Earnings Report /
Turkey

Turk Telekomunikasyon AS: Higher deferred tax income led to strong bottomline

  • Turk Telekom recorded TL1,392mn net income in 2Q22, far better than consensus est. of TL713mn and our est. of TL831mn.

  • Despite higher than expected financial expenses, higher than expected deferred tax income led to strong net income.

  • Keeping TTKOM in our top picks list...

Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
9 August 2022
Published byATA Invest

Turk Telekom recorded TL1,392mn net income in 2Q22, far better than consensus est. of TL713mn 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 9.5% y/y to TL4.40bn in 2Q22, broadly in line with our estimate of TL4.38bn but lower than consensus of TL4.65bn.  Including IFRIC 12, revenues increased by 31.2% y/y to TL10.73bn, beating our estimates by 0.5%.

Management revised up its 2022E guidance: 1) Topline growth guidance (exc-IFRIC12) of c.33% from 23-25% versus our estimate of 32% (2) EBITDA guidance of c.TL18.5 from TL17.5-18.3bn versus our estimate of TL18.5bn and (3) Capex guidance to c.TL13bn from c.TL12.5bn versus our estimate of TL12.7bn.

Excluding non-operational construction revenue adjustment, consolidated revenues increased by 30.8% y/y, driven by 26.1% growth in broadband and 32.5% growth in mobile and 36.0% growth in international revenues in 2Q22.  Fixed voice revenues inched up 6.6% y/y and the share of fixed voice in consolidated revenues declined to 6.8% in 2Q22 from 8.3% in 2Q21. Broadband subscribers and total mobile subscribers increased by 87K and 246K to 14.6mn and 24.6mn in 2Q22 whereas fixed voice subscribers (inc. nDSL) increased 100K q/q to 17.1mn during the same period.

Excluding non-operational construction cost adjustment (IFRIC 12), total opex increased by 54.5% y/y to TL5.6bn in 2Q22. Direct costs and others increased by 30.5% and 79.0% y/y to TL2.17bn and TL3.06mn, respectively, in 2Q22. During the same period, commercial costs were up 47.2% y/y to TL368mn. In 2Q22, consolidated EBITDA increased by 9.5% y/y to TL4.4bn, implying 41.0% EBITDA margin.  Excluding IFRIC 12 impact, EBITDA margin was 43.5% in 2Q22.  Margin contraction was mainly due to higher personnel, energy and commercial costs. personnel, network (including energy), commercial and equipment & technology sales costs.

Turk Telekom’s net FX long position increased to US$414mn in 2Q22 from US$389mn long position in 1Q22, including swaps and futures contracts. The sensitivity of 10% US$ and € appreciation against TL on net income is negative TL1,158mn as of 2Q22-end versus -TL1,133mn in 1Q22. Net debt was up 27.2% q/q to TL206.9bn in 2Q22. Net debt (excluding the IFRS 16 impact) was up US$169mn q/q to US$1.48bn in 2Q22.  Net Debt/EBITDA ratio was slightly up to 1.54x in 2Q22 from 1.24x in 1Q22 due to significant TL depreciation.

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