Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2018-Q2

[Operator]

Good day, and welcome to the Turkcell Second Quarter 2018 Results Conference Call. For your information, today's conference is being recorded.

At this time, I'd like to turn the call over to Korhan Billick, Director of Investor Relations and Mergers and Acquisitions. Please go ahead, sir.

[Zeynel Bilek, executive]

Thank you, Willis. Hello, everyone. Welcome to Turkcell's Second Quarter 2018 Results Call.

Today's speakers are our CEO, Mr. Kaan Terzioglu; and our CFO, Mr. Osman Yilmaz. We also have our Sales and Marketing Executive Vice President joining the call. We have a brief presentation, and afterwards, we will be taking your questions. Before we start, I would like to remind you to review the disclaimer of our presentation.

Now I hand over to Mr. Terzioglu.

[Muhterem Terzioglu, executive]

Thank you, Korhan. Good afternoon and good evening, and welcome to Turkcell's second quarter 2018 results call.

Before we get to the results themselves, I would like to take a couple of minutes to say farewell to a dear colleague and friend of ours, Bülent Aksu. As you may have heard, Bülent recently resigned from his position as Chief Financial Officer to assume a key role within the Ministry of Treasury and Finance. Bülent has been particularly successful in leading the implementation of best practices, innovative financing solutions and excellent risk management. With outstanding efforts, he has made notable contributions to maintaining our company's solid and healthy financial structure. I take this opportunity to thank him once more for all his valuable contributions to Turkcell and wish him great success in his new role. Today, I have asked him to join this call as our guest.

Bülent, the floor is yours. Anything you would like to say to our dear friends?

[Bulent Aksu, executive]

Thank you, Kaan.

It has been a privilege to be a part of the Turkcell management team under your leadership. In a very dynamic 2-year period, we have made significant achievements both in Turkey and our international markets. I enjoyed working very closely with the investor and analyst community and would like to thank them all for this good relationship and continued appreciation of our efforts.

Going forward, I am confident that Turkcell will succeed in achieving strategic targets on its digital journey. I am fully confident that Osman will do a great job taking it further. Osman has made significant contributions to sustain the group's healthy financial performance in his role as the Head of Treasury and Risk Management. Finally, I'd like to think that I will continue to serve the interest of Turkey at large in my new position.

Thank you all, and I hope we meet again.

[Muhterem Terzioglu, executive]

Bülent, thank you very much. I believe what is good for Turkey, what is also good for Turkcell. I wish you all the best in your new career. And Osman, welcome.

Now let's take a look at the highlights of these quarters. In quarter 2, our revenues grew 18.3% to TRY 5.1 billion. This brings the cumulative 2-year growth rate to 52% with a real growth rate of 21 after inflation. EBITDA rose 46.5% to TRY 2.1 billion, and our margin now stands at 41.8%. The share of Multiplay customers using our mobile voice, data and digital services reached almost 61% of our total digital services downloads have already exceeded 100 million. 47% of fixed residential subscribers use our TV services. With 18 million, 4.5G compatible smartphones on our network, the average data usage has continued to rise reaching 7 gigabytes in June.

Our strong second quarter performance has prompted an update on our full year guidance. We revised our top line growth expectations from the 14% to 16% range to 16% to 18% range while keeping the EBITDA margin and CapEx overall sales targets unchanged. This quarter marked an important milestone for our fiber business. In line with our asset-light strategy, our appeal for the joint deployment of fiber has finally been received positively. All leading telco players in Turkey have now signed a passive infrastructure sharing protocol, which I will elaborate shortly.

Last but not least, in this quarter, we paid the first installment of TRY 635 million of our 2017 dividends with the remainder to be paid in September and December in equal installments. This makes us the only dividend-paying company in the sector in Turkey.

