[Starts Abruptly] 2017 results conference call. For your information, today’s conference is being recorded. At this point, I would like to turn the call over to Korhan Bilek, Director of Investor Relations and Mergers and Acquisitions. Please go ahead.

Thank you, Seth. Hello, everyone. Welcome to Turkcell's Third Quarter 2017 Results Call. Today’s speakers are our CEO, Mr. Kaan Terzioglu and our CFO, Mr. Bulent Aksu. We have a brief presentation, and afterwards, we will be taking your questions. Before we start, I'd like to remind you to review the disclaimer of our presentation. Now, I hand over to Mr. Terzioglu.

Thank you, Korhan. Good afternoon and good evening and welcome to our third quarter results call. We are pleased to announce another remarkable quarter of operational and financial performance. Our group revenues grew 25.7% to TL4.6 billion and EBITDA rose 34.1% to TL1.6 billion. Our EBITDA margin is now at 35.5 points -- percentage points, marks the highest quarterly print since 2009. Our data and digital services revenues grew 37% year-on-year with continued expansion of the 4.5G customer base, growing smartphone penetration of 71% and 40% higher data usage of 4.5G customers reaching 6 gigabytes per user as the average of the quarter. On 7% growth, total subscribers in Turkey reached 37.2 million. Over 50% of our customers in the mobile segment have preferred multiplay and actively used our voice data and at least one digital service. Our consumer finance company, Financell, completed its second asset backed security issuance of TL100 million, contributing further to the group focus on balance sheet efficiency and boosting cash flow generation ability. This quarter, we marked another milestone in our digital transformation by launching the Lifecell brand and accompanying plans in Turkey. With Lifecell plans, all communications, including calls, will be conveyed over mobile data and through our digital services. I will elaborate more on Lifecell. Move to the next slide. I will now elaborate more on the financial results of this quarter and our nine months performance. In the third quarter, Turkcell Group recorded 25.7% revenue growth with an EBITDA of 35.5%. Group net income virtually quadrupled year-on-year to TL601 million. With our third quarter top line performance, we are now Turkey's largest revenue generator in telecoms business. We have achieved this target one year ahead of our plan. At the group level, we registered TL13 billion revenue and TL4.5 billion EBITDA in…

Thank you, Kaan. Good afternoon and good evening to all participants. Let's take a closer look into the financials. In the third quarter, group revenues rose by 25.7% year over year, corresponding to TL939 million in nominal terms. This came mainly from subscriber base growth as well as the strong ARPU performance driven by the data and digital services growth of Turkcell Turkey and the additional TL103 million generated by Turkcell consumer finance company. Turkcell International added an incremental TL50 million to our revenues. EBITDA rose by 34.1% year on year to TL1.6 billion. This was mainly due to a solid rise in revenues and effective cost transformation program. The EBITDA margin improved by 2.2 percentage points to 35.5%. Next page. In the quarter, net income rose to TL601 million, 3.7 times that of last year. The TL450 million higher EBITDA was the main driver of this growth. Other positive factors are the TL101 million improvement of FX gain/loss after hedging costs, including the positive impact of the change in the fair value of swap transactions. The TL150 million change in other income expense, which was mainly due to the TL138 million negative impact of the tax I missed last year. This quarter, we again saw a limited TL74 million rise in depreciation and amortization with a base comparable to that of last year. Fintur contributed a TL5 million net loss in Q3 16. Yet, as expected, it had no P&L impact in Q3 ’17 as in the previous quarter. Regarding Fintur sale process, we see continuous progress and high activity and it is still our ambition to divest these assets before year end. Moving on to the next page. Now, I would like to talk about our balance sheet and leverage detail. At the end of the third quarter,…

[Operator Instructions] And we will take our first question from Vyacheslav Degtyarev with Goldman Sachs.

Can you please elaborate a bit on your plans with regard to search? Is there any international role model for you here? So why do you think that your search opportunity model is successful in Turkey. So you obviously have reached more than 40% of the mobile users in the country, but what makes you confident that significant part of them will move towards your search engine versus Google. And also if you can elaborate how many people are involved into that project. And also on top of that what is the digital advertising market in Turkey in order to serve the opportunity here. Thank you.

Vyacheslav, thank you very much for the question. The search engine and the digital advertising market is a market which is growing very healthily in Turkey. However on the other side, Turkey is one of the unique countries where Google has a 97% market share. If you look around the world countries like Russia, China, Korea, Japan have all come up with strong local search engines reach which adhere to local market needs. Turkey is one of those countries where language is an important issue and location based services which can only be effectively delivered through abilities of a local telecommunications player is key. Therefore we believe there is a healthy segment of the TL2 billion advertising market that can be captured through our entry to the market. Yaani, our search engine is going to focus on local language, local localizations of the search results, and combine these with secure commerce platforms. Therefore we see this as a very important investment on our side and we deploy almost 100 of our engineering resources developing the capabilities of local search. Today, we made our first announcement and we are coupling our local search tool Yaani with search capabilities, which does not consume from the quarters of the users. We will also provide one gigabytes of free browsing with the search engine users. I expect a strong demand to show up in our customer base, but the demand will not be limited to Turkcell customers because the engine will be open for all operators, all devices and all operating systems. And we will be providing further details in next quarterly calls on the progress of this product.

