Turkcell Margins Finally Turn the Corner

Includes: TKC, TUR, VOD
by: Emerging Money

We have been big fans of Turkcell (NYSE:TKC) for ages. This is one of the great emerging market phone companies, but its margins are only now showing concrete signs of improvement.

TKC earned a 12% fatter profit in the third quarter, handily beating analyst consensus across the board.

The company attributes part of its improved performance to a substantial campaign of cost cutting: lower sales and marketing costs, as well as transmission fees, added 2% to its margins last quarter.

On the other hand, revenue dipped a bit on a year-over-year basis, largely due to lower subscriber price caps and sharply lower interconnection fees. Still, revenue from wireless data -- a key metric for emerging phone companies -- is up 28% on a year-over-year basis.

From here, Turkey watchers will be glued to Vodafone's (NASDAQ:VOD) earnings on Monday. The company is a global behemoth, but its business in Turkey in particular is eagerly anticipated.

Meanwhile, TKC is a key component of Turkish ETF TUR (quote). At a 7% weighting, the company's recent underperformance has dragged on TUR, so any rebound could give the already-booming ETF an added boost.

Turkey, notably, is growing as fast as China right now, with GDP surging ahead at around 10%. The country is exposed to the eurozone and is a key supplier of several niche commodities as well as manufactured products.

Disclosure: No positions