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Turkey Wireless: 4G LTE To Rejuvenate Sluggish Market

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Turkey ended 2015 with 75 million wireless subscribers, representing a compound average growth rate of just 1.9% over the last seven years. Sluggish growth largely stemmed from prepaid subscriber declines in 2009 and 2010 following the global financial crisis — with those declines not outweighed by postpaid subscriber increases — as well as from a small majority of users continuing to rely on prepaid plans. As of first quarter 2016, 50.3% of Turkey's 75.1 million wireless subscribers still used prepaid services, representing a significant decline from almost 80% in 2008. Outpacing subscriber growth over the same period, wireless revenue maintained a 8.2% CAGR, driven by strong ARPU gains, the increasing share of postpaid subscribers and higher data usage. The launch of 4G Advanced LTE services on April 1 is expected to boost subscriber and revenue growth.

Turkey wireless subscibers and penetration, 2009-2015

Turkey's wireless penetration, defined as wireless subscribers as a percentage of total population, reached 97.7% as of year-end 2015 and first quarter 2016, indicating wireless service accessibility to the vast majority of the general public. According to telecoms regulator Information and Communication Technologies Authority (BTK), wireless penetration breaches 100% if M2M subscriptions and subscribers under 10 years of age are excluded. Of 75.1 million subscribers in first quarter 2016, 89.6% were residential and 88% subscribed to 3G plans, while the rest used 2G.

On the mobile broadband side, total subscribers reached 39.1 million by year-end 2015 and 42 million by the end of first quarter 2016, equating to 54.6% penetration of Turkey's population. Mobile broadband subscriptions include prepaid and postpaid 3G (and, since second quarter 2016, 4G) wireless data subscriptions via mobile handsets and computers (including with USB dongles). As of first quarter 2016, just over 50% of mobile broadband subscribers were on postpaid plans, according to BTK. Mobile handsets remain by far the most common device used to access mobile broadband, with a 96.5% share in first quarter 2016.

Despite widespread use of mobile internet via handsets, usage of mobile internet via computers as primary or supplementary connections remains low compared to the use of fixed broadband. At the end of 2015, just 1.6 million people in Turkey had mobile broadband subscriptions for a computer, compared to 9.3 million homes with a fixed-broadband connection, indicating that fixed services offer better value for primary home broadband than mobile plans, which usually have lower data usage caps and connection speeds than fixed plans.

Turkey mobile broadband subscribers, 2011-2015

Despite slow subscriber gains, Turkey's aggregate wireless service revenue increased at an 8.2% CAGR over the last seven years, from 2008 revenue of 12.8 billion Turkish lira to 2015 revenue of 22.2 billion lira ($8.16 billion, based on an average 2015 exchange rate of US$1 being equivalent to 2.73 Turkish lira). Aggregate wireless service ARPU during 2015 was 14.5 lira ($5.31) — a 6.6% seven-year CAGR. Although a fair share of low ARPU prepaid subscribers churned out between 2009 and 2011, wireless service ARPU and revenues received a boost from heavier data usage and increasing subscriber migration to postpaid plans. Data's share of total wireless service revenues increased from 1.3% in 2008 to 36.5% in 2015. Voice continues to comprise the biggest chunk of wireless revenues; however, its share dropped from 80.9% in 2008 to 50.7% in 2015.

Turkey wireless service revenuw and ARPU, 2008-2015

Turkey's wireless market is divided among telecommunications firms Turkcell, Vodafone Group's Vodafone Türkiye and incumbent telco Türk Telekomünikasyon Anonim Şirketi. Of the three, Turkcell and Turk Telekom offer quadruple-play services, which also include IPTV, fixed broadband and voice. Vodafone offers wireless communication services as well as ADSL and fiber broadband. However, it partners with DTH provider Filbox to bundle its fixed-broadband services with satellite television.

Turkey operators wireless subscibers market shares, 2008-2015

As of 2015, Turkcell was the largest of the three wireless carriers, claiming 35.8 million subscribers, a 48% share of subscribers and a 47% share of revenues. However, its market share has declined over the last seven years from 56% of subscriber and 65% of revenues in 2008. Competitive pressures from Vodafone and Turk Telekom have resulted in subscriber losses from a peak of 36,000 in 2013 to 34,500 by second quarter 2016. Vodafone remains the second-largest wireless operator and the only one with a slight majority of wireless subscribers on prepaid plans.

Turkey operators wireless revenue shares, 2008-2015

All three carriers started to offer 3G services in 2009. Although Turkey's government intended to skip 4G network rollout, going straight to 5G, the lack of 5G standards, international spectrum allocations, and demand for faster wireless connectivity forced an intermediate move to 4G, with a spectrum auction held in August 2015. Turkey's telecom regulator BTK sold 20 frequency packages in the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz bands during the auction. The three wireless operators were required to achieve 90% population coverage with 4G within six years. Market leader Turkcell acquired 44% of available 4G spectrum.

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All three operators launched 4G services on April 1, deploying Advanced LTE technology with services available nationwide. Turkcell announced it has achieved speeds of up to 390 Mbps in tests over its LTE-A network. To drive customer adoption of the services, it also doubled mobile data allowances for a three-month period. The operator announced that in the second quarter 16% of its wireless subscribers, or 5.5 million, took 4G plans (marketed as 4.5G by all operators). Vodafone, in turn, offered free 4G subscriptions for the month of April. According to BTK, by the end of May, the number of active 4G subscribers in the market reached 12.1 million.

As of Sept. 14, US$1 was equivalent to 2.98 Turkish lira.

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Jul 05, 2017