And we’ll move to our next question from Maddy Singh with Morgan Stanley.

Just continuing on the digital opportunity, out of the main categories you mentioned, which one do you think has the biggest opportunity for revenue and profits? And also what do you think of the like overall market potential for digital services as a whole. And how do you see the overall growth trend over next two, three years in the segment. And on the financials, just wondering how much was the FX loss in the third quarter exactly? Thank you.

Thank you very much. The digital opportunity can be best expressed in terms of the time that our customers spend on our services. If you take a day as 1440 minutes, we actually value the most where the customers spends the most time. From that perspective, our OTT TV offer TV+ has the maximum time spent by our customers with 53 minutes. This is followed by our digital media platform, KYCK, which actually is the digital publishing of magazines and newspapers in Turkey, which actually is consumed by 31 minutes by our customers. This is also followed by 24 minutes of music listening almost equivalent to 8 million streamed songs a day. Now naturally another important segment is safeguarding the digital assets of our customers, which is our cloud service. And I consider all these portfolio coupled with bit and also in the future with the searches that the Yaani will provide as our core seven corner digital services strategy, but our digital services strategy is not only limited to our own digital services, while we consider sharing, listening, watching as core parts of the digital services that we will provide, we also expand this as a platform for third parties. Through our fast entry Mobile Connect platform and Paycell we provide a secure commerce platform for any e-commerce player in the country. And we would also consider these in the future as our combination of our own services and third-party services to go. I expect most of our services and relevance of the customer will come from these digital services. As of the end of Q3, one out of two customers we have on mobile segment enjoys a minimum of one digital service from Turkcell. With regard to the foreign currency loss in Q3 exactly, this quarter our FX loss has been TL135 million. This is a combination of our cross-currency swap position changes.

On the digital revenue, if you see quarter on quarter, third quarter saw probably around 60 million additional revenues. So is that the number what we should expect in terms of the revenue opportunity or you would see further acceleration in the revenue generation trends in digital services place.

The digital services revenue growth drivers are a couple of different issues. One is the smartphone penetration, which heavily affects the consumer's appetite to consume more digital services. The second point is 4.5G customer base, which we believe we have a significant upside since still about 40% of the phones of our 4.5G customers are not yet supporting 4G technologies. And of course the third extent of our service offerings, so all these three things play a role and we do expect a healthy growth in penetration rates of our services.

So acceleration is possible?

Acceleration on digital services is sustainable and possible.

Any plans on monetization of BiP, your messing platform.

BiP is already monetized through our Lifecell, our new digital brand. We actually bundled app-to-network which is a unique feature of BiP called as part of our lifestyle packages. BiP unlike other OTT instant messaging platforms is not a closed loop application, we integrated IRIMS capabilities and call management capabilities into BiP, which allow BiP users to place calls to other operators as well as landlines. So this is a direct start of our monetization of BiP. And of course the real monetization of BiP comes from lower churn rates who experienced this superior service.

And just to get it clear here, the revenues which would be booked via a BiP to normal phone call, would that be booked as a digital revenue or as a voice revenue?

It will be booked as a digital service revenue.

And we’ll move to our next question from Anna Kazaryan with VTB Capital.

The first question about your churn rate, so we see the sustainable year-on-year decline of the mobile churn rate, but if you look on the quarter-on-quarter trends, we see that there was some increase in the third quarter versus the second quarter. so could you explain this trend. And the second question about your search service. So as the search service is quite complex from the technological point of view we think, could you elaborate what the search service totally you owned property or you develop this service in collaboration with some other IT companies. Could you clarify, thank you.

Anna thanks a lot. The rise observed this quarter stems from the correction of the seasonality of the churn rates due to changing from 9 months to 12 months. As you would remember the seasonality especially during summer times in Turkey due to the influx of foreign visitors have forced us to change our churn policy from 9 months to 12 months and basically we see the impact of this. This is a healthy change and we actually foresee that the year on year churn rate is on a declining trend on an annual basis and this is significantly lower rate than compared to our competitors. With regard to the search engine, nationally we partner with best of class technology companies in developing our solutions. Search engine is no different, we have technologically advanced partners which are working together with our local Turkish engineers and developing the solution.

[Operator Instructions] And we’ll take our next question from Walid Bellaha with Barclays.

Just one question on the planned disposal, so you mentioned that you're still expecting to complete a sale by the end of the year. Is it possible to give us just a sense of what you would do with the proceeds of such a sale?

