Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, welcome to Turkcell First Quarter 2019 Results Conference Call and Webcast. Please be reminded that this call is being recorded. Today's first speaker will be Mr. Korhan Bilek, Director, Treasury and Capital Markets Management. Sir, please go ahead.

[Zeynel Bilek, executive]

Thank you, Ian. Hello, everyone. We apologize for the delay. It seems there was a technical problem with the voice recording of the web chat. Hello again. Welcome to Turkcell's First Quarter 2019 Results Call. Today's speakers are our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz.

Now I hand over to Mr. Erkan.

[Murat Erkan, executive]

Good morning, and good afternoon, everyone. Welcome to Turkcell's First Quarter 2019 Results Call.

I'm honored to have been appointed as Turkcell Group CEO. I'm excited to meet the group in the next phase of the journey. I've been with Turkcell Group since 2008, first as the CEO of Superonline, our fixed business as a separate company at the time, and then as a Chief Sales Officer of Turkcell. With almost 12 years of experience in the sector, 12 of which at Turkcell alone, I will continue my efforts at centering Turkcell pioneering growth in the industry. Together with highly capable Turkcell team, we will take the company to even greater heights.

In the past, I have met with some of you on several occasions. One of my priorities will be to have an open dialogue with you regarding our business and benefits from your variable [indiscernible].

Now let's look at the highlights for this quarter. The macroeconomic environments remained pressured in the emerging market in the first quarter of 2019. And yet, we delivered robust results, exceeding our targets on the back of our solid business model built on strong pillars with 19.2% annual top line growth and TRY 2.3 billion EBITDA, we recorded an EBITDA margin of 40.2%.

Upon completion of our Fintur stake divestment on 2nd of April, we booked TRY 772 million net income. Fintur cash proceeds of around EUR 353 million contributed to the downward trend of our leverage to 1.3x at the end of the quarter. On the operational front, our digital services gained further popularity with cumulative downloads reaching 178 million.

In April, we hosted Turkey's largest technology summit for the 10th time with thousands of participant at 30 session, we both led the discussion and demonstrated new technologies, 5G, AI and robotics, and their likely impact on lives.

Going to next slide. Now some additional details on our quarterly financial performance. We recorded TRY 5.7 billion top line on 19.2% growth and TRY 2.3 billion EBITDA on 12.8% growth. Our 40.2% EBITDA margin marked a 0.4 percentage point quarterly improvement. Turkcell Turkey was the main driver with its 2.2 percentage point quarterly increase.

On a year-on-year basis, we observed impact of our new businesses, which have relatively lower margins. To this, we made a divestment of our high-margin sports betting business in Azerbaijan. With our effective FX and interest rate hedging practices and the one-off Fintur sales income, we printed net income of TRY 1.2 billion this quarter. Capital expenditures remained under control with a 15.6% operational CapEx over sales ratio.

Moving to next slide. Let's look into our operational performance. Our monthly average mobile churn rate during the quarter changed to 1.9% as we faced challenges in retaining some of our budget-concerned customers.

While we were timely in reflecting the prevailing inflation environment to our prices, the market did [indiscernible] and to less than expected. We have taken several actions to retain this price-sensitive customer by implementing AI-based [indiscernible] learning technology, which allow us to realize retail segmented prices. We have seen the positive impact of these actions since March. Then we registered positive net [ add ] numbers. Offsets to high CapEx coupled with price adjustment have increased mobile ARPU by 13.4% year-on-year. On a like-for-like basis, this is more visible at 19.6%.

On the fixed broadband front, our fiber subscriber continued to grow with 25,000 net additions. Our [ running ] fiber tariffs offering our customer more [indiscernible] have been instrumental in the 12.3% yearly ARPU growth. Of particular note is the double-digit ARPU growth of [indiscernible] fiber business. Our fixed wireless access product, Superbox, has great potential to reach those locations not covered by our fiber networks and with twice the ADSL ARPU.