Next page. On a quarterly basis, with the TRY 5.1 billion top line and TRY 2.1 billion EBITDA, we recorded a 41.8% EBITDA margin. This is an 8 percentage point increase in the EBITDA margin over the year. With our 2-year cumulative top line growth of 52% and 107% 2-year cumulative growth in EBITDA, we achieved stronger margins and real growth. In the quarter, we observed Turkish lira depreciation and market economic volatility compounded by concerns in the emerging markets. Despite these strong headwinds, we generated a net income of TRY 415 million. This confirms the efficiency of our long-term foreign currency risk management measures and the resilience of our business model. In the first half, revenues rose 17.9% and EBITDA 45.5%, resulting in 42.1% EBITDA margin. Operational CapEx as a percentage of sales in this first half was 16%.

Next slide. Let's elaborate on Turkcell Turkey's operational performance. In the second quarter, we have 37.6 million subscribers in Turkey with 950,000 yearly net additions. This quarter, we gained 174,000 mobile customers. The postpaid subscriber base continued to grow with 205,000 additions, the majority of which were from the corporate segment. In the corporate segment, we recorded the lowest quarterly churn of the last -- past 12 years. Our tailor-made end-to-end solutions as well as our value propositions for corporates have facilitated their digital integration.

Our fiber business continued to grow with 40,000 net additions. The number of IPTV subscribers enjoying the TV+ experience rose by 25,000 this quarter. Our quarterly mobile churn rate of 5.5% compares favorably to the competitive quarterly average of 7% over the past year.

Mobile blended ARPU in Q2 grew 13.3% to TRY 34.9. Successful execution of our digital services-focused strategy, upsell performance, inflationary price adjustments, increased share of triple play subscribers and the larger postpaid subscriber base have all supported the rising ARPU trends. When considering the ARPU of subscribers who have been with Turkcell for over 1 year, in another words, like-for-like growth, now reaches 15%. Fixed residential ARPU rose 5.1% year-on-year due to rising Multiplay with TV users.

Next slide. Our marketing team designs distinctive campaigns for our customers, creating additional incentives that invite them to try our digital services. We continue to see great appreciation for these campaigns as in the case of the legendary Shake & Win. The enhanced digitized shopping experience at Turkcell stores and superior network performance verified by independent companies significantly boost customer satisfaction. Coupled with our superior services, sales and marketing initiatives also increased customer satisfaction. We are glad to see that our customers have become voluntary ambassadors promoting our services as reflected in our Net Promoter Score. In fact, our latest Net Promoter Score further widens the gap between us and both of our competitors.

Next slide. Demand for data and digital services remain the key driver of our strategy. Average mobile data usage rose 30% in a year to 5 gigabytes per user in the second quarter. The main driver of this increase is the rising consumption of 4.5G users, which reached 7 gigabytes in June. Out of 31 million customers signed up for 4.5G services, the 18 million have 4.5G compatible smartphones. This indicates a potential of additional 13 million 4.5G users to get smartphones capable of consuming these services. Tapping into this potential, we have continued to add about 1 million 4.5G compatible smartphones to our base this quarter. We have continued to encourage our subscribers to experience 4.5G through successful campaigns in our digital service platforms.

Next slide. Let's take a deeper look into 2 important performance indicators that we closely monitor. Nearly 61% of our mobile subscribers use at least 1 of our digital services. This indicates a 14 percentage point rise from 47% in the second quarter of last year. These triple play customers generate 77% of mobile revenues in the second quarter with a 12 percentage point rise year-on-year reflecting their ARPU higher than the average subscriber. On the fixed side, our IPTV reaches the homes of 47 out of every 100 fiber residential subscriber.

Next slide. In the second quarter, we have continued to observe increasing engagement with our customers through our digital services. In addition to 32 minutes of GSM calls, our customers spend 55 minutes on the TV+ application, 23 minutes reading Dergilik on our digital magazine platform and 23 minutes listening to music on fizy. The call time for voice-over-IP customers on BiP increased to 39 minutes, while a user on average spends 16 minutes interacting on BiP, chatting, sharing videos and photos as well as playing games.

