Turkcell Iletisim Hizmetleri A.S. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your chorus call operator. Welcome and thank you for joining the Turkcell’s conference call and live webcast to present and discuss the Turkcell’s full year 2023 financial results. All participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Ozlem Yardim, Investor Relations and Corporate Finance Director. Ms. Yardim, you may now proceed.
Ozlem Yardim: Thank you, Konstantinos. Hello, everyone. Welcome to Turkcell's 2023 full year earnings call. Today, our CEO, Ali Taha Koc and CFO, Kamil Kalyon will be delivering a brief presentation covering operational and financial results of 2023, which will be followed by a Q&A session. Before we begin, I would like to kindly remind you to review our safe harbor statements available at the end of our presentation. Now I'm handing the meeting over to Mr. Ali Taha.
Ali Taha Koc: Thank you, Ozlem. Good afternoon, everybody, and thank you for joining us today. Despite the challenges of 2023, including various uncertainties and economic pressures, we remain committed to our goal of pioneering the digital transformation of Turkiye and generating value. By leveraging our technological capabilities and leading the telecommunication market, we achieved solid results across all fronts. According to the IAS29 applications, we delivered double-digit real revenue growth of 15% driven by dedicated price adjustments over the past two years, which has supported our pool expansion as well. We also prioritized value-generating postpaid and fiber customers, expanding our subscriber base by 799,000 net additions.
This top line growth led to significant operational leverage, evidenced by a remarkable 20% increase in EBITDA. Our margin expanded by 1.8 percentage points to 41%, driven by reduced energy prices and lower interconnection expenses. Ultimately, our strong operational performance resulted in a remarkable net profit of TRY12.6 billion, marking an impressive 83% year-on-year rise. Next slide, please. We successfully achieved our guidance in 2023. In a challenging year, we maintained our business strategy, prioritizing agility to effectively respond to evolving market conditions, particularly to address inflationary pressures. Consequently, including Ukraine’s financials, we recorded 75% revenue growth, suppressing our guidance. This strong performance also enabled us to exceed our EBITDA expectations.
An accelerated top line performance resulted in a 21% CapEx to sales ratio at year end. Additionally, investments to solar energy and Belarus have been postponed to following year. Next slide, please. Let's take a closer look at our mobile operational performance. Thanks to a focus on postpaid segment, we added 1.6 million postpaid customers in 2023, of which 476,000 came in the last quarter. The prepaid segment shrank by 1.1 million subscribers annually, mainly due to the alternative data solutions. In addition, the rising cost of new line activations and customers preferring postpaid lines to fix their offerings in an inflationary environment also negatively impacted the prepaid site in 2023. Please recall that we also disconnected inactive prepaid lines at year end, which was the main reason for the quarterly acceleration in mobile churn.
Compared to the previous year, our portfolio composition has become more valuable. We achieved a three-point increase in post-paid share in the mobile segment, exceeding 71% this year. By historical figures, blended mobile ARPU grew by 85% year-on-year, thanks to the rational price adjustments, upsell efforts, and a rising postpaid subscriber share in the portfolio. In line with inflationary pricing policy, we started the quarter with around 20% adjustment in our mobile prices in October. We will continue this approach and therefore anticipate sustaining real ARPU growth in 2024. Next slide please. In the fixed broadband segment, we adopted a profitability-focused approach in ADSL and cable by prioritizing penetration in the fiber segment. On the fiber front, we are pleased to have registered a further 43,000 net additions in this quarter and 169,000 for the full year of 2023, owing to an expanded footprint and a seamless, pure fiber experience.
Furthermore, we are pleased to see strong demand for our TV services. Despite higher price adjustments compared to the data-only packages, we provide this service to 66 out of every 100 households among our residential fiber customers. ARPU continued to widen the spread with inflation, growing by 76% on a yearly basis in historical figures. This growth was driven mainly by two factors, a rise in 12-month contract tariffs which enabled us to reflect price increases more rapidly and a rise in the share of higher speed tariffs from 18% to 30% compared to the previous year. As 86% of new residential fiber customers opted for 12-month contracts in the last quarter, we anticipate a higher share in the coming quarters. Next slide, please. Let's discuss our strategic focus areas, beginning with digital services and solutions.