Thanks, Walid. I mean as also Telia Corporation expressed their opinions in their quarterly call. We reiterate those, we are working hand in hand with them in terms of the sales process and we still expect to close the sale in this year. Now with regard to the proceeds naturally it will be cash inflow which will be impacting our leverage points and we will consider reducing the leverage or ultimately for benefiting our shareholders.

[Operator Instructions] And we’ll move to [indiscernible] with ATA Invest.

I have two questions. The first one is about the possible tax increases or tax changes related to telecommunication. What could be the impact for this for next year and maybe if you can give an example based on 2016 numbers assuming that everything would be similar and only the changes would apply. So maybe you could give an example on the previous year because for the future everything could change, you can increase the prices or change the prices. So it could give us some indication about predicting the future. And the other question is related to OpEx, I see significant improvement in your OpEx management, it's very impressive. And I would like to understand how it's connected going forward. Are there any room for improvement in that side. And the third one - my third question is related to any indication related to 2018 on top of a very successful year. Thank you.

First of all I would like to mention that the tax legislation is still addressed and it is in the process of being discussed. So lots of things may not be final in those. Having said that over the last years different application of special communication tax has led into a lot of complexities and speculations in the market. So overall, we see simplification suggest – suggested simplification by the government as a positive thing. With regard to total impact on the industry, we do not see anything that would necessitate a change in our guidance. Having said that, I believe this simplified method of taxation will be good for our industry and any potential increases in taxation will naturally be also passed to the customers in terms of increased prices. With regard to our OpEx management, we will continue to be very disciplined and continue with our cost takeout initiatives that has proven to be successful. I think again our guidance reflects the impacts of this type of initiatives as we have provided.

And the last question was related to 2018, how do you see the trends for the following year in general.

I would recommend to look into since there is a 4.5G step impact in 2017. In order to see a sustainable development and progress one needs to look carefully into the two year-on-year cumulative growth figures. And I would see that in our next conference call we will be in a better position to provide you the 2018 guidance and in our Capital Markets Day to come in the first quarter in London we will provide again a revised three-year outlook as well.

And we will move to our next question with Ondrej Cabejsek with Berenberg.

Two questions from me please. On Yaani, I would like to ask if you plan potentially on developing this into a web portal more than just a search engine. Hook this up somehow with for example the publishing services that you have which I guess would together [Technical Difficultly]

Segment, still losing your growth could be some sort of low teens level or you view your guidance as conservative. And secondly also, how do you view the adoption of the 5G technology in Turkey. When do you think that the standard might be put into the commercial iterations in Turkey? And so you do you think that it might require substantial increase in [indiscernible] or you will be looking for some of infrastructure sharing with other industry participants? Thank you.

First of all as I tried to explain in the first explanations, if you look at the last three quarters from a two-year cumulative year-on-year growth perspective, our growth in the last quarters have been in between 30% to 35% range. And this is the sustainable continuation for Q4 as well. So if you take this into consideration actually the trend is stable and will continue. And we reiterate our guidance that we have provided before which is in line with our plans and yearly targets of 21, 23 percentage points of year-on-year growth. With regard to 5G, as you know during the 4G spectrum tenders, Turkey has adopted a technology agnostic spectrum utilization policy and we have deployed an advanced version of LTE technology which is 4.5G or in the world known as LTE Advanced. This gives us the capabilities for carrier aggregation, which could easily be done also for 5G deployment. Our network we have deployed now in Turkey which covers 82% of population actually is ready to be upgraded whenever needed through application of massive MIMO antenna technologies to 5G. But we do expect deployment of 5G unlike for 4.5G into industrial zones especially airports, railroads, and highways for industrial usage. So this will be a planned, controlled and economically feasible deployment model. With regard to consumer applications of 5G, we see a big potential in the home gaming market where we're going to see very high speed connections allowing virtual reality and augmented reality based gaming applications. And this is again a deployment that is possible through carrier aggregation through license and unlicensed spectrum. So we do not see potentially 5G as a major investment. However, having said that we are always open for infrastructure sharing both passive and active whenever possible and wherever applicable.

[Operator Instructions]

We have a question from the web from [indiscernible] it was about revenue guidance and also EBITDA guidance for 2017. I think revenue guidance is covered, maybe EBITDA guidance.

Actually maybe it came at the same time with [indiscernible] question. So the revenue guidance 21% to 23% year-on-year growth for the entire year and EBITDA guidance of 33% to 35% are unchanged and these are stable and in line with two year-on-year cumulative growth experiences that we have in throughout the quarters this year.

And there are no further phone questions in the queue at this time. I’d think to turn the call back to Korhan Bilek, please go ahead sir.

This is the end of our call. Thank you very much all for your participation and in interest in our company and we hope to you see in the next quarter.

Thank you very much. Take care bye, bye.

Again this concludes today's conference. Thank you for your participation. You may now disconnect.