Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2018-Q3

[Operator]

Good day, and welcome to the third 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 Bilek, Director of Investor Relations and Mergers and Acquisitions. Please go ahead, sir.

[Zeynel Bilek, executive]

Thank you, Wali. Hello, everyone. Welcome to Turkcell's Third Quarter 2018 Results Call. Today's speakers are our CEO, Mr. Kaan Terzioglu; and our CFO, Mr. Osman Yilmaz. We'll 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]

Korhan, thank you very much. Good afternoon, and good evening, and welcome to our Third Quarter 2018 Results Call. We are pleased to announce another set of strong results, especially in a challenging macroeconomic environment. We continued our growth momentum at the top line with 26.1% year-on-year increase to TRY 5.8 billion. This brings the 2-year cumulative growth rate to 59%. Even with an accelerated inflation level, this represents a real growth after inflation rate of 14.5%. The key driver of this outstanding performance was the record high mobile ARPU growth of 18% due to successful execution of our digital services focus strategy and upsell performance.

EBITDA rose to TRY 2.4 billion with a 41.3% EBITDA margin. As the download of our digital services reached 130 million, the share of Multiplay customers also followed, resulting in 64% of our mobile customer base on triple play and 47% of fiber residential subscribers using our TV services. With 18.2 million 4.5G-compatible smartphones on our network, the average data usage has continued to rise, reaching 7 gigabytes quarterly average. Given these better-than-anticipated 9 months results, we once again raise our revenue growth guidance from the 16% to 18% range to 20% to 22% range, along with a higher EBITDA margin guidance of 39 to 41 percentage points for 2018.

Our capital expenditure, monitored for efficiency at all times, remains on chart at 18% to 19% operational CapEx-over-sales ratio guidance, despite sharp lira weakness.

Next slide. Our robust business model has successfully weathered the top macroeconomic environment of the third quarter. Our ability to create revenues with adjacent products and our focus on the value offered to our subscribers contributed to the year-on-year mobile ARPU growth of 18% for the quarter. Resilient operational performance is proven again by continued growth momentum and an EBITDA margin of 41.3% with a 5.8 percentage points rise year-on-year.

Customer loyalty is intact, as seen in the sector low monthly churn, as well as our leadership in the Net Promoter Score. This resulted from our value offerings enhanced by digital services, superior network quality, retention campaigns and user experience. Our prudent and disciplined financial risk management strategy has protected us in volatile times. Additionally, effective credit scoring and collection mechanisms have allowed us to maintain robust asset quality, including our consumer finance business.

Next slide. Now more details on our financial performance. On a quarterly basis, with a TRY 5.8 billion top line and TRY 2.4 billion EBITDA, we recorded a 41.3% EBITDA. With our 2-year cumulative growth of 59% in top line and 97% in EBITDA, we achieved higher profitability and even deflated by inflation over the 24 months, at 14.5% growth -- real growth.

Clearly, Turkish lira depreciation and macroeconomic volatility dominated the headlines during this period. Regardless, we generated a net income of TRY 241 million. This confirms the efficiency of our long-term foreign currency risk management measures and the resilience of our business model. In the first 9 months, revenues rose 20.8% and EBITDA 45.9%, resulting in a 41.8% EBITDA margin. Operational CapEx as a percentage of sales for the first 9 months was 16%, in line with our plans.

Next slide. Let's elaborate on Turkcell Turkey's operational performance. In the third quarter, we had 37.8 million subscribers in Turkey with 591,000 yearly net additions. This quarter, we gained 128,000 mobile customers. The postpaid subscriber base continued to grow with 191,000 additions, reaching 19 million in total.

Our monthly average mobile churn rate during the quarter was 2.2%. Specifically, in the corporate segment, we witnessed the lowest churn rate of the past 13 years. Our tailor-made end-to-end solutions and value propositions for corporates have been instrumental in the success. Our customers' higher data and digital services usage and upsell to higher tariffs have led to higher ARPU. Mobile ARPU grew by 18% year-on-year to TRY 38.7. On the fixed broadband front, fiber, our key focus, is clearly gaining ground on ADSL market. Indeed, our fiber business has performed well with yearly net additions of 175,000, 25% of which were gained through our wholesale contracts for other operators.

The number of IPTV subscribers rose by 115,000 in the year, and including our OTT TV subscribers, this exceeded 3 million. Fixed residential ARPU reached TRY 55.3. Superbugs, our innovative product for wireless home broadband service, generates TRY 105 ARPU. This product is becoming increasingly popular. Superbugs net adds have reached 1/4 of fiber net adds this quarter.