Standalone revenue from digital services and solutions grew 19% year-on-year, driven primarily by 25% increase in digital OTT service revenues. The paid user base reached $5.6 million, mainly with TV and cloud services. Our digital business registered solid 23% year-on-year revenue growth. Beside the performance in managed services, a 50% increase in cloud service revenues and a remarkable 61% real growth in data center revenues supported the growth. Amid increased demand in areas including data centers, cloud solutions, and data analytics projects, we secured a thousand new contracts in the last quarter. Looking ahead to 2024, while TV+ and lifebox will maintain their flagship position in digital services, we will prioritize ramping up the capacity of data centers and cloud services to meet the high demand in these areas.
Next slide, please. Our techfin companies continued to deliver a strong performance, contributing to the company's top line growth in 2023. During 2023, Paycell expanded its product portfolio and strengthened its position within the fintech verticals to better serve customer needs. Paycell offers services from stock exchange transactions to shopping limits through Financell, and it is taking firm steps towards leading the Turkish fintech ecosystem. Paycell revenue rose 29% year-on-year, primarily fueled by the success of its direct carrier business Pay Later. The active user base of Pay Later reached $6 million, marking 19% annual growth, while its transaction volume surged 80% in the last quarter. Meanwhile, Financell, our financing company, continued to lead the sector in small loans catering to the needs of Turkcell customers, also playing a significant role in the improving the financial inclusion in Turkey.
A mid-rise office building bustling with employees working on various telecom projects.
Financell’s revenue grew by 28%, thanks to the demand for smart devices and new areas we enter such as shopping loans, car loans, and green loans. However, a significant rise in interest rates in the last quarter leading to higher funding costs had an adverse impact on Financell’s margins. Next slide, please. Now our performance in the international markets. Ukrainian subsidiaries have been classified as discontinued operations as of the end of 2023 due to announced sales process. Turkcell international revenues, which now accounts for 3% of group revenues, decreased by 1.8% to TRY2.6 billion. Base revenues rose 20% on a yearly basis in local currency terms, primarily driven by higher data invoice revenues. The improvement in EBITDA margin was supported by lower interconnection costs and energy expenses as a percentage of revenue.
Revenues of our Turkish Republic of Northern Cyprus subsidiary increased 20% year-on-year, fueled by strong real ARPU growth. The introduction of 4.5G services in September 2023 resulted in a 45% increase in 4.5G data consumption on a quarterly basis. Next slide, please. In our pursuit of building the Intelligent Edge, we will focus on three key initiatives in 2024. As Turkiye's largest data center operator, we prioritize keeping Turkiye’s data within its borders to ensure data security and confidentiality of personal information. To date, we have invested EUR330 million in our data centers, which currently boost a capacity of 33 megawatts in four new generation data centers. Due to high demand, we plan to add 9.1 megawatt of new capacity this year.
Secondly, Turkcell is leveraging its capabilities in artificial intelligence and machine learning to enhance our business models. For instance, our stores and the Turkcell mobile application have implemented AI, supported identity verification processes. Additionally, we have integrated AI into our communication channels for an improved customer experience. Last but not least, we remain committed to focusing on our state-of-the-art mobile and fiber infrastructure. Our objectives include increasing fiber-to-site investments and carrying out GPON modernization for improved efficiency. We have also signed a cooperation agreement with Lynk, a non-terrestrial network provider, to provide mobile services via satellite in rural areas where access to mobile networks is limited.
We continue to take proactive steps to maintain our leadership position in the technologies of 5G and beyond. Next slide, please. To conclude my presentation, I would like to end by sharing our guidance for 2024. Given the macroeconomic dynamics, projecting inflation in particular will be a challenging task. We aim to keep you updated about the guidance whenever there is a change in our inflation assumption. For 2024, we expect high single-digit real revenue growth, EBITDA margin guidance of around 42%, and we expect a CapEx intensity of around 23%. I will now leave the floor to our CFO, Mr. Kamil Kalyon.
