Turkcell Misses Q2 Zacks Estimate by Five Cents

| About: Turkcell Iletisim (TKC)
This article is now exclusive for PRO subscribers.

Turkcell (NYSE:TKC) reported earnings per share from continuing operations of 31 cents for the second quarter of 2010, below the Zacks Consensus Estimate of 36 cents. Total revenue grew by 1.7% to TRY2,241.2 million ($1,468 million) due to robust contributions from acquisitions.

An improving subscriber mix in favor of the higher margin postpaid segment along with implementing the TRY-based pricing has offset the impact of the sharp reduction in Mobile Termination Rates and regulation-driven maximum price cap cuts. However, mobile data and services revenues increased 29.0% year over year.

In the second quarter, blended minutes of usage per subscriber increased by 33.7% to 171.0 minutes compared with the prior-year quarter, driven by insightful campaigns.

Blended average revenue per user in TRY terms increased 4.3% year over year to TRY19.4 mainly due to a larger usage of data and increased proportion of postpaid customers.

Churn refers to voluntarily and involuntarily disconnected subscribers. In the most recent quarter, churn rate increased to 9.8%, from 9.0% in the corresponding quarter of 2009 as postpaid subscribers switched operators in a competitive environment. This has been facilitated by the presence of mobile number portability in Turkey.

Direct costs increased to 54.5% of sales, from 53.0% in the corresponding quarter of 2009. This increase was due to the higher depreciation and amortization expenses, network-related expenses wages and salaries.

Selling and marketing expenses increased by 2.1% of sales due to campaigns and higher selling expenses compared with the prior quarter.

General and administrative expenses increased by 1.6% year over year to 6.1%, primarily due to higher bad debt provisioning.

In the most recent quarter, the company’s share in the net income of unconsolidated investees, consisting of Fintur and A-Tel, increased by 88.7% to TRY45.1 million ($29.5 million) mainly due to the improved performance of Fintur's operations in Kazakhstan.

Consolidated debt amounted to TRY2,664.4 million ($1,745.3 million) as of June 30, 2010, TRY970.8 million ($635.9 million) of which was related to Turkcell's Ukrainian operations. Capital expenditures in the second quarter of 2010 amounted to TRY360.5 million ($236 million).

Total cash and equivalents at the end of the quarter were TRY4,193 million ($2,746 million), a reduction of 4.3% compared with the prior quarter due to dividend payment.

Turkcell Iletisim Hizmetleri A.S. engages in establishing and operating a global system for a mobile communications network in Turkey. The company provides mobile voice and data services over its mobile communications network; voice services, which include wireless telephone services on a prepaid and postpaid basis; mobile data and services, including mobile Internet and content services; and interactive voice and video response services.