Instead of opting for the lower-speed ADSL service, some 56,000 customers have chosen Superbox. With our wider frequency and strong infrastructure, our ability to provide Superbox confirms our readiness to 5G. In addition, through our infrastructure sharing agreement with Turkcell, we now have nearly 10,000 cable subscribers.

Next slide. Let's dive deeper into marketing campaigns which boost customer engagement and loyalty. Our 25th anniversary of campaigns show 4.5 million participants, 2.2 million of whom were into this, our digital services. Our legendary Shake & Win campaign, with over 13 million participants during the quarter, has distributed over 140 million gifts, including minute [indiscernible] subscription to our digital services. Despite the premium pricing, our Mean Promotor Score -- sorry, Net Promoter Score remained intact on the back of our network quality, sales channel efficiency and overall brand image.

Next slide. Now the key driver of our strategy, demand for data and digital services. Average mobile data usage rose 34% in the year to 5.9 gigabyte per user in the first quarter. The main driver of this increase is the rising number of unconventional 4.5G users at 7.4 gigabyte per users. Out of 31 million customers signed up for our 4.5G services, 18.5 million have 4.5G-compatible smartphones. Room for growth here underline the potential for greater data usage by a wider customer base as 4.5G users consume more than twice the data.

Our network registered close to 1.7 million net additional 4.5G-compatible smartphones over the past years. And despite the regulatory limitation and higher retail price, we have seen an increase of half a million in the first quarter.

Next slide. A few words on our performance in the international markets. Turkcell International generates 7% of group revenue. Our operation printed top line growth of 17% year-over-year in the local currency terms on the back of strong ARPU. This rises to 52% in TRY terms with impact of currency movements. Both Ukraine and Belarus operation have continued their focus on expanding the 4G penetration and the usage of digital services. Accordingly, we note 1 million active digital services user in Ukraine, whereas, 4.5G users reached 36% of data usage within 1 year.

Going forward, our strategy focus will be on 3 key areas: our digital services, digital business solutions and our techfin platform. For digital services, we will continue to work on increasing data usage. Also, we will establish new commercial partnership to export our portfolio. We will start the digital transformation of both private and public sector through the digital business solution arm, including mega projects like [indiscernible] hospital, which are capable of offering tailor-made solutions given our vast experience and strong business partners.

The situation of financial services is another area of great potential. New technologies enabling more efficient and lower-cost access to and from the cost [indiscernible] brings the whole financial sector to the brink of major disruption. Although we invested in this area, we have the best tools and assets to lead this change. This will be our first focus area. As we move forward, we will remain alert for new business opportunities and has all that expects more to come.

And most importantly, in the new area, we aim to strengthen our emotional ties with our customers, positioning us at the heart of all we do. For this purpose, we have recently redesigned our sales organization. We now have a structure enabling us to design more effective services and solutions.

Next slide. Some infrastructures [indiscernible] meeting our targets. Today, our well-invested mobile network operates on the widest frequency in Turkey. Our 43,000 kilometers of fiber and 8 data center enable us provide the high-quality services with the complement of 10 Gbps speeds and the first in Europe.

Additionally, we brought fixed broadband to more households through lateral agreement with Türksat and Vodafone Turkey. We have agreed [indiscernible] investment. Joint infrastructure will enable Turkey to roll out 5G the fastest and cost-effective manners. It serves the interest primarily of our country but also of all parties involved. That's why we remain focused on this matter to finalize it before Turkey adopts 5G.

Next slide. As for digital services, total downloads reached 178 million or a 75% increase at the end of the quarter. With those 6 million downloads to date, active BiP user exceeds 10 million. 194 million messages per day were sent through BiP in the first quarter, marking a new record high. This instant [ messaging ] capability in 106 languages has been [indiscernible]. The leading digital publishing platform, Dergilik, has 12.1 million active users. These have read some 1.3 million magazines and newspaper per day thanks to its expanded content.