Kamil Kalyon: Thank you very much, Ali Taha. Now let's move on to our financial results. Before we proceed, I'd like to outline the impact of inflationary accounting on our key financial metrics. Group revenues ramped up by 76% in historical figures, while under inflationary accounting, the rise was 15%. Over the past two years, inflation-adjusted Turkcell Turkiye revenues have outpaced the growth of Turkcell Group revenues, driving the overall growth. An expanding subscriber base and robust ARPU growth, as well as digital services, were the main drivers of this growth. EBITDA increased by 83% on historical figures, while according to inflationary accounting, growth was 20%. Apart from robust top line growth, lower energy prices, favorable interconnection expenses, and a decrease in the cost of goods sold as a percentage of revenues have been instrumental in driving real EBITDA expansion.
Lastly, net income growth was 65% on historical figures, whereas by inflation adjusted figures, it rose 82%, thanks to a strong EBITDA performance. Next slide, please. In 2023, EBITDA surged 20% to TRY44 billion thanks to a strong top line performance. Accordingly, the EBITDA margin expanded 1.8 percentage points year-on-year. Despite an increase in personal expenses resulting from two wage rises throughout the year, this was more than offset by declines in the cost of goods sold, energy costs, and interconnection expenses. The reduction in energy prices during the second and third quarters of 2023 supports the margin. Additionally, the continued decline in MTR positively impacted our profitability, a trend expected to persist in 2024. Next slide, please.
Now, let's dive into the net income performance. Thanks to a robust operational performance, EBITDA has contributed TRY7.3 billion to net income. The other operating income and expense item includes the first installment of the earthquake donation payment made in October, as well as a provision amount for the second installment of the donation, which was already paid in January. The balance sheet change due to inflationary adjustments in 2023 had a more adverse effect compared to 2022, with the monetary gain loss item being the most significant pressure point for net income, amounting TRY4 billion. Our Ukraine operation, classified under discontinued operations due to the ongoing sales process had a positive impact of TRY1.1 billion on net income throughout the year 2023.
Next slide, please. Let's take a closer look at our CapEx management. In historical figures, the CapEx to sales ratio for 2023 was 20.6% with accelerated revenue. This year, we maintained an equal focus on mobile and fixed investments. As our CEO stated, in alignment with our goals, our investments in 2024 will primarily target three areas. One, we will increase the fiber to towers, extending them to 41% of towers in Turkiye. This empowers us to advance our core capability in offering best-in-class 4.5G services and further strengthen our position in 5G and future technologies. Second, we will continue our investments in solar renewable energy to generate electricity for sustainable resources and secure cost advantage for the coming years. Lastly, responding to heightened demand, we will expand our data center capacity by constructing two new modules in Corlu and Ankara, increasing capacity by 28%.
As a result for 2024, we anticipate greater CapEx intensity. Next slide, please. Now let's turn our attention to the balance sheet. In 2023, our cash position increased by TRY7.2 billion, majorly supported by FX movements and organic cash generation. Our gross debt was at TRY84 billion, and we ended the year with a net debt position of TRY24 billion. Thanks to strong cash generation, our net leverage decreased to 0.5 times. In addition to the strong cash position, we have committed lines of around $120 million equivalent for the upcoming periods. The majority of our cash remains denominated in hard currencies. Excluding FX swaps, 53% of our cash is in US dollars and 20% in euros. Next slide, please. Lastly, let's look into the management of the foreign currency risk for 2023.
At the end of 2023, our balance sheet had around $2 billion equivalent in FX financial liabilities. In addition to the $1.5 billion equivalent FX denominated financial assets, we have a $0.6 billion effective hedging portfolio, the vast majority of which consists of future forward and NDFs. We ended up with a long FX position of $22 million, which is within our neutral FX position definition. This concludes our presentation, and we can now open the line for questions. Thank you.