Next slide. With our marketing campaigns, we aim to constantly create new motivations for our customers to experience our digital services. In a recent exemplar, we have participated in the government-initiated nationwide all-out war against inflation by doubling data quota with our customers until year-end. While this confirmed our support for Turkey, it has also been instrumental in engaging our customers with our digital services, as well as customer retention. In addition to ever more relevant digital services, to quality of network, the efficiency of our sales channel and overall brand image continued to impact positively in the eye of our customers. Our Net Promoter Score not only increased in this quarter, but we have also widened the gap with our competitors.

Next slide. The key driver of our strategy, demand for data and digital services. Average mobile data rose 29% in a year to 5.4 gigabytes per user in the third quarter. The main driver of this increase is the rising consumption of 4.5G users, which reached 7 GB per user. Out of 31.5 million customers signed up for 4.5G services, 18.2 million have 4.5G compatible smartphones. The room for growth here underlines the potential for more data use by a wider customer base as 4.5G users consume twice as much data in consumption to -- comparison to non-4.5G users. To tap this potential, we continued to increase the penetration of 4.5G smartphones on our network.

Accordingly, smartphone penetration reached 74%, out of which 79% are 4.5G-compatible. This is 11 percentage points increase in a year. The recent regulatory change limiting installments for device financing coupled with currency devaluation will significantly decrease smart device sales in the market. For us, this is likely to have a limited impact, given the already high level of smartphone penetration on our network and ever-increasing demand for data usage. Going forward, we also expect customers to shift to mid- and low-segment devices available in our sales channels.

Next slide. In the third quarter, customer engagement through all our digital services continued to increase. In addition to 32 minutes of GSM calls, the call time for voice over IP customers on BiP increased to 30 minutes. While a user on average spends 8 minutes interactive on BiP, we saw a diluted impact on average usage levels as the user base continues to increase.

Our customers spend 60 minutes on TV+, 21 minutes on reading Dergilik magazines and newspapers, and 48 minutes listening to music on fizy. Thus, an average fizy user today listens to 1 full album of 12 songs per day. We continue to advance our digital services with new features this quarter as well.

Next slide. Now let's look to the KPIs of our services this quarter. From this period onwards, we will be disclosing our 3-month active user figures to better reflect quarterly performance. With 30.3 million downloads to date, BiP active users increased from 8.6 million or 9.7 million. 114 million messages per day are sent through BiP, marking a new record high. BiP ranked #1 application downloaded in app stores for the 6 consecutive days in October.

UpCall, which combines an enhanced calling experience with secure phonebook, digitized 2 million calls per day. The leading digital publishing platform, Dergilik, with expanded content has 13 million active users. Nearly 110,000 magazines and newspapers were read per day this quarter.

Total fizy downloads reached 19.2 million, where over 7.8 million songs are streamed on a daily average. 36 live concerts were broadcasted on fizy this quarter. We're proud fizy now is equipped with accessibility features for the vision impaired as well. 2.3 million active users on our TV+ application has 2.6 million session logins per day. This quarter, we have added Bundesliga, the German's football league, to our sports content exclusively for TV+ customers. lifebox, our personal cloud application, has 2 million active users, with 36 objects uploaded per person per day.

Our key tool to digitalize connection with our customers, My Account, has 18.6 million active users, generating a 32% greater ARPU. My Account users enjoy this user-friendly access to Turkcell's online platform. Yaani, our locally developed search engine, has been downloaded over 6.5 million times since its launch just a year ago. Today, Yaani hosts 1.8 million search inquiries per day.

Our payment platform, Paycell, hosting several texting solutions, has 4.8 million active users, with transactions worth of TRY 1.5 billion in Q3. The application has 1.9 million registered credit cards. Our Fast Log-in service, enabling secure and seamless sign-in to mobile apps and online websites, has 12.2 million registered users. Fast Log-in is integrated into 31 services, through which around 182 million logins have been facilitated to date.

Last, but not least, our gaming services, including Playcell and BiP gaming has reached 9.2 million users in Q3.

Next slide. Our communication and lifestyle experience platform, BiP, has probably been developed using internal resources in Turkey. With a significant hike this quarter, total BiP downloads reached 30.3 million, 2.7 million of which were in global markets. Ukraine tops the list, over 650,000 downloads followed by Saudi Arabia and Germany. BiP's first global advertising were broadcast on digital screens in New York's Times Square during the week of the United Nations General Assembly in September, accelerating the global communication of our flagship service. Our initial target is to reach 25 million global downloads of BiP and to register 1 billion downloads of overall digital services over the next 3 years.

