Turkey Telecom Sector

The Turkish Telecommunication Sector

The number of operators has increased due to regulations related to the Turkish electronic communications market introduced over recent years. In particular, the number of mobile and broadband subscribers has reached a significant number. When progress in total revenues by years is considered, we see that revenues, especially those earned from mobile telecommunication services at first hand has increased. Within this framework, Türk Telekom’s total sales revenues, and those of mobile operators had realized at around 5,8 billion TL as at the end of December 2011.

In the electronic communications sector, a very rapid increase in the number of mobile subscribers has been observed since the concession agreements executed with GSM operators in 1998. There were 65.3 million mobile subscribers as of December 2011. While the number of mobile subscribers and penetration rate have indicated a continuously rising in previous periods, this upward trend had ended as of the beginning of 2009. It is commented that the said slowdown resulted from the cancellation of the dual sim card due to mobile number portability, besides the “all directions” tariffs offered by operators. On the other hand; the 3G service commenced in July 2009, with the number of 3G subscribers reached 31.4 million as of December 2011. With the 3G service, the number of users obtaining mobile internet services increased to 6.454.801.

Having 15.21 million landline subscribers as of December 2011, the penetration rate in Turkey decreased to around 20.6%. On the other hand, given that the average household size in Turkey is 3.97 people , it is possible to say that in the landline services market a significant portion of the domestic population has been reached.

The total number of phone subscribers (landline and mobile) was approximately 80 million as of December 2011. Thanks to investments in DSL technologies over recent years the number of internet subscribers exceeded 14 million as of December 2011. The number of broadband subscribers, at around 18 thousand in 2003, had exceeded 14 million in the fourth quarter of 2011.

When the population, strategic position and economic dynamics of Turkey are taken into account, we note that global fluctuations will merely cause temporary recession in the sector, with its prevailing potential supporting the long-term growth of the macro economy.

Landline Services

Having executed a share sale agreement for the sale of a 55% stake corresponding to 6.55 billion US Dollars to Oger Telecoms Joint Venture Group in August 2005, Türk Telekomünikasyon A.Ş. (Türk Telekom) was organized as Turkey’s sole landline operator based on its historic structure and mission, with its infrastructure established accordingly. Reflecting these values, as the owner of all distribution networks, telephone exchanges and transmission infrastructure nationwide, the Company became an incumbent operator in the competitive environment.

Given that the average household size in Turkey is 3.97, we may observe that almost the entire domestic population can access landline services, with a certain saturation point having been reached.

Mobile Telephone Services

In July 1993, for a license fee of 500 million US Dollars for each, and with the provision that sublicenses would be issued when licensing conditions became suitable, Turkcell İletişim Hizmetleri A.Ş. (Turkcell) and Telsim Telekomünikasyon Hizmetleri A.Ş. (Telsim) signed an agreement with Türk Telekom based on the revenue sharing principle. Until 1998, all investment costs were borne by the above-mentioned companies in the project implemented according to the revenue sharing principle. The revenue sharing charges under the agreement consisted of the call fee, monthly fixed fee and the installation fee. Türk Telecom collected 67.1% of the revenues earned from the above-mentioned agreement, while 32.9% was shared between the above-mentioned companies. A GSM concession agreement was executed between the Ministry of Transportation and the above-mentioned companies for 25 years for a consideration of 500 million US Dollars on 27th April 1998, whereupon alternative operators to Türk Telekom became active in the telecommunications field in our country. Commencing operations in the telecommunications field in 1998, Turkcell and Telsim rapidly met a large subscriber potential in a wide geographical area throughout Turkey.

The total number of mobile phone subscribers was 65.3 million corresponding to an 88,6% penetration rate as of December 2011. While the number of mobile subscribers and penetration rate had seen a continuously rising tendency in previous periods, this trend had stopped as of the beginning of 2009. It is stated that the said slowdown results from the cancellation of users secondary subscriptions due to mobile number portability, as well as the “all directions” tariffs offered by operators. On the other hand, 3G services commenced in July 2009, with the number of 3G subscribers having exceeded 14 million as of December 2011.