Over 8 million songs were streamed daily on average on fizy, while over 60 documents were uploaded per person per day on lifebox. Games played on BiP reach 36 million, up from 30 million in the previous [indiscernible] quarters.

Next slide. Already active in our international subsidies, our digital services are set for expansion in new markets. As such, following the one signed with Moldcell in Moldova, we have also signed cooperation agreements with ALBtelecom of Albania, CG Corp Global of Nepal and Digicel Group of Caribbean. In total, these countries number 38. While continue to work on increasing the usage of these digital services, we will establish new commercial partnership for digital export.

As the second pillar of our strategy, we will serve the digital transformation of both the private and public sector. For this purpose, we have established a company which provides end-to-end ICT solution by leveraging cable to have combined telecom and IT services. The total average market in this field is estimated to be $20 billion in Turkey, including connectivity, hardware, cloud services, security services, IT integration and solution using AI, IoT and Big Data. We all have had some know-how of industrial digitization that includes [indiscernible] energy and public sector transportation. We'll focus further on these rising industries. We are cognizant of becoming the #1 IT services company in Turkey within next 3 years.

Next slide. Our techfin services portfolio is diversified by our Paycell, Financell and Güven-Cell subsidiaries. Leading payment system provider Paycell has established 3 vertical business lines, including mobile wallet, carrier billing, utility payment, money transfer, QR code payment and POS services. Going forward, Paycell will focus on scaling its product, for example, with new partnerships.

In the first quarter, some 5 million Paycell users generated TRY 1.7 billion to transaction volume. Registered credit card on Paycell will continue to rise, while Paycell credit cards today number 1.5 million. Our consumer finance company, Financell, 28 million credit score customers, multiple times higher than a sizable bank in Turkey. Underlining its potential, our insurance business, Güven-Cell, complements Financell perfectly and contributes to controlled cost of risk ratio.

Moving to next slide. Encouraged by our first quarter performance and considering what lies ahead, we revised our 2019 revenue growth guidance upwards from 16% to 18% to 17% to 19%. Similarly, we are now confident of achieving our EBITDA margin of between 38% to 40%. We reiterate our operational CapEx to sale ratio guidance.

Next slide. Before I leave the floor to Osman, a few words on the next 2 big dates on our agenda. First, as announced last Friday, our annual general assembly is scheduled for Friday, May 31. Next, we have saved the date for 2019 Capital Markets Day as 31st of October, and for the first time in our history, we will hold it in New York. At this event, we plan to provide an update on the group strategy along with our 3-year outlook. Hope to see you all on that day.

I will now leave floor to our CFO, Osman Yilmaz.

[Osman Yilmaz, executive]

Thank you very much, Murat. Good afternoon, good evening, everyone. Now let's take a closer look into the financials.

In the first quarter, group revenues rose 19.2% year-on-year, corresponding to an incremental TRY 914 million. TRY 764 million positive increase is from Turkcell Turkey on back of the strong ARPU. Our exit from this first betting business in Azerbaijan had a 1% negative impact on the top line.

Meanwhile, our new business lines such as energy contributed to both top line and [indiscernible] EBITDA, albeit with a lower margin. The EBITDA rose by 12.8% year-on-year to TRY 2.3 billion with a margin of 40.2%. Last year, we had seen the onetime positive effect of our sales channel reorganization on EBITDA creating a high base effect. In a quarterly trend comparison, our EBITDA margin marked a 0.4 percentage point improvement. Turkcell Turkey was the main driver with a 2.2 percentage point increase.

Next slide. Now some highlights from our balance sheet and leverage. As at the end of the quarter, our net debt position came down to TRY 11.7 billion from TRY 12.7 billion, thanks to the Fintur sales proceeds of TRY 2.2 billion. Accordingly, the net debt to EBITDA ratio declined to 1.3x, below our [ confidence ] ratio of 1.5x. Major factors impacting our net debt position in the first quarter include currency depreciation with a net impact of TRY 560 million, advanced lender payments of EUR 90 million and wireless usage fees of TRY 520 million paid every year in February.

