Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2019-Q3

[Operator]

Good day, and welcome to the third quarter 2019 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 Treasury and Capital Markets Management. Please go ahead, sir.

[Zeynel Bilek, executive]

Thank you, Denise. Hello, everyone. Welcome to Turkcell's Third Quarter 2019 Results Call. Today's speakers are our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz.

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. Erkan.

[Murat Erkan, executive]

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

I'm glad to announce a quarter of profitable growth on strong operational performance. We observed the positive result of our customer-centric position. We gained 526,000 new subscribers, 503,000 of which are postpaid. At the same time, the average revenue per user, both in mobile and fixed broadband continued to rise by double digits. We recorded 14% consolidated revenue growth on top of the 26% realized last year, our 2-year cumulative growth reached 43%.

Turkcell Turkey continued its momentum, while we were negatively impacted by our consumer finance company and termination of our sports betting business. This performance was in line of expectation. As for Turkcell Turkey, the Consumer business grew by 15%, with a strong ARPU, while the corporate segment grew by an impressive 28%. We will elaborate more on revenue segments in the financial sections.

With TRY 2.8 billion EBITDA, our EBITDA margin was 43.1%. Net income was more than 3x that of last year, reaching TRY 801 million. We have further strengthened our balance sheet with prudent financial management and cash generation capability. As at the end of September, our net debt-to-EBITDA ratio has improved by 0.8x year-on-year to 1x.

Next slide. Now some more details on our financial performance. We recorded a TRY 6.6 billion top line and TRY 2.8 billion EBITDA in this quarter. As we stated in previous quarters, due to the new IFRS rules impacting EBITDA, we also started to discuss EBIT in our presentation. Our EBIT this quarter reached TRY 1.6 billion with a 24.9% margin.

Capital expenditures remain under control, with a 15% operational CapEx over sales ratio. In third quarter, our net income was TRY 801 million. In this figure, there's a negative impact of TRY 116 million provision booked for wireless tax related to 2018 and 2019.

In the first 9 months, revenue rose 19% (sic) [ 17.8% ] to TRY 18.5 billion with a 41.6% EBITDA margin. EBIT reached TRY 4 billion with a 21.8% margin. The cumulative bottom line reached TRY 2.5 billion. These results are in line with our plans, as we reiterate our full year guidance.

Moving to next slide. We would like to give an update on our 3 strategic focus areas: our digital services, digital business solution and our techfin platform. For digital services, we are focused on meeting our targets at stand-alone level. To improve our advanced digital services, we launched voice over IP on BiP Web this quarter. BiP user now make voice and video calls over the web with alternative devices even when their phones are unreachable. We also launched a new platform for SMEs that has them to save on expenses.

In digital business solutions, firstly, Bursa City Hospital, the IT infrastructure, which we installed is now operational. And secondly, in digitalization, the 112 Emergency Line infrastructure after Istanbul, we now cover 24 addition city across Turkey. All in all, the business lines, 9 months revenue growth is around 48%.

Reaching techfin, we continue to expand the Paycell network to agreement with key accounts. Moreover, Paycell is now integrated to Istanbul travel card (sic) [ IstanbulCard ] increasing its value proposition. Meanwhile, Financell has also started provision financing for corporate to assist in the digital transformation. Moreover, at Turkcell, we have launched smartphone leasing in the corporate segment in [ a first 4 sector ].

Moving to the next slide. Now let's look into our operational performance. This quarter, postpaid subscriber rose by 503,000. This strong rise result from offer that leverage big data analysis and innovative [ service ] rather than price action. This evidence in the yearly 10% increased new customer output. Our objective is further postpaid growth through structured action that enhanced customer experience. The blended mobile ARPU rose to TRY 45.5 on a 17.6% increase with upsell to higher tariffs, postpaid subscriber mix, increasing data usage and the continued effort of pricing adjustments.

On a like-for-like basis, growth reached 20.1%. Mobile churn was at 2.1%. The regulatory change has been introduced also in prepaid user without resident permit. This change has led to mandatory closure impacted with churn rate by 0.1 percentage points. We foresee a larger impact in the fourth quarter. On the fixed broadband front, our fiber subscriber base rose by 29,000 net additions. Residential fiber ARPU post all-time high growth of 19.8% year-over-year. This reflects the upsell performance and price adjustments.

