Earnings Report /
Turkey

Turk Telekomunikasyon AS: Higher deferred tax income helped the bottomline

  • Turk Telekom recorded TL1,171mn net income in 3Q22, higher than consensus est. of TL648mn and our est. of TL831mn.

  • Turk Telekom’s EBITDA increased by 17.4% y/y to TL5.04bn in 3Q22, 5.9% above our estimate of TL4.76bn.

  • We maintain our Outperform rating for Turk Telekom. However we favor Turkcell against Turk Telekom at current valuations

Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
9 November 2022
Published byATA Invest

Turk Telekom recorded TL1,171mn net income in 3Q22, higher than consensus est. of TL648mn and our est. of TL831mn.  Despite higher than expected financial expenses, higher than expected deferred tax income led to strong net income.

Turk Telekom’s EBITDA increased by 17.4% y/y to TL5.04bn in 3Q22, 5.9% above our estimate of TL4.76bn and 3.2% above consensus of TL4.88bn.  Including IFRIC 12, revenues increased by 45.3% y/y to TL12.55bn, beating our estimates by 4.3%.

Management revised up its 2022E guidance: 1) Topline growth guidance (exc-IFRIC12) to c.37% from c.33% versus our estimate of 32% (2) EBITDA guidance of c.TL19bn from TL18.5bn versus our estimate of TL18.7bn and (3) Capex guidance to c.TL14bn from c.TL13bn versus our estimate of TL13bn.

Excluding non-operational construction revenue adjustment, consolidated revenues increased by 43.3% y/y, driven by 35.5% growth in broadband and 48.9% growth in mobile and 67.8% growth in international revenues in 3Q22.  Fixed voice revenues were up 15.5% y/y and the share of fixed voice in consolidated revenues declined to 6.3% in 3Q22 from 7.9% in 3Q21. Broadband subscribers and total mobile subscribers increased by 214K and 682K to 14.8mn and 25.3mn in 3Q22 whereas fixed voice subscribers (inc. nDSL) increased 100K q/q to 17.2mn during the same period. 

Excluding non-operational construction cost adjustment (IFRIC 12), total opex increased by 71.9% y/y to TL6.8bn in 3Q22. Direct costs and others increased by 40.9% and 105.7% y/y to TL5.71bn and TL3.65mn, respectively, in 3Q22. During the same period, commercial costs were up 69.7% y/y to TL443mn. In 3Q22, consolidated EBITDA increased by 17.4% y/y to TL5.04bn, implying 40.1% EBITDA margin.  Excluding IFRIC 12 impact, EBITDA margin was 42.1% in 3Q22.  Margin contraction was mainly due to higher personnel, energy and commercial costs. personnel, network (including energy), commercial and equipment & technology sales costs as well as change in revenue mix. 

Turk Telekom’s net FX long position increased to US$450mn in 3Q22 from US$414mn long position in 2Q22, including swaps and futures contracts. The sensitivity of 10% US$ and € appreciation against TL on net income is negative TL970mn as of 3Q22-end versus -TL1,158mn in 2Q22. Net debt was up 1.1% q/q to TL27.2bn in 3Q22. Net debt (excluding the IFRS 16 impact) was down by US$97mn q/q to US$1.4bn in 3Q22.  Net Debt/EBITDA ratio remained flat q/q at 1.54x in 3Q22.

Turk Telekom will be holding a conference call today, 9 November at 15.00 pm Istanbul time.