Next slide. Let's take a closer look at Lifecell, our digital-only offering, built on our digital services and mobile data platform. Last quarter, we introduced a tariff creation option for Lifecell users, who are now free to choose digital services other than Turkcell's, designing their own tariffs. Fueled by this new model, our Lifecell subscribers have doubled this quarter again, reaching 1.6 million by October. 55% of postpaid Lifecell users are new to Turkcell. Lifecell users are consumed 8.6 gigabytes on average. A Lifecell subscriber generates 1.3x the ARPU of a Turkcell customer. The churn rate of Lifecell customers is 40% lower than that of average Turkcell customer.

Next slide. Financell, our consumer finance company, continued its steady growth this quarter with a 52% revenue rise, more than tripling net income year-on-year. This was mainly due to portfolio growth, higher insurance services revenue and one-off gain from swap transactions. Financell's consumer loan portfolio reached TRY 4.8 billion, including the contracted handset receivables of Turkcell, total receivables from handset financing rose to TRY 5.2 billion during the quarter. Financell has a portfolio of 4.7 million loans, the average ticket size of which is approximately TRY 1,600. Consumers pay TRY 91 per month on average, with over 95% also opting in for add-on loan protection insurance. Thanks to our strict credit scoring, cost of risk remains stable at 2.2% as of September, despite the challenging macroeconomic environment. As discussed before, the regulatory changes of September has limited the financing installments for telecom devices to 6 months across all channels. While this will have a substantial impact on the number of smartphones sold in the market along with the slower renewals, we expect no impact on the level of data consumed. We expect the resulting disposable monthly budget of our consumers to create more room for service revenue growth. Also, the potential of deleveraging of Financell will enhance Turkcell group's cash flow generation.

Next slide. This brings us to the Turkcell International's performance during Q3. Turkcell International generates 7.3% of our group revenues. Our operations grew by 55.4% year-on-year to TRY 424 million, with an EBITDA margin of 35.5%. Lifecell in Ukraine contributes 65% of our international business. Fueled by the launch of 4.5G services, quarterly mobile data consumption per user more than doubled in a year. Accordingly, Lifecell revenues climbed 62.6% in TRY terms. The EBITDA margin came in at 41.8%. The 3-month active 4.5G users expanded by 50% this quarter, as the network rollout continued. In Belarus, the revenues of BeST rose 61.6% with an EBITDA margin of 16.1%. Higher data and digital services usage with 4G led to revenue growth. Digital magazine, music TV and gaming services are the key contributors in Belarus. This quarter, we saw the launch of the new kids game platform available to BeST subscribers. Our Turkish Republic of Northern Cyprus operation, Kuzey Kibris Turkcell, saw 12% year-on-year growth, with an EBITDA of 35 percentage points.

Next slide. Considering the strong 9-month performance, we revised our 2018 top line guidance upwards from 16% to 18% range to 20% to 22% range. And we also increased our EBITDA margin target from 37% to 40% range to 39 to 41 percentage points. As to our CapEx budget, we have taken several actions, including advance payments at lower exchange rates, renegotiating with our suppliers and revaluation of our CapEx program to mitigate the impact of the TRY devaluation. Accordingly, we retain our operational CapEx to sales ratio guidance at 18% to 19%.

I will meanwhile leave the floor to Osman for the financial overview. And before he starts, I would like to also congratulate him as his permanent appointment as Chief Financial Officer. Osman, to you.

[Osman Yilmaz, executive]

Thank you very much, Kaan. There are a couple of things I should highlight regarding the key components of our business model hedging, which enabled us to weather the tough macro conditions and the Six Sigma events in financial markets we have experienced. First of all, we have been determined in implementing inflational pricing over the past [ few ] years, which we consider the key to sustainable growth and profitability margins in an inflationary environment.

Our proven track record in this regard is evidenced by our ARPU growth versus consumer price increases. The former has always been at a higher level despite its latent impact, given a contracted customer base. We are more selective than ever in our new projects and investments, evaluating opportunities with utmost scrutiny given the prevailing higher cost of capital.

Secondly, we have prudent financial risk management mechanisms in place. Accordingly, we have engaged in several hedging instruments shortly after we secured the financial debt. This helped us convert the majority of our FX debt to fixed-rate TRY debt, eliminating currency, maturity and interest rate risks.