We continue to advance our digital services with new differentiating features. I will elaborate further on what is new this quarter in our digital services next slide.

Here are the key performance indicators. With 21.3 million downloads to date, BiP has 6.5 million active users as of end of Q2. BiP now enables the use of a second number on a single phone via the application. UpCall, which combines an enhanced calling experience with secure phone book, reached 3.2 million downloads. Around 1 million customers actively use this service where some 1 million calls per day are made.

Our digital publishing platform, Dergilik, reached 6.5 million downloads. In May, a wide range of international magazines were introduced to the Dergilik platform, elevating the content to nearly 1,500 magazines and newspapers. A monthly average of 7.9 million customers enjoy the benefits of Dergilik over the application as well as web services.

Nearly 7 million songs are streamed daily on fizy, our popular digital music platform, which has 1.8 million active users. We have migrated fizy to its new platform making it more amendable to future upgrades and additions and also international usage. 1.9 million monthly active users on our TV+ application had 8.2 million session logins per day. This quarter, we have seen peaks in data traffic during the general elections in Turkey and the World Cup.

lifebox, into which we have successfully integrated the option of using Paycell has 1.3 million active users. Our key tool to digitalize connection with our customers, My Account, currently has 11.8 million monthly active users. My Account users have 33% greater ARPU. These quarters, we introduced the web version of our search engine, Yaani. Reaching a download count of over 5 million in a shorter-than-expected time frame, Yaani has hosted 2 million search inquiries per day.

Next slide. Our mobile payments platform, Paycell, offers differentiated payment options. Mobile payment ability, also known as direct carrier billing, has seen traction from 5 million users, making transactions at app stores and most known OTT players. The Paycell app, now with the new interface, is the platform for all Paycell services, including an enhanced mobile wallet. Users can top up their Paycell credit cards, make utility payments, money transfers or pay via QR code using the application. There are around 0.6 million registered credit cards on the app. Nearly doubling in a quarter, the app has reached 1.5 million downloads.

Last but not least, the Paycell Card, available physically and online, had 277,000 users at the end of June. Enabled by Turkcell technology, Paycell offers a low cost and easy-to-use alternative to the conventional banking system for both existing banked customers and the unbanked society.

Next slide. Financell, our consumer finance company, continued its steady growth in Q2 with a 63% revenue rise while more than tripling net income year-on-year. The net income rise was mainly due to portfolio growth and higher insurance services revenue. Financell's consumer loan portfolio reached TRY 5.1 billion. Including the contracted handset receivables of Turkey, total receivables from handset financing rose TRY 0.3 billion during the quarter. Financell has a portfolio of 4.7 million loans, the average ticket size of which approximately TRY 1,500. 95% of loans were for smartphones and a corner store of our digital strategy. Consumers pay TRY 85 per month on average with over 90% also opting for add-on loan protection insurance.

Next slide. Let's take a deeper dive into our gaming business. Turkey's vibrant gaming market has 31 million gamers and the market size of nearly $800 million. With our technology and customer base, we aim to create the largest gaming brand in Turkey. We have opted for a segmented approach based on age. Our plan is to offer games on 3 key platforms including Playcell for those up to age of 12, Gamecell for older than 12 years and Kahvelig for older than 18 years of age. BiP gaming will serve as an umbrella platform for all these platforms. So far, we offer Playcell, which is a safe zone for kids offering a variety of educational and entertaining games. Available on web and mobile formats, Playcell users doubled to 1.4 million in June from the previous quarter with 7.2 million page views a month. As an introductory game to Kahvelig, we have launched TavlaGO, a Turkish backgammon application this quarter. You will hear about Gamecell from us as it rolls out in the upcoming periods.