On the positive side, besides Fintur, we had TRY 530 million [indiscernible] from the deleveraging of the consumer loan portfolio. Excluding [indiscernible] consumer finance loan portfolio, our telco-only net debt was TRY 8.1 billion with a leverage ratio of 0.9x.

Next slide. Now a few words on our techfin company's performance. Despite the regulatory limitation of financing installments as well as cumulative pressure on the smartphone device prices, Financell grew by 14% year-on-year. Meanwhile, its consumer loan portfolio decreased to TRY 3.6 million, which has affected the net positive cash flow for the group. With an average ticket size of TRY 1,700, our customers paid TRY 124 per month on average.

Cost of risk rose to 2.8% in March, which is still below the market average for general-purpose loans. Loan insurance penetration of 95% over the past 1 year will have reduced its ratio as NPL [indiscernible] will be compensated by this issuance. Meanwhile, our payment services company, Paycell, continued its strong momentum on 26% year-on-year driven growth. Its EBITDA growth was 12.9% with a 71% EBITDA margin.

Over the coming quarters, we expect Financell growth to slow down in line with its loan portfolio contraction, while Paycell growth will accelerate its main products and services. As a result, the techfin business is expected to continue its positive contribution to the group.

Next slide. Let me give you more color regarding our consolidated cash position. Our cash position rose by TRY 1.5 billion in the quarter. Our operations generated TRY 2.3 billion of EBITDA. Working capital rose by TRY 827 million due to mainly seasonal decline in trade payables. Investing activities, including advance payments to lenders, led to a cash outflow of around TRY 1.6 billion. Of that, a EUR 90 million advance payment helped us to fix security rate and benefit from discounts on procurement.

Regarding financing activities, we utilized EUR 235 million [indiscernible] at very attractive rates. Separate lender financing from [ EKM ] of USD 50 million was also secured in March. This has helped further improve our liquidity position, which has almost reached $2 billion as of the end of the quarter.

Next slide. Now I will go into the management of foreign currencies. We continue to hold 100% of our cash in hard currency as a natural hedging tool. In addition, with hedging instruments in place, the share of FX debt declined from 83% to 44%. As discussed, the Fintur transaction proceeds have led to a long net FX position of USD 216 million. As stated in the fourth quarter of last year, we target a neutral FX position going forward.

This concludes our presentation, and now we are ready to take your questions. Thank you very much.

[Operator]

[Operator Instructions] Our first question is from Cesar Tiron from Bank of America Merrill Lynch.

[Cesar Tiron, analyst]

Congratulations on the results. I have a couple of questions. Apologies for that. The first one is on the revenue trajectory. Has there been any gradual improvement if you look at it on a year-on-year basis between, say, March and January? Second question, moving on to OpEx. It seems that the -- most of the cost, actually, sorry, was -- that increased faster than revenue was cost of goods sold. Can you please shed some light on which cost exactly grew faster than revenue in cost of goods sold? So the question, can you please explain why there has been such an improvement in margins in international operations? And then finally, on shareholder remuneration, have you made or are you planning -- either Board planning to make a recommendation on the dividend for 2018?

[Murat Erkan, executive]

Okay. First of all, thank you very much for the question. The first one, the gradual improvement in our result, it's mainly coming from our corporate business. Actually, our corporate business year-over-year growing more than 20%. And last quarter, it was like 27%. So mainly, it's coming from our corporate business. On the OpEx side, cost of goods sold, we start to grow. This was coming from our terminal, smartphone, tablet sales. Part of it -- and this is kind of low-margin business for us, so it impact our OpEx [ path ].

Why improvement in margin on international operations? This is mainly IFRS 16 impact of the Belarus and Ukraine operation. We did our -- on the other hand, we have some organic growth as well. Out of total growth, 4% is coming from organic growth of 4% margin -- organic growth of Ukraine and Belarus operation. So we have 4% organic. The other part is coming from IFRS 16 adjustment for capital expenditures side. What was the last question? Sorry, I...

