Turkey Telecommunications Report Q3 2012

This Q312 update to BMI’s Turkey Telecommunications Report contains forecasts and market data analysis that draws on the latest data from the regulatory agency, the Information Technologies and Communications Authority (ICTA), and operators for full year 2011. It includes revised forecasts for the country’s mobile, mobile ARPU, fixed-line and broadband markets through to the end of 2016; market data analysis of the Turkish wireless and wireline markets; as well as analysis of the latest trends and developments in the market including service offers and product launches.

The start of 2012 has seen the acceleration of development in Turkey’s machine-to-machine (M2M) market including the development of services in transportation, connected home, telehealth, smart metering and industrial processes. Vodafone is an international leader in the M2M market, and we expect it to play a significant role in the Turkish M2M market. Turkcell announced it had 750,000 SIMs on its own M2M platform in March 2012, and stated that it estimated the total Turkish M2M market could ultimately reach 150mn SIMs. In contrast to Turkcell’s utilisation of its own platform, BMI believes Türk Telekom may have gained competitive advantage in the nascent Turkish M2M market through its mobile subsidiary Avea’s collaboration with Telefónica Digital, announced in April 2012.

Wireless data service growth and the proliferation of smartphone ownership continue to be trends dominating the Turkish market, even as the mobile market added nearly 3.5mn subscribers in 2011 alone, reversing net subscriber losses in 2010. Mobile market leader Turkcell reported 88% population coverage for its 3G services in Q411 from a network of 10,500 base stations, all supported by its fibre subsidiary’s fibre network for backhaul purposes. However, Turkcell will face strong competition from both Vodafone and Avea in the wireless data market. Both operators have also invested heavily wireless network infrastructure, expanding 3G population coverage. Further, with Avea able to draw on Türk Telekom’s fixed-line network infrastructure and Vodafone able to draw on fixed network resources following its acquisition of Koc.net in December 2011, we expect them to be able to compete with Turkcell in terms of cost and quality of service. Finally, the report outlines a number of macroeconomic risks to what is otherwise one of the brightest outlook for a telecoms sector in the region. Turkey's economy is set to undergo a sharp slowdown in 2012.

Turkey's external dynamics present by far the biggest risk to the country's medium-term macroeconomic trajectory. An external shock to the economy, leading to a subsequent flight of foreign capital out of Turkey, would prompt the monetary authorities to aggressively tighten policy. In turn, this would leave the domestic economic reeling, and would prompt us to re-evaluate all of our major forecasts. Although the telecoms sector is generally resistant to macroeconomic shocks, relative to other sectors, if external conditions result in a macroeconomic shock, we expect the market to slow down, putting an end to the turnaround it has experienced in 2011.