Next slide. Inflationary pricing policy remains a key pillar of our business model, playing an important role in achieving strong ARPU growth. Due to contracted nature of business, our price action are reflected in ARPU with a lag. This has been evident in both mobile and fixed residential ARPU trend, since the beginning of the year. This slide illustrates the strong momentum of ARPU growth that exceeded the inflation following the second quarter. A higher postpaid ratio is yet another important factor supporting strong ARPU growth in the third quarter.

Next slide. Superbox, our fixed wireless access product, provides a 5G-ready service on our strong 4.5G network. It is ideal solution with customer without fiber access. The customers who are not satisfied by the performance of ADSL service prefers Superbox. It generates twice the ARPU fixed broadband further monetizing our 4.5G spectrum.

At the end of the third quarter, Superbox subscriber reached 217,000 on a strong add on 88,000. Given the strong demand for this product, Superbox is becoming the generic name for the fixed wireless access in Turkey.

Moving to the next slide. We enhanced our marketing campaign with the use of artificial intelligence and subscriber profile and network parameters. The CAT LAT campaign, offering customized gifts attracted 11 million young subscribers. Comfortable tariffs introduced in Q2 contributed to new customer acquisition more than half of the subscription to [ these tariffs were need to send ]. 300,000 customers participated in our new social responsibility projects smile. The project made use of face recognition technology. All in all, consumer have continued to recommend Turkcell to a significantly higher degree than the competition as seen in our Net Promotor score. Next slide.

And now update on the data usage and 4.5G subscription trend. Average mobile data usage rose 49% in a year to 8.1 gigabyte per user. We observed growing data demand for 4.5G as well as non-4.5G subscribers. The main factor driving this 8.1 gigabyte are greater data consumption of all users, the rising share of 4.5G user and digital services. Out of 42.2 million customers signed up for 4.5G services, 19.6 million have for 4.5G compatible smartphones indicating room for growth. In the third quarter, there was 655,000 net additional 4.5G compatible smartphones.

Next slide. Let's look at our performance in the international markets. Turkcell International generated 8% of group revenues. The third quarter revenue of our international operations rose 23.8% year-on-year, mainly on higher mobile data consumption and FX impact. In a local currency term, the growth was 13.9% year-on-year. We started to see a lower positive impact of FX movements in the third quarter, and this impact will likely be even lower in the fourth quarter. This is an expected impact covered in our guidance. This segment has 9.5 percentage point EBITDA margin improvement, on a like-for-like basis, this is 2.3 percentage points. The analysis eliminates the impact of radio frequency usage cost capitalization in accordance with IFRS 16, which began in the fourth quarter of 2018.

Our Ukrainian subsidiary, Lifecell, continue to expand 4G penetration and enrich its digital services. Lifecell maintained leadership in smartphone penetration with 79%. 3 month active 4G user exceeded 45% of total mobile data users, consuming the 8.8 gigabyte per month on average.

Last but not the least, I would like to remind you that we will be hosting a Capital Markets Day in London on November 20 -- November 11 (sic) [ November 12 ]. At the event, we will provide an update on group strategy along with our 3-year outlook. I hope to meet you all on that day. Now I will hand over to Osman, our CFO, for the financials.

[Osman Yilmaz, executive]

Thank you, Murat. Now let's take a closer look into the financials. In the third quarter, group revenues rose 13.6% year-on-year, corresponding to an incremental TRY 788 million, TRY 745 million of this increase is from Turkcell Turkey growing at 15.2% on strong ARPU.

Turkcell International revenues rose by 23.8% and contributing TRY 101 million in this quarter on strong ARPU with rising data consumption as well as currency movements. As expected, the contribution of Turkcell consumer finance company turned negative in consequence of a declining loan portfolio, mainly due to regulatory limitation on installments. This had a negative 1.2 percentage point impact on group growth.

On the other subsidiary side, our exit from the sports betting business in Azerbaijan in December 2018. And in Turkey, late in the third quarter was impacted by as much as 2 percentage points on the group growth. All in all, the weight of Turkcell Turkey in group revenues has increased from 84.6% to 85.8% in the third quarter.

Next slide. EBITDA rose 18.6% year-on-year to TRY 2.8 billion, with a strong margin of 43.1%. Seasonally, Q3 is strong in terms of sales, thanks to higher usage over the summer. This reflects in higher profitability. Out of the 1.8 point (sic) [ percentage point ] EBITDA margin improvement, 1 point comes from the gross margin and the remaining 0.8 point comes from OpEx.

Gross margin improvement resulted mainly from lower cost of funding in consumer finance business and lower Universal Project there. As you might recall, Universal is a special project covering rural areas and realized at cost.