Furthermore, we carry cash at hand in hard currency as a natural hedging tool. And thirdly, we have strong liquidity position with USD 1.5 billion equivalent cash in foreign currency sufficient to cover debt service, including interest, for the next 2 years in addition to committed credit line.

Next slide. Now let's take a closer look into the financials. In Q3, Group revenues were up 6.5% year-over-year, corresponding to an incremental TRY 1.2 billion. This increase is mainly comprised of TRY 916 million from Turkcell Turkey on the back of strong ARPU, TRY 151 million from Turkcell International and TRY 86 million from Turkcell Consumer Finance. EBITDA rose by 46.6% year-on-year to TRY 2.4 billion, with a margin of 41.3%. This was mainly due to a solid rise in revenues and lower G&A expenses.

Next slide. Now I would like to talk about our balance sheet and leverage details. At the end of third quarter, our net debt position was at TRY 13.2 billion with a net debt-to-EBITDA ratio of 1.83x. Excluding our consumer finance company loss, our telecom net debt was TRY 8.4 billion with a leverage of 1.23x. Our net debt position in Q3 saw an FX impact of TRY 2.3 billion and dividend payment.

Next slide. Now I will go into the management of foreign currency risk. As stated before, as the nature of hedging tool, we hold 100% of our cash in hand in hard currency. In addition, by using hedging instruments, the share of FX in our debt at the end of the quarter falls from 85% to 43%. Our short FX position was at $255 million by the end of third quarter, within our comfort zone. In this quarter, we observed extraordinary circumstances of 31% dollar appreciation against lira. Yet due to our consistent and prudent risk management policies, we have been able to limit our net FX loss to TRY 716 million, which otherwise would have been TRY 4.3 billion without the FX asset on our balance sheet and the hedging instruments in place. Recently, we have observed a more stable macroenvironment and Turkish lira appreciation. Yet, we will remain conscious regarding our financial risk management and continue to keep our FX risk at manageable levels. Let us also remember that we expect to complete the Fintur sale process and receive nearly $400 million cash for our stake in the near term. On the FX, this is not currently reflected on our balance sheet nor in our net FX position.

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

[Operator]

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

[John-Paul Davids, analyst]

Two questions from my side. So just coming back to the inflationary environment, a question there, if I may, to start. And so you presented a very strong message on your historic pricing power and ability to offset inflation, and at the same time, you've highlighted a commitment to supporting the government initiative around containing inflation going forward. So really it's about the forward-looking view of Turkcell around pricing and how you expect to balance inflationary pressures in the market with supporting this government initiative? And then the second question would be more -- would be focused around the net debt. So net debt up by about TRY 3 billion in the period, and I'm just trying to understand exactly what the drivers of that increase in the lira debt is? I mean, obviously, FX is impacting, but it looks like free cash flows is positive in the quarter and it looked like the FX loss for the quarter was only around TRY 700 million. So maybe you can just help me understand that movement in the lira debt?

[Muhterem Terzioglu, executive]

JP, first of all, let me start with the second question you have. It is purely the foreign currency impact on the debt. And that's practically a simple driver of the TRY 3 billion increase in our net debt position and dividend payment as well. Please also take that into consideration in trying to reconciling the differences on the cash movements. Now with regard to your first question about the inflationary environment, our commitment to the government initiative and our, also, disciplined approach on pricing, these are not mutually exclusive events. If you think about the way we acted in terms of supporting the government's initiative in terms of containing inflation, it was actually towards increasing the supply of data, not towards reducing our pricing. And frankly speaking, I think the right way to challenge the current conditions about inflation is to move towards more affordable entertainment platforms and make it available even more. We see this as a great opportunity to drive the usage levels in our digital services, and actually, we did not see an impact or any diversion from our disciplined pricing actions moving forward.

[Operator]

Our next question comes from Herve Drouet, HSBC.

[Herve Drouet, analyst]

Two questions on my side. The first one is, I noticed you have quite good growth in mobile ARPU, but much less so on the residential fixed line, only single-digit growth. I mean, in light with some of the tariff increase which was seen with one of your competitors, especially on broadband, should we expect an accelerated increase of ARPU for your residential fixed line? Or do you think it will still stay in this low single-digit growth? And the second question is regarding, do you see any impact looking forward or already in term of bad debt? I mean, with the macro environment getting tougher, is there any impact, you think, may come not only on the consumer financing but also in terms of the ability to be paid on time and as a potential risk associated as well with payment on consumer financing?