Next slide. Taking a closer look into Lifecell, our data all-day offering built on our digital services and mobile data platform, with its unique digital services proposition, it doubled its subscribers in the quarter to 879,000. As of mid-July, more than 1 million subscribers are Lifecell customers. 70% of postpaid Lifecell users are new customers to Turkcell, and we welcome them to our world of enhanced digital experience through Lifecell.

Using 8 gigabytes data on average, a Lifecell subscriber generates 1.4x the ARPU of a Turkcell subscriber. The churn rate of Lifecell customers is 21% lower than that of the average Turkcell subscribers, underlining the attractiveness of our digital brands. And now, we have introduced another first for the industry. Lifecell users can curate their own unique package from among the digital services portfolio globally available.

Next slide. This brings us to the Turkcell International's performance in Q2. Turkcell International generates 6.5% of our group revenues. Our operations grew by 28.6% year-on-year to TRY 332 million in Q2 with an EBITDA margin of 36.9%. Lifecell in Ukraine contributes 63% to our International business. With the rise of mobile data revenues, Lifecell revenues climbed to 31.6% in TL terms and the EBITDA margin came in at 47.6%. Lifecell, the first company to provide 4.5G services in all 24 Oblasts, also started to serve on 1,800 megahertz in July. Reaching 817,000 4.5G subscribers, mobile data of these users reached already 6.6 gigabytes.

In Belarus, the revenues of BeST rose 25% with an EBITDA margin of 16%. Higher data and digital services usage with 4G led to revenue growth. Digital magazine, music, TV and gaming services are the key contributors to digital services revenue. This quarter, fizy has been enhanced with local content in Belarus as well.

Our Turkish Republic of Northern Cyprus operation, Kuzey Kibris Turkcell, saw 13% year-on-year growth with a 38% EBITDA margin. Taking our integrated operator approach to this market, they started offering fixed broadband in addition to mobile and digital services.

Lifecell Europe, which we have rebranded as a digital offering at the end of last quarter, now serves 260,000 customers in Germany with Turkcell digital services, including international money transfer and second number integration through BiP.

Next slide. We have been expressing that our international growth will not be limited to our mobile operator footprint. As such, we are taking our digital services global. This quarter, we provide a more detailed breakdown of these services which we are reaching our international customers through 3 different channels. These channels include: Turkcell Group subsidiaries and partnerships in Ukraine, Belarus and Northern Cyprus and Germany; partnership with mobile operators of other countries through Lifecell ventures. We pioneered this model in Moldova with Moldcell; and lastly, the stand-alone growth and direct and customer reach of our services in other countries. For BiP alone, we have attracted 1.4 million downloads. In total, the apps in our entire portfolio have reached nearly 3 million downloads outside of Turkey as of June.

Next slide. Over the past 2 years, we have appealed to the sector players on every available platform to collaborate on fixed infrastructure investments in the interest of efficiency and effectiveness. Our efforts on this front have reached an important milestone this quarter. As a result, all key sector players have signed a passive infrastructure sharing protocol. We consider this a landmark protocol that will eventually pave the way for widespread availability of fiber in Turkey. In addition, we have signed an agreement with Türksat to mutually share existing fiber home pass, which will provide us immediate access to an additional 3.6 million home passes. We expect this process to prompt a change in our fixed business CapEx assumptions going forward. This will be reflected to our business plan once all necessary bilateral agreements are finalized.

In the first half of the year, we have exceeded our growth targets, and thanks to mainly a strong ARPU performance and increasing customers. The remarkable ARPU performance reflects strict pricing policy, increasing 4.5G customers, a higher share of Multiplay customers and upsell performance. Encouraged by the solid foundation amid a tougher macro environment forecast for the second half, we revise our 2018 top line guidance upwards from 14% to 16% growth to 16% to 18% growth. We reiterate our guidance for EBITDA margin and operational CapEx to sales ratio.

I will now leave the floor to Osman for the financial overview. Osman?