[Cesar Tiron, analyst]

On the dividend and whether the Board has made or will make a recommendation for the dividend that will be decided at the AGM.

[Murat Erkan, executive]

Yes. Actually, we expect to see 50% of profit to be proposed by our Board. It is still up to the shareholders on the 31st of May, but this is typical behavior of Turkcell. So we are more -- probably going to propose [ 50% ] of profit -- net income.

[Operator]

Our next question is from Herve Drouet from HSBC.

[Herve Drouet, analyst]

My first question is regarding your digital strategy. Where do you see, you think, the future for Turkcell? I mean do you see a shift in the strategy for Turkcell in digital applications? And what is, in your view, the most brighter future for Turkcell in digital apps? Do you think, for instance, financials apps could be something? And what, in your view, could make, for example, some of your -- for example, Paycell to take up strongly? What is needed, in your view, to take it up strongly? So that's my first point of questions.

My second question is back to the cost of goods sold. I was wondering how much of the energy resell is in your number in Q1? I mean is it a significant number or not? And could that have as well an impact on cost of goods sold as well? And my third question is -- I mean it looks like we've seen quarter-on-quarter churn, right, especially in Turkey going down quarter-on-quarter. I was wondering do you believe that decrease in churn rate is sustainable looking forward. And what do you think could be the impact on the EBITDA margins? And could it be as well linked with potential cleanup of some of the SIM cards you report? So those are my main 3 questions.

[Murat Erkan, executive]

Okay. Thank you very much. Let's start with the first question regarding our digital strategy. There was a slide about our strategy going forward. One of the pillar was our digital services. As a management team, we wanted to -- the total energy generated by our digital services in accordance with our 14.4 division. Our ambition, developing and offering digital services, is to enrich our customer risk by meeting in all their digital needs. So we focus digital services, digital strategy. On the other hand, one of our pillar is [indiscernible], which is based on Paycell and Paycell application. So texting is quite important [indiscernible] role and important [indiscernible] our segment. We have 35 million clients. This is bigger than any bank in Turkey, probably bigger than -- and our largest bank in Turkey has 8 million subscribers. So this clearly shows opportunity for us, and we are planning to introduce new product to monetize our mobile payment and other stuff with Paycell. We do believe that we have strong position around it.

Regarding cost of goods sold, the energy part is not significant because one of the major customer of energy is [indiscernible] Turkcell. Out of Turkcell -- I mean to the market, our energy business [indiscernible] 37 million [indiscernible] significant, actually. Mainly, cost of goods sold side is -- rely on turnover sales, I mean, our smartphones, tablet and other [indiscernible].

What was the third question?

[Herve Drouet, analyst]

[indiscernible]

[Murat Erkan, executive]

Okay. This is -- obviously, for the churn rate -- for Q4, churn rate is not organic churn rate. As you know, we're doing some action on -- during Q4 for the customer. We're closing down -- shutting down some of the customer for -- if they don't bring any value to us. So I don't think it's a good idea to compare Q4 versus Q1. But obviously, we would like to keep sustainable churn rate around 2% range. I mean around 2% is, I think, quite healthy churn rate for us. But not -- you cannot compare Q4 versus other quarter. Q4 is not organic churn rate.

[Operator]

Our next question is from Slava Degtyarev from Goldman Sachs.

[Slava Degtyarev, analyst]

Couple of questions. Firstly, Murat, following more than a month in the CEO role, do you see particular strategic opportunities that were not well addressed before? And also, do you aim to somehow modify your digital, your asset-lights or financial hedging strategy that is currently in place? And secondly, it seems like your mobile data consumption hasn't grown compared to Q4. Is there any seasonality here again or maybe some other effect here?