[Muhterem Terzioglu, executive]

Herve, thanks a lot. Actually, the ARPU increase on the fixed business is impacted also by the change of taxational liability. But despite that, as you can imagine, we are not the market leader in this particular segment, and of course, the prices are mainly set by the ADSL provisioning of the telecom. So this is a market where we are trying to bring innovative products. And as you have noticed, the innovative product we have in terms of fixed wireless access has almost an ARPU of twice the average fixed business. And we are focusing mainly on fiber and fixed wireless access rather than the commodity ADSL business. So you should expect a better performance moving onwards on the ARPU side on the fixed side as well from us.

[Herve Drouet, analyst]

Do you think that could reach double digit in the coming future or not?

[Muhterem Terzioglu, executive]

Yes, it should.

[Herve Drouet, analyst]

And do you think that could be reachable in a 12-month period or...

[Muhterem Terzioglu, executive]

My expectation is to reach the same levels of performance on fixed business, with our new line of products on fixed wireless access, as well as fiber business. I will not comment on the ADSL side, which suffers from heavy price squeeze in terms of wholesale and retail markets.

[Operator]

Our next question comes from Alex Kazbegi, Renaissance Capital.

[Alexander Kazbegi, analyst]

If I can go back to the inflation question, as far as I understand your answer, Kaan, basically to increase revenues more through consumption, should we only expect that after this massive increase in inflationary pricing, such as in [ near side ] in Q3, you are still looking forward to much more moderate increases of your pricing? Second question with the same regard is that when do you see the inflation is actually hitting also on the cost side, when the wages are going to be adjusted, and when are the cost items might be going up? So what's sort of inflationary pressure on the cost side you might be seeing in the beginning of 2019? And lastly, maybe just understand on your hedging positions, the duration of the hedges, I mean. Are these basically set for the entire duration of the debt instrument or do you need to roll over the hedges at some stage?

[Muhterem Terzioglu, executive]

Okay. So in terms of the inflationary actions we have taken by doubling the quotas of our customers, again, I see this actually as a midterm, a great opportunity for us to get more customers and more usage. Now our position in terms of inflationary pricing has not changed. That means any impact on the cost side, as well as the overall pricing levels in the economy, will be reflected in our pricing actions as well immediately after we have this 3 months of special campaign period. So we feel very comfortable in terms of continuing our disciplined approach to pricing on that side. Now with regard to hedging positions, I will leave it actually to Osman to answer the question.

[Osman Yilmaz, executive]

Right. All cash flows of the loss, including coupon and interest rate savings, are fully hedged. We don't need to roll over none of our hedges.

[Alexander Kazbegi, analyst]

So for the entire duration?

[Osman Yilmaz, executive]

Yes, for the entire duration, including whole coupon and interest rate savings.

[Operator]

Our next question comes from Slava Degtyarev, Goldman Sachs.

[Vyacheslav Degtyarev, analyst]

A couple of questions. Firstly, maybe it's a bit pretty much early to ask, but is there willingness of the management to adjust the upcoming dividend recommendation on the FX losses? And secondly, maybe if you have any update on the Fintur sale?

[Muhterem Terzioglu, executive]

Okay. So Slava, thanks a lot. We have no change in our dividend policy. Our dividend policy remains at 50% -- minimum 50% of our net income, and there is not anything to report at this particular time. With regard to the Fintur, we are progressing on our divesting policy of Fintur. As -- also CEO of Telia has commented on his quarterly update last week, the process is ongoing and on track. And I will not be providing any more information on this, but what I can tell you is it is in line with our expectations, and we will let you know if there are any new news on that.

[Operator]

[Operator Instructions] Our next question comes from Cesar Tiron, Bank of America Merrill Lynch.

[Cesar Tiron, analyst]

I have some questions for you. First one, I wanted to understand if the price increases that you implemented in Q3 have had, in fact, impact on the revenue growth since -- I think most of them have been implemented in September? Second, I wanted to understand why you didn't take this opportunity to improve your midterm outlook, given the impressive results that you delivered? And the third question, can you share some KPIs on the gaming reserves? For example, the [ up ] level of the, I think you mentioned, 9 million users?