[Osman Yilmaz, executive]

Thank you, Kaan.

Now let's take a closer look into the financials. In Q2, group revenues rose 18.3% year-over-year, corresponding to an incremental TRY 789 million. This increase is mainly comprised of TRY 601 million from Turkcell Turkey on the back of strong ARPU, TRY 89 million from Turkcell consumer finance and TRY 74 million from Turkcell International.

EBITDA rose by 46.5% year-on-year to TRY 2.1 million with a margin of 41.8%. This was mainly due to a solid rise in revenues, lower G&A and S&M expenses.

Next page. In this quarter, we printed a net income of TRY 415 million. The TRY 677 million higher EBITDA was partly offset by TRY 429 million higher D&A expenses. Of which, a TRY 292 million increases due to IFRS 15 and 16. Net income was also impacted by higher interest expenses due to rising interest rates and the higher loan amount, mainly resulting from TRY 2.6 billion in dividend payments during this term and TRY 1.1 billion [ chips ] towards these obligations under IFRS 16.

Higher FX was a result of FX volatility. In Q2 2017, Turkish lira had appreciated 4% against U.S. dollar, whereas in Q2 this year, Turkish lira depreciation was 16%. Our net FX for this quarter was TRY 279 million, which would have been TRY 961 million without the hedging instruments in place.

Next page. Now I would like to talk about our balance sheet and leverage details. As of the end of the second quarter, our net debt position was at TRY 10.2 billion with a net debt-to-EBITDA ratio of 1.49x. Excluding our consumer finance company loans, our total on the net debt is TRY 5.5 billion with a leverage of 0.84x. Our net debt position was impacted in Q2 by an FX impact of TRY 740 million and a dividend payment of TRY 631 million.

Next page. Let me give you more color regarding our consolidated cash position. Thanks to a successful eurobond issue in early April, we strengthened our liquidity position by TRY 2.5 billion ahead of the uncertainty and volatility in global financial market. The major items of the quarter includes EBITDA of TRY 2.1 billion, capital expenditure of TRY 1.2 billion, net interest income of TRY 474 million, net change in borrowing of TRY 1.6 billion, mainly due to the eurobond issue and the first installment of dividend payment of TRY 631 million.

Next slide. Now I will elaborate further on foreign currency risk management. As a hedging mechanism, we hold 78% of our cash in hard currency. In addition, these costs was to cover the large portion of our long-term foreign currency debt to fixed rate local currency liability. After hedging, the share of FX debt falls from 82% to 42%. In total, our short FX position was at USD 301 million as of the end of the second quarter, within our comfort zone. We also diversified our net FX exposure with different currencies, including the Chinese Yuan. Excluding the USD 16 million FX position stemming from the capitalized lease obligations, our net FX position would be at USD 215 million. We have been applying prudent risk management policy consistently over the past 2 years. This quarter, we have benefited significantly. Our net FX this quarter of TRY 279 million would have been TRY 961 million without the hedging instruments in place. Please also keep in mind that our nearly USD 270 million share of interest cash is not reflected on our -- Turkcell balance sheet nor in our net FX position.

This is the end of presentation, and we are ready to take your questions. Thank you.

[Muhterem Terzioglu, executive]

Thank you, Osman. We are now ready to take your questions.

[Operator]

[Operator Instructions] Our first question comes from JP Davids, JPMorgan.

[John-Paul Davids, analyst]

This is JP Davids from JPMorgan. Two questions, please. The first one is just around your buyback program. So you've -- you made some announcements recently that you are participating in the market in buying back some shares. Have you given any consideration to increasing the size and the scale of that buyback program, both for equities and bonds, but more specifically, for the equity component? Second question. Can you provide a little bit more color around the talks you're having with Mail.Ru to partner around IP into Turkey and possibly outside Turkey? And I guess more broadly, your view on partnerships with other Internet companies to scale your own digital services.