[Murat Erkan, executive]

First of all, in terms of our strategy, we do believe in digital services. Since I have been in the company for 12 years, I left part of the digital services, and this is one of the strong arm of Türksat. So we continue to execute our digital services and digital services exportation to the outside of Turkey. On the other hand, we're focusing corporate. We do see that corporate needs digital transformation. That's why we just established a company for integration and digital transformation side of the business. So we do see that there is opportunity. As I mentioned, $20 billion market is around for IT and communication side, so we need to capture that part as well.

For the techfin side, this is new to us, but also, we are preparing ourselves for the techfin platform. It's not just financing. It is also as a platform, Paycell, new application on Paycell, payment system, mobile payment, et cetera. This is also opportunity for us in Turkey and around Turkey as well. So these are the 3 areas. Obviously, we're very strong on the infrastructure side. We'll continue to invest in our mobile infrastructure and fiber infrastructure as well as data centers.

For the second question, mobile data consumption [indiscernible] Q4. Q4 is -- as I mentioned, Q4 is exceptional quarter in terms of every reason because we did inflation campaign -- inflation reduction campaign during Q4, so we gave double of capacity to our customer. So our customer is very good. They utilized this capacity. So Q4 is exceptional in terms of -- exceptional quarter in terms of usage, number of customer, et cetera. So the real comparison should be Q1 2018 versus Q1 2019. We have 34% growth, I believe.

[Operator]

Our next question is from Ivan Kim from Xtellus Capital.

[Ivan Kim, analyst]

Two questions from me, please. Firstly, on the inflationary price increases, is there any pushback from the government on that or from the consumers? And then secondly, about the automotive project that you're involved in. Can you please comment on how much equity do you plan to commit to that? Or are there going to be any other liabilities for you like debt guarantees or something like that?

[Murat Erkan, executive]

Yes. Let me start with the first question. Inflationary pricing is continuing. It shows in our ARPU growth. ARPU grew around 14% range as well as our like-for-like growth is 19.6%. So we're continuing doing our inflationary pricing. It shows we need that because our cost depends on inflation. So we'll continue doing inflationary pricing. We don't have anything from government. So obviously, everybody like to fight with inflation, including us. If inflation is going down, we'll stick on this one as well.

The second question, how much equity to commit to [indiscernible] project. We have no commitment about it.

[Ivan Kim, analyst]

Okay. But you -- I mean as a significant investment that the [indiscernible] plans, so for now, there is sort of nothing to comment on yet in terms of how much cash you will contribute there?

[Murat Erkan, executive]

Yes. Actually, we are partnering with 4 other investor in this aspect. So we recently assigned a CEO to the -- to our automobile business. So I think he will better comment on this one, but there is no commitment yet actually. So I would rather to say this on her -- or his side. So -- but so far -- let me continue. So far, we only put TRY 90 million as capital, so far.

[Operator]

Our next question is from Ondrej Cabejšek from UBS.

[Ondrej Cabejšek, analyst]

I have a couple, please. The first one is on the ICT and the digital business solutions. If you could please be more specific in terms of what the opportunity within the size of the market that you mentioned exactly is, capabilities you need to develop in order to tap into it and whether the recent acceleration in corporate is perhaps the primary driver of your guidance increase. That's my first question. Second question is you always talk about the double data inflationary measure from 4Q '18 as the opportunity to upsell people when this is reversed in 1Q '19, so if you could please comment on how successful or not you are with upselling people. And the third question would be if you could please confirm or not the target that you gave for the consumer finance company portfolio to be around TRY 3 billion towards the end of this year.

[Murat Erkan, executive]

First of all, regarding IC and digital business solution, we expect to see 30% [ cover ] of the business next 5 years, and we might reach TRY 4 billion on this side. Regarding our guidance increase, I think -- the first quarter strong result shows us that we can increase our target -- guidance increase. So -- and also, we do trust our team and our strategy and opportunity.

