, given the high data traffic growth with the digitalization, the additional frequency capacity provided by 5G is crucial for maintaining a high-quality customer experience. The 3500 megahertz and 700 megahertz frequencies were auctioned as the primary bands. Decisions regarding 5G investments were made with a focus on the quality of the customer experience.
We initiated 5G rollouts with an optimal investment strategy in 2025 that prioritize high-traffic locations. We are prioritizing C-band coverage in heavy data traffic areas and DSS coverage in lower traffic areas. We aim to reach a significant portion of consumer subscribers within a few years. We estimate that 5G-compatible device penetration across Türkiye is around 25%-30%. We also observed that 5G began to support our upsell and ARPU performance. We are working to track and analyze its contribution to our mobile business across a range of metrics. We believe the transition to 5G offers additional ARPU growth, and for the rollout, we can say it will take two to three years of time from now. Thank you.
That's helpful. But in terms of, let's say, the user behavior change, have you seen people actually going out and buying the 5G devices now, given that 5G service is available?
Yes, we are witnessing the 5G adaptable mobile phones are increasing and significant subscribers accumulated on, let's say, 5G tariffs.
Understood. Thank you very much.
Thank you.
For any further questions, 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.
Thank you. In summary, overall, we had a very good quarter, delivering strong operational and financial results. We remained robust with our strong balance sheet and risk management practices amidst global macro challenge and local market volatility. We are excited about continuing our solid growth into the fourth quarter and also in 2027. Thank you again for your participation and wishing you all the best for the rest of the year.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.