[Muhterem Terzioglu, executive]

JP, this is Kaan. Thank you very much for the questions. First, on the buyback. As you know, about a year ago, we announced -- almost 2 years ago, we announced a buyback program which was close to TRY 300 million. As of today, we have consumed about half of this buyback program through our buyback of equities and shares. Maybe Korhan, you can give us an update on the current portfolio in terms of the shares and the bonds on this.

[Zeynel Bilek, executive]

Yes. We did start buying back in late 2016 and recently, during the last 2 weeks, we purchased some shares. In total, we have about 9 million shares purchased and also USD 13.5 million of bonds also purchased. As mentioned, half -- roughly half of our TRY 300 million budget is consumed. Of course, we shouldn't look at this as a signal to the market that we see the share price as significantly undervalued. Rather than dictating the price, we just want to signal to the market and support the share price against high fluctuations.

[Muhterem Terzioglu, executive]

As you can imagine, JP, the Turkish equity market is really depressed at this point with very low valuations. And there are lots of speculative news around, and we would like to make sure that the market feels that we feel that it is right time to buy back, and we will continue doing that. Currently, we have not changed [ in terms of ] digital assets which are complementary to our current digital services portfolio, specifically in the areas of mail services for consumers, corporates, games as well as social media applications. We intend to work together with them on these different areas to complement our digital services. And of course, in exchange, the same thing holds true for them. So we are working and this is just one of the collaborations that we do with digital players. As I mentioned during our call, we have recently also announced a new capability for our customers to curate any digital service that they want. That practically brings all the OTTs as partly to our curated packages where our customers can reach the OTT applications through our billing, credit scoring platforms. So this type of collaborations you can expect us to do more of. Thank you.

[Operator]

Our next question comes from Herve Drouet, HSBC.

[Herve Drouet, analyst]

Two question also on my side. The first one is on the churn. Can you give us a bit more color on the reason why in Q2, the churn has increased? And do you think -- versus Q1? And do you think it's a temporarily phenomena? Or do you think there's been a change in the competitive arena that made that churn slightly going up quarter-on-quarter? And the second question is also on the -- on your interest expense. And I was wondering in term of the hedging and hedging tools you are using, have you experienced or are you currently experiencing an increase cost of hedgings, especially considering the higher volatility of the currency?

[Muhterem Terzioglu, executive]

Herve, first of all, thanks a lot for joining and for the question as well. In terms of the churn [Audio Gap] rates change, first of all, I would like to clearly say that we are extremely happy with the churn rate we have. As you know, this churn rate has moved from 7 percentage points to almost 4.5. And now stands at 5.5, which is a reflection of actually seasonally changes. As you know, we have made certain changes last year from our churn practices from 9 months to 12 months for silent accounts. And this is now actually where we see the trends stabilizing at 5.5%, which is extremely beneficial to us considering the averages of 7% in the marketplace. So we consider this as actually a very satisfactory level from our perspective. It has not been an impact of any competitive dynamic. On the contrary, as we have mentioned, our Net Promoter Scores continue to increase the widening gap of the competitors as well as the customer satisfaction ratings that we see. With regard to the hedging and the cost of hedging, I will leave Osman to comment on it.

[Osman Yilmaz, executive]

Thank you. Actually, we have done most of the hedging for our core business. And over the last 2 years, we have made significant executions in hedging. And the overall cost of these hedge are 11% in TL terms. And the remainder part is for Turkcell consumer finance company. This company's hedging program is relatively shorter term. Because of the nature of this business, the average duration is 1 year, but we can reflect the increasing cost to decline. And recently, we increased the prices on consumer loans. So we don't expect a significant impact on our balance sheet from increasing interest rates because we have done most of the hedges over the last 2 years with relatively more favorable costs.