Regarding OpEx, we maintained an effective G&A and incentive management, particularly, we performed lower number of mass-selling campaign. In line with EBITDA improvement, EBIT increased by 15.7% to TRY 1.6 billion, on a 24.9% margin, representing 0.5 percentage point improvement versus last year.

Next slide. Let me give you more color on our consolidated cash position. Our cash position rose by TRY 288 million in the third quarter. Our operations generated TRY 2.8 billion of EBITDA. The working capital improvement of around TRY 189 million in Q3 resulted mainly from lower receivables from financial services. As we have stated in previous quarters, we expect a continued positive impact from Financell. TRY 1.1 billion spent on CapEx during the quarter. As seen in the cash flow from financing activities, we were a net payer of debt redemptions in the quarter. Next slide.

Now let's take a closer look at our techfin company's performance. In Q3, Financell's revenues lost 13% on shrinking portfolio due to the regulatory limitation on financing -- in financing installment in place since September 2018. This resulted in flat 9 months revenues growth.

Financell's net income was TRY 83 million in the first 9 months of 2019 mainly due to lower interest rate environment as well as lower dividends from its subsidiary, Paycell. In line with our expectation, Financell's consumer loan portfolio continues to decline to TRY 2.7 billion. We expect this trend to continue to less than TRY 2.5 billion by the year-end. While this means a lower top line contribution, it is positive for the group cash flow.

Cost of risk rose slightly to 3% due to shrinking average portfolio size, but it's still below the market average for general purpose loss. Loan insurance penetration of 96% over the past year, we will continue to mitigate further increasing cost of risk. While EBITDA is improving, thanks to a lower cost of funding, Financell's net income was affected by the mark-to-market loss of swaps due to declining interest rates.

During the quarter, 1 year Turkcell to upgrades fell 700 basis points to 13%, reflecting the declines in consumer price index. Meanwhile, our payment services company, Paycell continued to expand its reach on service portfolio in the quarter with new agreements and launches. Over 4.6 million customers made use of this services in Q3. Revenue growth was at 21.6% year-on-year. Next slide.

Now some highlights from our balance sheet and leverage. Our leverage has further improved this quarter to 1x. Excluding the consumer finance business, this was at 0.7x. Our consolidated net debt position declined to TRY 9.7 billion from TRY 11.4 billion at the previous quarter. The key underlying factors that led to TRY 1.7 billion decrease in the net debt, TRY 1.1 billion of cash generated from operations, TRY 491 million leveraging of consumer finance company, and TRY 53 million of net FX impact on debt and cash. Next Slide.

Now I will go into the management of foreign currencies. We continue to hold the bulk of our cash in hard currency as a natural hedging tool. As at the end of September, some 11% of cash was in Turkish lira, which has already been allocated today's scheduled dividend payment. With hedging instruments in place, the share of FX debt declined from 83% to 42% as at the end of third quarter. We are in a long net FX position of USD 155 million. Going forward, we target a neutral FX position.

This concludes our presentation. We are now ready to take your questions. Thank you.

[Operator]

[Operator Instructions] The first question comes from Cesar Tiron from Bank of America.

[Cesar Tiron, analyst]

I have 2, please. Can you please talk a little bit about the slowdown in prepaid? I understand it's not really material because it's only about 20% of the Turkish revenue, but if you could explain that, please? And then also on the guidance, I mean, given the run rate for the 9 months of the year. On the EBITDA margin, 41.6%. Can you please explain why you reiterated the margin target of 39% to 41%? Do you expect any exceptional cost in Q4? Have you delayed any expenses in Q4?

[Murat Erkan, executive]

Let me explain the prepaid trend. First of all, we do see that postpaid is more variable customer for us. And our customer behavior is moving from the prepaid to postpaid due to the better reach -- data-reach tariffs, et cetera. So we do see that the switching from prepaid to postpaid is the trend in Turkey, but this -- I believe it's not just for Turkcell, the switching from prepaid to postpaid is also one of the trends in Turkey, for question number one.

For the guidance side, I think historically, Q3 is always in terms of EBITDA performance, always a good quarter. This happened again. Actually, we didn't delay or postpone any expenses. But due to the Q4 seasonality behavior, we have more sales and marketing expenses happened during Q4. So this is mainly coming from marketing and sales expenses, and we expect that it impact 2% of our margin.

[Operator]

The next question comes from Dilya Ibragimova from Citi.