[Muhterem Terzioglu, executive]

Okay. So the price increases is something that we have been doing on an ongoing basis, so there is no specific action that particularly we have taken in September. It has been an ongoing process. And as I mentioned to you, this has been going on actually for the last 16 quarters that we have been on these calls and it will continue to be in a disciplined approach. But what I would like to mention to you, our price increases are coupled with adjacent products. Our customers are not just consumers of calls and SMSs. They also consume music services, TV services, messaging services, cloud services. Our combined value propositions have not been even more affordable, but were able to deliver us higher ARPU and lower churn. So please keep in mind that we are not just raising prices on a single commodity product, but providing a comprehensive value proposition on a portfolio of products. If you would just like, from a price increase perspective, it is -- will be very difficult for you to decipher, that is secret sauce of our strategy in digital services. With regard to Playcell and BiP gaming, your other question, in Q3, the distinct number of subscribers who have been engaged in these platforms is 9.2 million, and we have also bundled some of these products into our packages as well. And next quarter, I will also report to you in terms of how many new subscribers with gaming packages involved. We have also introduced a special backgammon game application, where we have close to 190,000 subscribers and the average number of people who are engaged in this particular game is already 40 minutes. And this 9.2 million subscribers distinct users represents almost 4 million to 9.2 million increase, more than doubling in the last quarter. Thank you. You also asked the second question, which I couldn't get. If you repeat that as well, I would love to answer that.

[Cesar Tiron, analyst]

Sure, thanks. Just wanted to understand why you didn't take your opportunity to revise your midterm outlook based on these very strong numbers?

[Muhterem Terzioglu, executive]

Well, I think it would be wiser for us come back to you on that one next quarter. I think that would be a more prudent thing to do. As you may have noticed, we have been not raising our guidances on possibilities, but when it becomes probable and we will do exactly what will be the picture next quarter's call. I think I missed one question there that you have asked about the collection performance. And as we have indicated, the quality -- the cost of risk on our portfolio does not seem to show any fluctuation, even at this particular time. Thank you.

[Operator]

[Operator Instructions] Our next question comes from Dilya Ibragimova, Citi.

[Dilya Ibragimova, analyst]

I had a quick question, please, on CapEx hedging. You mentioned that you have hedged some of the payables and also or made prepayments and also have renegotiated some of the payments. Just wanted to ask about how far in advance had that been done? Is it only for this year CapEx, or would that apply also to some of the 2019 investments that you're planning to do?

[Muhterem Terzioglu, executive]

So, Dilya, thanks a lot for the question. These actions that we have taken actually are not unique only to this year or at this time. We have been applying these techniques in the past as well. So this will cover some of the investments that we will do this year, but also it covers, of course, 2019 as well.

[Dilya Ibragimova, analyst]

Okay. And may I just also follow-up on the price adjustments or value adjustment that you have done in October to address the inflation request from the government? Were these adjustments done only to contract packages or across the board? And also, is there -- have you done it in a way that you would still expect ARPU growth or -- the reason I'm asking, for example, if I used to be on the package, which is TRY 50. Next year, for example, I'm in more difficult financial situation, and I am reviewing my cost and now that I am seeing that for TRY 40 I can get the same value, is this how -- I mean, is this -- would that be available to me as a customer, based on what you have done in October?

[Muhterem Terzioglu, executive]

So let me clarify one thing, we have not done anything on the request of the government. Government has initiated a campaign, and we have used that campaign as an opportunity to create a retention campaign to double up everybody's quota without exception. Actually, this -- the first of 4.5G users and anyone who would shift from 3G to 4.5G would get the advantage of that. Now this is a campaign model that we have used in the past. And there is also such campaigns have always led into a higher usage, higher retention and higher loyalty. So we do not see this as a prohibitive factor in terms of neither the ARPU levels or the pricing decisions that we will take in the future.

[Operator]

We have no other audio questions. Dear speakers, we can now switch to the written Q&A.

[Muhterem Terzioglu, executive]

I think there is one more question that I see from the system in terms of hedge accounting. I'll actually have Osman to respond to that as well.

[Osman Yilmaz, executive]

As you know, we have been using hedging instruments as part of our financial risk management strategy, and we are hedging our company for tail risks. And that's why we started implementing hedge accounting, then tail risks started to arrive, especially starting from the July. And we will continue to implement hedge accounting going forward.

[Muhterem Terzioglu, executive]

Any other questions from the network or from voice? Thank you very much for all the questions and spending time with us, and looking forward to seeing you in the next quarter's call. Thank you. Bye-bye.

[Osman Yilmaz, executive]

Thank you. Bye-bye.

[Operator]

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