Turkcell Iletisim Hizmetleri A.S. (ADR) (TKC)

Turkcell is primarily involved in the business of providing mobile services in Turkey. It holds over 50% share in the domestic market with over 28.7 million subscribers. The company also holds major stake in Astelit, the third largest operator in Ukraine and Fintur International that operates in Azerbaijan and Kazakhstan. Turkcell revenues are divided into five major segments: communication fees, commission fees, monthly fixed fees, sales of SIM cards and call center revenues. Communication fees, consisting of charges for calls that originate or terminate on company’s network, that include voice and data services, are the most important source of revenues contributing about 95% to the tally.

Turkey’s population is about 75 million, with over 60% mobile penetration. The average age of the population is 29, much lower than other western European counterparts. As mobile industry looks younger age group as a major target audience especially for the growing data and web based services, the appealing age group makes turkey an impressive market for the mobile operators. However, the competition in the market is heating up rapidly, as the dominance of Turkcell, is up for challenge with government selling Telsim to Vodafone and Turk Telekom to Oger Telecom, the two major competitors of TurkCell.

Looking forward, the ongoing dispute between Turkcell’s three main stake holders Cukurova Group, Alpha Group and TeliaSonera for control of the company, is set to take its tool, and can create negative impact in such a competitive market condition. Adding to it, Turk Telecom’s move of drastically reducing prices can make the company to follow suit in order to hold the market share, which can affect the margins negatively. Further, company’s proposed $250 million investment in Ukraine affiliate Astelit raises additional concerns, due to low Average rate per unit and negative margins of the Ukrainian operator, making Turkcell a risky investment in 2007.