Internet and Broadband

The number of broadband subscribers has shown a significant increase in recent years, and the penetration rate, at 3.71% in 2005, had reached 10,4% in the fourth quarter of 2011.

XDSL services were widely provided thanks to Türk Telekom investments since 2005, and accordingly, the number of ADSL subscribers had reached 6.8 million from the 450 thousand level within five years. It is estimated that increases in the number of fiber-optic service subscribers besides mobile broadband subscribers will also continue with marked acceleration in the coming periods.

Services Other than Landline Telephone and GSM Services and Market Structure

Totally 556 authorizations were granted in the Turkish telecommunication market as of March 5,2012. Operators were authorized under Service Contracts and Concession Contracts, as well as Right of Use and Notification Agreements.

Satellite Operators

Satellite operators are divided into two groups, with the first providing satellite communication services, while the second provides satellite platform services. Satellite communication services cover simplex or duplex data communication through satellites and earth stations. There were 23 operators providing this service as of December 2011.

Satellite Platform Service Operation is carried out by combining and multiplexing analog and digital signals received from different transmission environments in the form of digital packages, and then transmitting these packages to subscribers over satellites. Among the services offered by Satellite Platform Operation are high speed internet access, broadband data transmission, digital broadcasting and multimedia applications. There were 4 operators providing such services upon notification as of December 2011.

Operators Providing GMPCS Mobile Telephone Services

Operators providing Internet Service Provider (ISP) services give end users internet access services through the supply of necessary infrastructure, hardware and software. The job performed by an ISP can be defined as carrying users to the local and international internet backbones through their hardware and leased lines. ISPs give service on a notification basis, and there were 6 authorized ISPs as of December 2011.

Operators Providing Internet Service Provider Services

Operators Authorized to Offer Mobile Virtual Network Services

In the provision of mobile virtual network services, namely the provision of mobile services by utilizing the existing networks of actual operators with mobile networks, instead of building their own network, there were 38 operators authorized on a notification basis and 6 operators authorized on a right of use basis as of December 2011.

Operators Authorized to Offer Landline Services

Landline Services (LS) cover the provision of local, intercity and/or international telephone services to users by utilizing any type of technology over any telecommunication network and infrastructure. In other words, operators can provide local, intercity and/or international call services to users over a fixed, mobile or any other emerging network by using any technology they prefer. There were 67 operators authorized on a notification basis and 101 operators authorized on a right of use basis as of December 2011.

Operators Authorized to Offering Multi-Use Radio Services

Multi-Use Radio Service (MURS) includes more than one closed user group within the same system by using analog and digital technologies, which consist of a minimum of one radio repeater and sufficient volume of subscribers’ radio equipment. It covers the provision of simplex or duplex audio, data and optimized data, message, video, etc. services to subscribers, and an electronic communication service that can be either cellular and/or non-cellular, and can be operated either on a local or regional basis. There were 62 operators authorized to provide this service as of December 2011.

Operators Authorized to Offer Cable Broadcasting Services

The cable broadcasting service is an electronic communication service that covers the provision of simplex/duplex transmission of all types of data, video and/or encrypted/unencrypted radio/TV signals to subscribers over a cable platform network. Where operators providing cable broadcasting service also wish to provide a telephone service, they must notify the Institution for Landline Service, or else submit their application for the Right of Use. There were 14 operators authorized to provide cable broadcasting service as of December 2011.

Operators Authorized to Offer Infrastructure Operating Services

Infrastructure Operating Service involves the establishment and operation of transmission infrastructure in order to provide telecommunication services to operators and users. There were 68 operators authorized on a notification basis and 68 operators authorized on a right of use basis to provide this service as of December 2011.

Operators Authorized to Offer Directory Assistance Services

There were 14 operators authorized to offer a directory assistance service, which involves providing a service for unknown numbers, as of December 2011.

Directory Assistance Service

The objective of the Institution concerning the directory assistance service is to bring the said market to a satisfactory level concerning price, quality and preferences, besides maximizing customer interest. It is important to establish a competitive environment in the market in order to realize this objective. There are 14 operators authorized by the Institution to provide this service within the framework of directory assistance services.