[Dilya Ibragimova, analyst]

I just had a couple of questions. One is a Superbox that you mentioned during your presentation. Could you give us a bit more insight where you see the customers are coming from? Or which areas are you targeting with the product? Is it open? Or outside of cities where there is less fiber? And also, what spectrum you're using for this product? Is it dedicated band? Or you're just using your normal capacity that you also use for mobile -- for mobile data? Yes. So if you could answer that, and then I'll shoot my next one.

[Murat Erkan, executive]

Yes. First of all, we have probably one of the widest frequency band in Europe and maybe for -- so this gave us the fastest mobile network in the world as well. So these 2 things enables to offer latest technology and product to our customers. So Superbox is kind of products in our pocket. We monetize the unused capacity on our 4.5G network to Superbox in an efficient way. And we have enough room for further growth for the which area, mainly the area we don't have fiber, we have capacity for spectrum. And also there are a lot of ADSL penetration, et cetera. So we focus on where the customer needs for high speed, but they cannot get due to the lack of fiber from us actually. So then we penetrate this market.

[Dilya Ibragimova, analyst]

That's fair. And maybe just a follow-up on this. But do you have visible -- or do you see how many of your ADSL customers are actually taking this product? Is there -- is it a good demand from your own customers?

[Murat Erkan, executive]

To be honest, very limited ADSL customers, because the nature of the fixed broadband is long-term contract, mainly 24 months. So it is not easy to switch the existing customer to new technology. So -- and the second thing is it is -- that Superbox tariffs is 2x expensive than the ADSL tariffs. So it is not -- and the main target for the other competition customers.

[Dilya Ibragimova, analyst]

My second question is on the corporate -- the product that you launched the leasing of devices. If you could give us a bit more color how popular is this product, maybe how many corporate customers, you have been able to get into this scheme since the launch, or whether that helped at all your postpaid customer growth?

[Murat Erkan, executive]

For the corporate side, actually, we recently started this leasing program. We hear from our customers, which is the demand from our customers for this model. Nobody would like to own the product, they'd like to lease it for their employees. And as to sell one of our proprietary is to have our corporate customers with their digital transformation. As part of this effort, now we have started to test this leasing model, where the cost of customer can lease smartphones from Turkcell for 24 months. The scale is small, but we will continue as long as there's a demand from customers and profitable from our company as well. So there are demand, but it is not a significant scale. Yes.

[Operator]

The next question comes from Atinc Ozkan from Wood & Company.

[Atinc Ozkan, analyst]

Three questions, if I may. The first one is on Slide 7, you have an impressive inflection point showing ARPU growth versus CPI trend. Can you remind us the latest inflationary price adjustments and whether there are any other plans for fourth quarter? So that's the first question.

My second question is, I was also looking at -- to telecom's press release, and I noticed that there is a new regulation imposed by ICTA regarding requirement write-off inactive line where subscribers cannot provide an ID line. And I think [ they write ] region of something like 300,000. Does your quarterly net additions numbers of 526,000 include any such write-offs for the quarters? And finally, I noticed that in the new tax package being discussed in the Turkish Parliament is that new digital tax of 7.5%. If this is ratified, would you expect a significant impact on your margins, given that we have several digital solutions and types of services?

[Murat Erkan, executive]

Okay. First of all, let me start with inflation part of the question. Inflationary pricing is our policy and is a key pillar of our business model. And it is really important role in achieving strong ARPU growth along with upsell. Thanks to increased data usage as well. So due to the contracted nature of our business, our transactions are reflected in ARPU with the lag. This has been evident in both mobile and fiber residential ARPU trends since the beginning of the year. And also, we follow the inflation. And recent month, I believe we increased our price based on inflation. But nobody -- everybody -- I would like to remind everybody that inflation in Turkey is decreasing month-over-month, year-over-year. So the inflation part is becoming more reasonable these days.

Regarding the churn rate -- regarding the churn rate, let me tell you -- but because also, everybody is under the BTK regulation. So our average monthly mobile churn rate in Q3 was 2.5%. This regulatory change to close the prepaid lines of such -- subscriber with no resident permit impacted the churn rate by 0.1%. So you can see the calculation point, we foresee a larger impact in the fourth quarter as well. So but we see also nearly half of these lines are active or they use active existing line as well. So we'll see during the fourth quarter what's going to happen on this.

On the -- for this quarter, it is like close to 70,000 prepaid customers for the Q3. For the tax question, this is actually what we were looking for to happen. The reason for that, we were saying that same service, same tax rules. So before that, we had some disadvantages -- advantages versus foreign competition on the digital services side. So this clears everything for our competition. So this is a draft law, taxation of digital services. We believe that this is very important step for fair competitive environment. As we always say, same service, same rules.