[Muhterem Terzioglu, executive]

Maybe one more thing I would like to add, Herve, in terms of the hedging policy we have, we actually take the hedging concept beyond the hedging of foreign currency. We have a business model hedge mechanism where we hedge not only foreign currency exposures but also interest rate fluctuations as well as the maturity of the loans we have. And this actually brings our next 3-year business model to be fully funded and eliminating all the potential interest rate fluctuations, foreign currency fluctuations through this model.

[Operator]

Our next question comes from Mr. Slava, Goldman Sachs.

[Vyacheslav Degtyarev, analyst]

A couple of questions -- sorry if you answered the other questions as I missed part of the call. So firstly, how would you qualitatively describe the reasons behind your guidance, upgrades on the revenue line? Do you see high demand from your digital and data services? Or you feel more comfortable with the inflation pass-through? And secondly, could you please update on the progress with regard to the Fintur divestment? Do you still see the possibility to sell it by the end of this year?

[Muhterem Terzioglu, executive]

Thank you, Slava. With regards to our guidance increase, we have made I think very clear that our business model involves inflationary pricing. And practically, the performance we had in the first half demonstrates that we have been able to move our prices up and while doing that also win customers. So the reflection and the trend in the consumer price inflation in Turkey has moved from 11 percentage points when we made our first projections to now to around 14%, 15%. So by definition, our performance and our projections and plans also caters to that. So that's why we see a 16% to 18% growth is perfectly feasible for the year. With regard to Fintur, our intention is to close this process by the end of the year. We are currently in process of negotiations for the remaining assets in the company, including Moldova and Kazakhstan. And I expect that closures to be happening by the end of the year.

[Operator]

[Operator Instructions] Our next question comes from Johan Kim VTB Capital.

[Ivan Kim, analyst]

So I have three questions for you. First, on CapEx. So given that about 2/3 of CapEx are -- if it's eliminated, how you plan to respond to the change? In later dates, do you think you''ll be just building physically less? Or we should expect some increase in CapEx longer term? Secondly, on the automotive project participation, you've got 19% stake in it. And I was wondering what kind of capital commitments do you expect to make into this project. And thirdly, given the current macro environment, which is quite volatile and tough, do you still think tower sale in any foreseeable future will be possible?

[Muhterem Terzioglu, executive]

Well, thank you, John. In terms of your first question on the capital expenditures, should we expect increase? The answer is no. We will stick to our plans. We are using the advantage of our balance sheet and cash position to do necessary hedging activities also on the capital expenditures front, including doing advance payments at significantly beneficial discounts as well as planning for our expansions in line with our proposed and promised capital expenditure guidelines. So you can assume us that we will be sticking to our guidance that we have provided. With regard to the automobile project, as you know, we are 1 of the 5 shareholders of this newly established company with a 19% share. And we expect not exceeding $100 million level on this initiative as to -- in terms of capital expenditure over the next 4 years. Now on the macro environment, the tower sale is -- we believe our tower company is a fantastic asset. And we will be looking for monetizing this asset in the best way possible, creating shareholder value. At this particular moment in the depressed equity valuations in Turkey, we do not think it is the right time. But when the right time will happen, you will see us exploring our strategic options in this front.

[Operator]

Our next question comes from Atinc Ozkan, Wood & Company.

[Atinc Ozkan, analyst]

This is Atinc from Wood & Company. Two questions, but let me add a third one regarding -- comp base comments to the tower company. Well, given that we are seeing some milestone new loans on the infrastructure sharing side with the recent protocols you have signed with Türk Telekom and Türksat, what are the chances that we could also see a similar development on tower side, i.e., maybe bundling all tower assets in Turkey, which would be all these secured accounts? This is a friendly move and possibly purported by the government. It will likely also enhance your operating leverage and tenancy, [ it's global talk ]. So that's my first question. The second one is regarding your recently launched gaming platform, which is given the size of the Turkish markets and the dominance of PC and console games in this segment, how do you intend to monetize this initiative as a digital operator? Is this going to be limited only to small screen and mobile devices? And what kind of subscription model are you planning? If you could provide us any ARPU. I'll stop here.

