Turkey Telecommunications Report Q2 2008

In the third quarter of 2007, the number of Turkish mobile subscribers increased by an estimated 4% to reach 59.849mn. Vodafone expanded its Turkish subscriber base by 5.3% in the third quarter, while Turkcell's subscriber base grew by 3%. We estimate that during the first nine months of 2007, 7.421mn new mobile customers were added to the Turkish market market. At the time of writing, only Vodafone had published end of year data and, judging by the figures published by Vodafone, the operator has experienced a dramatic slowdown in net subscriber gains. Based on Vodafone's Q407 growth experiences, as well as our estimates for the number of Turkcell and Avea subscribers at the end of 2007, we are decided to leave our forecast figures for Turkey's mobile market unchanged. We estimate that there were 62.161mn mobile customers at the end of 2007, giving a penetration rate of 83%. We maintain our belief that growth will slow during 2008 and the rest of the decade, as the market approaches saturation and operators place an increasing emphasis on next-generation services and migrating existing customers onto post-paid contracts. We anticipate that penetration will exceed 100% in 2010, rising to around 116% by the end of our forecast period in 2012. Meanwhile, little progress appears to have been made by Turkey's telecoms regulator regarding the licensing of 3G services, following the annulment of the country's original 3G tender in September 2007. Two of the country's three mobile operators - Vodafone and Avea - boycotted the tender in protest at delays in the implementation of mobile number portability in Turkey. That left mobile market leader Turkcell as the only bidder and the regulator argued that the licences must be awarded in a competitive tender process.

Recent news on developments within Turkey's telecoms sector has focused on the possible further privatisation of fixed-line incumbent Trk Telekom. Local reports indicated in early January 2008 that the government hoped to earn US$2bn through the sale of a 15% stake in Trk Telekom. Metin Kilci, head of the privatisation administration, has reportedly said that Trk Telekom shares will be sold in an initial public offering (IPO) by 10 May 2008. Telekom's value has risen since the government sold 55% of the company to Saudi Oger for US$6.6bn in November 2005.

Meanwhile, it was announced in January 2008 that India's Dhanus Technologies had acquired 100% of Turkish alternative telco Borusan Telekom for US$30mn including debt of US$25mn, beating interest from companies including Hutchison Whampoa of Hong Kong and an unnamed US telecoms firm.

Borusan Telekom is focused on providing corporate fixed line services, with estimated annual revenues of US$70mn.

Turkey sits in ninth place in our latest set of revised Business Environment Rankings for the Middle East.

Although Turkey has a relatively high score for regulatory independence, it suffers from having a low country risk score and the lowest country structure in the Middle East.