[Atinc Ozkan, analyst]

Could you clarify what percentage of your top line would fall under digital services category to be taxed? I know it's not very clear, but do you have any ballpark?

[Murat Erkan, executive]

I don't believe that we're going to impact on this one. And the law is draft, so when the law published, we can see much better figure, but I don't think it's going to impact our top line. Because since the law is draft, we see that this draft law, we are under the threshold level. So it's not going to impact our top line. If the law comes with the existing draft [indiscernible].

[Operator]

The next question comes from Slava Degtyarev from Goldman Sachs.

[Slava Degtyarev, analyst]

Also a question on Slide 7, your mobile ARPU has accelerated, while inflation is going down. Trying to understand how sustainable is that trend? So or in other words, do you expect mobile service revenue to outperform inflation in the medium term by certain percentage points?

[Osman Yilmaz, executive]

First of all, it was under plan. That's why we were sharing like-for-like ARPU growth level, so that you can compare there what's going to come next quarter because in telecom world, you cannot immediately react inflation increase or decrease. The reason is we have -- we are in a contracted world. So when we have contraction, contract with the customer, you cannot immediately take action on pricing. So you need -- there is a lag between that. So that's why this is sustainable. Also, we share our like-for-like ARPU basis as well, it's close to 20%. So we'll see a little more better than inflation. But at the end of today, everything will come to the similar level. So in the long run, we see that they match each other on average basis. But through a couple of quarters, we're going to get in favor of versus inflation.

[Operator]

The next question comes from Cemal Demirtas from Ata Invest.

[Cemal Demirtas, analyst]

Congratulations for the very good results. My first question is related to your ARPU growth, coupled with subscriber growth, we see a significant increase in your subscriber base, and we see a similar picture into telecom mobile side. So we see in both in your company and into telecom, we see some increase. And in the same while, you managed to increase your ARPU at very impressive level. I would like to understand how much of the impact was related to your upsell to higher tariffs and contracts with these [indiscernible] customers. Does it have any effect on that? And how sustainable it's -- for the rest of the year and for -- maybe for next year? That's my first question.

[Murat Erkan, executive]

First of all, I think we have a higher double digit, close to 20% year-over-year, like-for-like ARPU growth. I would rather have a look at the numbers more carefully here to see the difference. On the other hand, ARPU growth, will continue, as I mentioned, for another couple of quarters, better than the inflation rate. And then they're going to match each other, and we'll continue to do our inflationary pricing. The good thing about this, we're gaining customers from postpaid side, which is lot higher ARPU versus prepaid ARPU, which gives us more benefits on the other hand.

[Cemal Demirtas, analyst]

Okay. And other questions about your financial expense side, when we look at the bottom line, we see higher negative impact of financial expenses. And you do all the hedging and all those accounting. And most of the better-than-expected operating results was just overshadowed by some financial expenses side. And we see similar levels of financial expenses in second quarter and third quarter. I'm just including the FX side and the expense side. How could we see the following quarters, at least, in Turkey, we are just getting into a low-inflation and low-interest environment. And I know you are protecting yourselves through hedging. But it's the most difficult part to just maybe the estimate. But I just want to understand how could we look going forward in the -- at least in the low interest rate environments going forward, maybe fourth quarter? And maybe can you just elaborate the mechanism in the third quarter, how maybe it was higher than maybe I thought you can compare maybe from your perspective?

[Murat Erkan, executive]

Let me give you -- the stage to Osman, so Osman will answer on that, but hedging is an instrument that we use, especially high FX currency fluctuation. So we -- it is under control with our treasury department. And so far, we did good, and we'll continue to do hedging with the -- but let me give you those stage to Osman. He can explain better than me.

[Osman Yilmaz, executive]

Actually estimating the net interest expense, net financial expense for Turkcell is becoming easier because we implement hedge accounting and the quarter variation in this financial expenses is getting more smaller. And the main underlying factor is hedge accounting. So applying hedge accounting since last year, gives us more visibility for net financial expense and also for the bottom line. Actually, what impacted us during the last quarters, while the mark-to-market losses on the swaps that we hold on our balance sheet. And most of these swaps were related to our consumer finance company, where we do not apply hedge accounting, since the hedges in this company are relatively shorter term. But it is worth mentioning that over the last quarters, 1-year Turkish lira swap rates fell more than 700 basis points. It is a biggest moment in almost -- a biggest downward movement. And being in a net payer position in those swaps gives us some downside in terms of trading losses. That was another factor impacting giving a minimal impact on our bottom line performance. Going forward, we can say that given that market conditions will be similar to that levels. Our financial expenses will be close to that levels, and we can easily say that our natural run rate of bottom line will be relatively close to what we had this quarter.