And also, for the third question -- sorry, for the second question, how successful we are on the upsell performance. Compared to February and March 2018, upsell figures increased by 30.7% in February and March 2019. Our upsell [indiscernible] package increased by 56%, which means TRY 16 versus TRY 10. So at the same time, if you compare 2018 Q1 and 2019 Q1, downsell ratio decreased by 12 points. I hope this will answer second question.

Regarding Turkcell financial services portfolio, we started the year with TRY 4.2 billion. Now it is TRY 3.6 billion. And our expectation for year-end is TRY 2.7 billion.

[Ondrej Cabejšek, analyst]

Nice. Can I just confirm, please? You said the ICT -- just to confirm the figure, as you said, 30%, 3-0, CAGR over 5 years, and you expect that business to be TRY 12 billion in size for Turkcell.

[Murat Erkan, executive]

TRY 4 billion. We expect the business in 5 years to be TRY 4 billion with 30% compound annual growth rate.

[Ondrej Cabejšek, analyst]

Okay. And the -- sir, can I just confirm that the portfolio target, you said 2.6 now is the target?

[Murat Erkan, executive]

As of today, 3.6, but our year-end target is 2.7.

[Operator]

[Operator Instructions] Our next question is from Cemal Demirtas from Ata Invest.

[Cemal Demirtas, analyst]

My question is about possible efficiency gains in the sector in general and, of course, for Turkcell. How do you head off 5G? I don't know when do you expect 5G, but do you see an opportunity for some site sharing going forward with the other operators? Do you see any potential gain from that side?

[Murat Erkan, executive]

Yes. First of all, our frequency and spectrum allow us to do 5G deployment as much as we have, but obviously, vendors and terminal site is not that ready for 5G. On the other hand, also, government is planning to -- probably will plan to increase the spectrum or frequency part in addition to that. We see this opportunity. So I don't think this is going to happen for this year, but hopefully, it's going to happen next year as well on the 5G side.

For the infrastructure sharing part, we see infrastructure sharing as an important aspect. For the 5G, it is necessary to have infrastructure sharing. Otherwise, it is very difficult for the operator to deploy multiple 5G network and get the benefit out of it or return on investment. So I think this is essential for the operators. But the 5G and site sharing needs to be part of fiber sharing as well because without fiber sharing, I don't see any 5G -- any successful 5G return in Turkey anyway.

[Operator]

Does that answer your question?

[Cemal Demirtas, analyst]

Yes. And as a follow-up question, as you mentioned, in the fourth quarter, there was some subscription loss, but it was not the organic for some other reasons. But when we get into the first quarter, we also see slight decline in the postpaid subscribers. Going forward, what do you plan about -- which is more important for you in terms of the ARPU or the detail about the subscriber loss going forward? Is it reasonable to assume that you will have flat or you have some ambition to increase the postpaid subscriber going forward?

[Murat Erkan, executive]

Okay. For the -- customer loss mainly came from the price-sensitive customers who are paying less-than-average package price on the postpaid front. This was mainly due to the across-the-board has increased to reflect cost inflation to our prices. Additionally, [indiscernible] income due to rising inflation also contributed to this outcome. Accordingly, customer with less than 25 [indiscernible] decreased by 4%, while customer with more than TRY 50 ARPU increased by 7% from Q4 '18 to Q1 '19. So this is mainly the reason. These value our customers greatly. We have taken some action to retain this price-sensitive customer by implementing AI-based adaptive learning technology, which gives us the ability to do micro-segmented prices. We have started to see the positive impact of this action starting from March, in which we observe positive net add numbers.

[Operator]

Our next question is from Dilya Ibragimova from Federated [indiscernible].

