Turkcell Iletisim Hizmetleri A.S. Q1 FY2026 earnings call

5G Launch and Mobile Leadership

• Successfully completed nationwide 5G launch on March 31, 2026, after precise end-to-end execution from spectrum acquisition to go-to-market.
• Secured 40% of available 5G spectrum in the tender, giving the company 25% more capacity than its closest competitor and reinforcing long-term capacity leadership. 5G tests recorded speeds exceeding 2,000 megabits per second across all 81 cities of Turkey, including a successful remote driving test of a TOGG-10F over 150 kilometers.
• To accelerate adoption, the company expanded 5G data package allowances fivefold, launched smartphone promotions including up to 50% discounts on Samsung devices, and ran a high-profile marketing campaign featuring celebrity Shaquille O'Neal that has received strong positive consumer response.

Fixed and Digital Infrastructure Growth

• Pursues value-led growth for fixed broadband by promoting multi-gigabit fiber offerings, with 20% of fixed customers already on 1Gbps+ speed plans.
• Continues expanding fiber infrastructure: base station fiberization has reached 47%, significantly improving overall network quality and 5G readiness.
• Digital business services are growing rapidly on strong demand for corporate digitization, with the company now positioned as Turkey's largest digital integrator serving domestic private and public sector clients.

Financial and Strategic Updates

• Strengthened the balance sheet by securing $1 billion in Murabaha financing, preserving investment capacity while maintaining a healthy leverage profile.
• Secured new strategic partnerships: a managed services collaboration with Asphalt in the defense industry, and a strategic cooperation with HBO Max to strengthen the company's TV platform strategy.
• Capex totaled 21.5% of sales in Q1 2026 (a seasonally low level), with 85% allocated to connectivity businesses for 5G rollout preparation, and 5% allocated to data center expansion.
• Ended the quarter with 96 billion TL in cash; liquidity is robust and fully covers upcoming 5G license payments and all debt maturities over the next four years. Net debt rose to 49 billion TL, with net leverage at 0.42x, and management expects leverage to remain below 1x for the full 2026 investment year.
• Proactive currency risk management: 77% of cash is held in hard currencies, and the company maintains a strategically sized net short FX position of $1.2 billion to avoid unnecessary hedging costs amid stable FX conditions, targeting a $1.5 billion net short position going forward.

Total consolidated revenue grew 9% year-over-year (YoY) to exceed 68 billion Turkish Liras (TL). Group EBITDA reached 28 billion TL with a 41.4% margin, and net income increased 15% YoY to 4.6 billion TL.

• Mobile: 661,000 post-paid net additions (the highest total mobile net additions in 14 quarters), post-paid subscriber share rose 4.6 percentage points YoY to 81%. Mobile ARPU remained broadly flat YoY, impacted by prior year competitive pricing, 12-month contract lag, and Q1 2026 inflation increases.
• Fixed Broadband: 36,000 net fiber subscriber additions, with 21,000 from Turkcell Fiber. Total Turkcell fiber home passes expanded by 138,000 to 6.5 million across 30 cities, with a 41.8% take-up rate. Residential fiber ARPU increased 9.7% YoY. Fixed broadband contributes to the core revenue base.
• Digital Business Services: Revenue grew 64% YoY, accounting for 12% of total Q1 2026 revenue. Data center and cloud sub-segment revenue grew 21% YoY; system integration backlog exceeds 10 billion TL, and cumulative data center investments have reached nearly 600 million euros. The fifth Ankara data center module is on track for completion, and the Google Cloud hyperscale partnership is progressing as planned.
• PayCell: Revenue increased 15% YoY, driven by strong momentum in host and pay later businesses, which now have over 3 million active users (up 16% YoY). Financial services revenue declined due to ongoing installment limitations, but net interest margin expanded 3.6 percentage points to 8.3% amid lower funding costs, with cost of risk held at 3.3%.
• Other: Contributed 0.5 billion TL to total revenue, driven by strong performance from call center operations and the Belarus subsidiary.