[Operator]

Operator Instructions] The next question comes from Anna Kazaryan from VTB Capital.

[Anna Kazaryan, analyst]

Could you clarify your view on the competitive environment in payment services, and particularly, could you give us an update of whether be [ Vikayam Express ] was shut down and EPS? So what impact it might have on Paycell business?

[Murat Erkan, executive]

Turkish techfin ecosystem is fragmented, whereas Paycell is present in our various domains with its wide portfolio solution. In terms of revenues, Paycell is the second in the terms of market after [ Balvin ], which is a transportation subsidiary of [ Tumant ] municipality. Paycell is well positioned to grow in a fragmented market, leveraging Turkcell takes know-how, customer base and [ wireless ] network. On the [ Vikayam Express ] side, I think, this is a decision by anti-competition, so we cannot comment on the Board decision. But as far as I see, they were not so strong players in this market. So I don't think it's going to impact a lot.

[Operator]

The next question comes from Asli Kumbaraci from Yatirim Menkul Degerler A.S.

[Asli Kumbaraci, analyst]

Can you give some color on the provision that you recorded in this quarter about the tax -- wireless tax?

[Murat Erkan, executive]

First of all, for our digital services part. We have tax called [ tariffs ] which is wireless usage fee. We believe that we shouldn't pay wireless tax provisioning for our digital services. On the other hand, on the regulation authority wise, they believe that [ tariffs ] should be paid on the digital services side. As we said before, same rules for same services. So this should apply on this side. But unfortunately, we couldn't come to agreement with the authority, and we provisioned this amount, starting from 2018 to 2019. But I believe we're going to go for legal action on this side because we do believe that this is not the right approach, I would say. Yes. By the way, I just want to remind you, if this thing doesn't happen, our net income will be [ 1 million 28 million ] higher.

[Operator]

[Operator Instructions] The next question comes from Ece Mandaci from ÜNLÜ & Co.

[Ece Mandaci Baysal, analyst]

I have 2 questions, if I may. One is about again Paycell. When you look at the quarterly growth figures on a year-over-year basis, revenue growth figures, we are seeing slower growth in the third quarter on a year-over-year basis, and a slight decline in the EBITDA margin of Paycell. What was the reason for that? And for the coming quarters, how much growth should we expect for Paycell specifically? And you were mentioning before that double-digit growth around 50% growth could be possible in Paycell going forward? And also, you mentioned about a potential partnership in Paycell in your earnings release. So could you overall comment on your prospects on Paycell and revenues generation going forward? This is my first question.

And the second one is about digital business solutions, I assume that the growth -- revenue growth in that category was around 25% to 30%. In the third quarter, possibly due to lower equipment sales because you were also mentioning about the normalization in revenue growth. So could -- would it be fair to assume around 30% sustainable growth again for this category on a year over basis for the coming quarters?

[Murat Erkan, executive]

First of all, regarding Paycell, to be honest, we don't look at Paycell as a revenue driver at this point of time. Paycell is our long-term strategy to create value for our company. So on this side, also, regulatory changes are helping us to make this happen. Instead of looking at just revenue, we looked at other KPIs like number of app download, number of transaction, number of contracts for long-term, like we did with Istanbul travel card agreement, et cetera. So the KPIs for Paycell are different than the -- just the revenue and EBITDA, first of all. So we see a lot of value on this side after these regulatory changes, it also proved that we are on the right track. And in this aspect, we will create more value in the future. Regarding -- regarding the other questions, it's about DBS, digital business solution. First of all, DBS is quite sustainable on this 30% revenue growth, 25% to 30% revenue growth. And first of all, we generate almost TRY 1 billion revenue, first 9 months, which has 48% year-over-year growth. Obviously, there are base impact of the revenue while we plan to keep it 30% [ cargo ] level for the next years.

[Operator]

This was the last question. Dear speakers, the floor is yours.

[Zeynel Bilek, executive]

Okay. This is the end of our call. Thank you very much, Murat and Osman, for your wonderful presentations. And thank you all, participants, for your time, and hope to see you at our Capital Markets Day on November 12. Have a good day.

[Osman Yilmaz, executive]

Thanks for the contribution. Thank you.