[Dilya Ibragimova, analyst]

This is Dilya from Citi. I just wanted to ask a couple of questions. First on guidance. Could you please -- I may have missed, but could you please give us a bit more insight what drives the upgrade on -- of the revenue guidance? If I'm just looking at the Turkey revenue trends, excluding the wholesale and the equipment sales, then the service revenue growth appears to be slowing to low teens. And is it equipment sales that you expect to be stronger? Maybe is it international performance that you expect to contribute -- to continue contribute to the growth on the group level? Or if it is Turkey service revenue? What do you expect to change going forward from now considering that the inflation environment in 2019 is not really favorable for price adjustments? That's first question. And then second -- yes. And then I'll come back to the second question.

[Murat Erkan, executive]

Okay. First of all, there are a number of things that support us to increase our prices. First of all, the first quarter performance, new organization and marketing activities plan, it gives us confidence. Secondly, our corporate business shows strong growth year-over-year basis, and it seems to continue to grow as well with the support of digital business solution and service revenue. So I think these are the important things that gave us confidence to increase our values.

[Dilya Ibragimova, analyst]

Okay. And maybe second question on the dynamics in the active user base of the digital services. If I'm just looking at sequential growth, there is some slowdown in what historically has been high-growth areas like publishing and messaging, but there is instead growth -- good growth in music and TV across cloud services. Is it -- where -- how you -- is it marketing-driven? Or is it perhaps seasonal? Just maybe if you could elaborate on the trends, we'd really appreciate.

[Murat Erkan, executive]

To be honest, our -- are trending the business services quite positive. There are some seasonality effect or our campaign effect in F by F difference. So as of today, when we look at our services, our BiP apps grow like almost double from Q1 '18 to Q1 '19. Just [indiscernible] is little bit in a flat basis, but this is, as I mentioned, a seasonality effect. Customer sometimes read more magazine or newspaper than the other season. On the music side, fizy, we have 2.9 million subs in 2018 versus 3.8 million active users. TV+ is almost more than double their performance. lifebox, it seems, 80% growth. When I go through all the apps, has increased just barely, it sounds like has almost flat subscription or active users. So this is mainly seasonal impact.

[Operator]

[Operator Instructions] Our next question is from Ondrej Cabejšek from UBS.

[Ondrej Cabejšek, analyst]

I have a follow-up on the ICT. Just to understand, Murat, do you think this is your first sort of big contribution for the group in general given your fixed business background because it seems like this is a new opportunity. Or was this ever part of the midterm guidance growing your ICT business like this?

[Murat Erkan, executive]

To be honest, I've been in the company for 12 years. I have contributed a lot on almost every strategy. So -- I mean, this is team effort, and as a company, we see the opportunity, and we decided to invest in the ICT and digital transformation project. And I think we did it right because our corporate business was growing like 5 years ago single-digit ratio. Right now, it is more than 20%, which gives us opportunity and confidence in this business and confidence to grow 30% CAGR as well. So I think -- I don't count on my side. This is team effort, and everybody believes in strategy. And this is not the only strategy for us. There are others as well. So I think -- but this is one of the important strategy to us.

[Ondrej Cabejšek, analyst]

And would you say -- was this ever part of the midterm guidance and growth target that Turkcell had going back a couple of years? Or is this something that is quite new?

[Murat Erkan, executive]

Yes. Actually, this is -- we have been working on this digital business solution company last 6 to 9 months. So last 6, 9 months, we've been working on this one. So you can count as midterm but relatively new because we convinced the Board to invest in digital business solution on this side. Also, we're working on Capital Market Day, which is going to happen 31st of October. We will give more detail about our strategy, especially on the ICT and digital business solution side as well.

[Operator]

[Operator Instructions]

[Zeynel Bilek, executive]

If you don't see further questions, I think we are about to close the call -- the end of the call. Are there any further questions?

[Operator]

There's no further questions. Back to you for the conclusion.

[Zeynel Bilek, executive]

Okay. Okay. So this is the end of our call. Thank you, Murat, Osman, for your presentations, and thank you all for taking the time to participate, and hope to meet you all in July, the second quarter results. Have a good day. Thank you.

[Operator]

This concludes today's conference call. Thank you, all, for your participation. You may now disconnect.