• Management reaffirmed that full-year 2026 revenue growth guidance is 5-7%, and stated it is too early to revise guidance after 9% Q1 2026 growth, as the outlook depends on future macroeconomic conditions in Turkey and the duration of ongoing geopolitical conflicts that impact energy prices and inflation. Management will evaluate potential guidance revisions after Q2 2026 results are available.
• For full-year 2026 mobile ARPU, management targets growth that more closely tracks Turkey's inflation cycle, aligned with macroeconomic indicators. Dynamic segment-based pricing and migration to higher-value customer segments will support this target, though unexpected shifts in inflation dynamics could alter the real growth trajectory.
• TOGG (Turkish automaker investment) is expected to maintain its positive profit momentum through the remainder of 2026 after returning to net income in Q1 2026.
• Capex intensity is expected to increase in upcoming quarters from Q1's seasonally low 21.5% of sales, driven by ongoing renewable energy investments and data center expansions for the Google Cloud partnership.
• Net leverage is expected to remain below 1x for the full 2026 high-investment year.

• Unexpected shifts in Turkish inflation dynamics could pressure real ARPU growth and disrupt margin targets, given the lag between inflation changes and mobile price adjustments due to 12-month customer contracts.
• Geopolitical conflicts have driven higher global fuel and energy prices, which could create upward pressure on operating costs. The final magnitude of this impact depends on the duration and intensity of ongoing conflicts, which remain uncertain.
• Installment limitations for financial services imposed by Turkish regulators continue to pressure PayCell financial services revenue, and full growth potential for the business can only be unlocked if regulatory constraints are relaxed in the future.
• The elimination of mandatory inflation accounting from Turkish statutory financial reporting increased the Q1 2026 effective tax rate, and this regulatory change creates ongoing tax impacts for the full year.
• Currency volatility could impact funding costs and the value of the company's FX position, though management has proactively structured its hedging strategy to balance risk and hedging costs amid current stable FX conditions.

Q: Consumer segment revenue growth of 3% is much slower than overall 9% top-line growth—what is driving this gap? Also, how much pricing has been adjusted year-to-date across mobile and fixed, what are future pricing plans, and have higher fuel/energy costs impacted operating costs so far? / A: The gap stems from very strong growth in higher-growth non-consumer segments: digital business services grew 64% YoY, data center and cloud grew 21% YoY, and PayCell grew 15% YoY. The consumer segment remains the company's largest, but diversification across digital verticals has lifted overall growth. For pricing, the company uses AI-powered dynamic segment-based pricing rather than mass price hikes: a 26% January adjustment and 16% follow-up adjustment were implemented for mobile in 2026, ~12% for shared infrastructure and ~18% for fiber products in February 2026, aligned with the incumbent's actions. Higher energy and fuel prices are being monitored, but it is too early to estimate the full impact, as it will depend on how long ongoing geopolitical conflicts last.

Q: Mobile ARPU is seeing a real-term contraction YoY—what will this trend look like in coming quarters? What is the expected contribution from TOGG going forward after its positive Q1 net income, and what should be assumed for the full-year effective tax rate? / A: Temporary ARPU pressure comes from lagged impacts of 2025 competitive pricing strategies and 12-month contracts that delay alignment with recent inflation increases. The full-year 2026 target is ARPU growth that tracks inflation more closely, with dynamic pricing and customer migration to higher-value segments supporting this goal. TOGG returned to profit in Q1 2026 due to higher vehicle sales, stable EUR-TL parity, and inflation accounting monetary gains, and management expects this positive momentum to continue. The higher Q1 effective tax rate stems from the elimination of inflation accounting in Turkish statutory reporting, which removed tax benefits from capital item indexation and created deferred tax impacts that will persist for the period the change is in effect.

Q: Your 5G marketing campaign has gotten very positive consumer attention—have you measured positive business impact from the campaign so far? / A: Management confirms the campaign has generated extremely strong consumer interest and positive reception, due to its humorous, locally relevant storytelling that effectively communicates 5G speed aligned with Turkcell's brand identity. The campaign is still ongoing, so full subscriber and adoption impact will not be clear until the end of the current campaign period over the next two months. The campaign also supports the launch of the new 5G fixed wireless access segment, and management expects an overall positive impact on 5G adoption across both mobile and fixed use cases.

Q: Will you be revising your full-year revenue growth guidance after the stronger-than-expected 9% Q1 growth? / A: Management stated it is too early to revise the existing 5-7% full-year growth guidance. Any revision will depend on how macroeconomic conditions in Turkey evolve, which is heavily tied to the duration of ongoing geopolitical conflicts that impact inflation and energy prices. Management will wait to evaluate Q2 2026 results before considering any upward or downward guidance revision, as it is not rational to adjust guidance based on one quarter of performance amid current uncertainty.