[Muhterem Terzioglu, executive]

Thank you very much. With regard to the tower infrastructure share, this is something already in place. We have been sharing our tower infrastructure with Vodafone and Türk Telekom in addition to the other radio companies in the country. I expect as the regulatory environment clarifies further, we can take this collaboration into a higher level. I think the example of the collaboration we have now for the fiber infrastructure will also help accelerate the collaboration on this platform. I do expect that from now on, we're going to do very calculated and cooperated investments on the tower side with the other players as well. With regard to the gaming platform, we think small is beautiful and we will stick to the small screens on the gaming platform and digital services. We are providing subscriber mechanisms for these. And also naturally, usage of games, consuming data is part of our packages. And we design them in that way. We have different platforms on this, including BiP, our instant messaging platform, which is a unique feature set that is embedding games into the instant messaging, but also applications and portals allowing our customers engage on this.

[Operator]

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

[Cemal Demirtas, analyst]

My first question is related to the trends in third quarter. How do you see the sentiments and the concession trends from your side? Your sectors may be much less sensitive to the changes, but how do you see the corporate's reactions or the consumer trend? Do you have any indication at least in July? This is my first question. And the second question is related to your net FX position. Hereon, I follow the net FX positions from the balance sheet from your footnotes and a further sheet from your presentation, you have around 215. I would like to understand what could be the impact of the currency changes on your income statement and balance sheet because when I look at the footnotes, I see that net effect is positive in your balance sheets. And I would like to understand the real picture in terms of quarterly changes and that any fluctuation affects your numbers, possibly quarterly transition. And so I would like to rather understand how these things change and what's the numbers we see in footnotes. And this number, how could we reconcile these numbers in our -- the models?

[Muhterem Terzioglu, executive]

Thank you very much, Jim. Now your first question in terms of the trends in Q3. Naturally, increasing foreign currency rates has an impact on the prices of smartphones. Our industry has proven to be very resilient towards model changes and the demand for data consumption, digital services consumption actually looks intact. And we do not expect a negative churn on those. But clearly, the increased pricing of smartphones will have an impact on the demand in terms of customer's ability to buy these products. Having said that, our position with consumer finance company actually gives us a competitive advantage also in that particular area. Therefore, I would see that over Q3 and Q4, as the new economic model in Turkey clarifies more, we will see actually a more stability on all these fronts. With regard to the foreign currency position, I will ask once more, Osman, to summarize the details of that so that it is clear.

[Osman Yilmaz, executive]

Thank you. Actually, this quarter, we've once again demonstrated that our net income sensitive to changes FX is variable. In a quarter when Turkish lira depreciated 16%, our net FX was about only TRY 279 million. The figure you are seeing, TRY 215 million, is the net FX position excluding the IFRS 16 impact. Including the IFRS 16 impact that you see on the presentation, our net FX position is TRY 300 million. For the next quarter, if you want to project an FX, well, for the next quarter, you can take the figure as the base case. We don't have plan to expand or minimize the FX position further from this position.

[Muhterem Terzioglu, executive]

Thank you, Osman. I hope you understand the impact of the foreign currency lease obligations, which are now reflected in our balance sheet due to IFRS 16 implementation. So they create actually a foreign currency liability which is related to the lease obligations we have for the next periods. So that's why we give those numbers separately.

[Operator]

We have no further questions. Dear speakers, lastly for the conclusion.

[Muhterem Terzioglu, executive]

Thank you very much for participating and also asking all these questions. It's a pleasure to spend this time together with yourselves. And Korhan, any more things on your side?

[Zeynel Bilek, executive]

Thank you very much. This is the end of our call. Thank you all for participating in this call, taking time. Thank you.

[Muhterem Terzioglu, executive]

Thank you. Bye-bye.

[Operator]

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