Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. I am Jota, your chorus call operator. Welcome, and thank you for joining the Turkcell's Conference Call to present and discuss Third Quarter 2020 Financial Results.

[Operator Instructions]

And the conference is being recorded.

[Operator Instructions]

At this time, I would like to turn the conference over to Mr. Korhan Bilek, Treasury and Capital Markets Director. Please, Mr. Bilek, you may now proceed.

[Zeynel Bilek, executive]

Thank you, Jota. Hello, everyone. Welcome to Turkcell's Third Quarter 2020 Results Call. Today's speakers are our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz. We will have a brief presentation, and afterwards, we'll be taking your questions. Before we start, I would like to kindly remind you to review the last page of this presentation for our safe harbor statement. Now I hand over to Mr. Erkan.

[Murat Erkan, executive]

Thank you, Korhan. Good afternoon, and good evening, everyone. Welcome to Turkcell's Third Quarter 2020 Results Call. Before we go into the results, I would like to extend my condolences to those who have lost their loved ones in last week's earth quake disaster in Izmir and in Greece, and wish a speedy recovery to the injured.

At Turkcell, we did our best to support the search and rescue efforts by extending free voice and data plans to those in the region and by making sure our network operate at maximum capacity. Now as to our performance. We had a strong quarter that beat our expectations. While the business got used to the circumstances of the pandemic, our customers have gradually regained their mobility.

Hence, the reopening of the economy has helped our strong performance. We registered 16% top line growth with over a 44% EBITDA margin. The ARPU trend remained robust at 14% on the mobile side, and close to double-digit on the fixed side. Meanwhile, our customer base grew by 382,000 net additions, 370,000 of which were postpaid.

Track driven by digitalization in the COVID period become permanent, such as the share of digital channels in our sales at 12% in the third quarter. We recorded solid growth in all our strategic focus areas. We continue to launch new products and services and enhance existing one.

Overall, we generated TRY 1 billion of free cash flow during the quarter marking a continued solid performance. Our leverage ratio remained at 0.8x. Moving to next slide. As international travel was not possible, our roaming revenue remained under pressure.

On a year-on-year basis, the decline was around 23%. Please consider that we realized a strong growth performance despite this headwind. Given the current state of pandemic, we expect a similar trend in roaming revenue in the fourth quarter as well. We observed the shift to e-commerce in Turkey, accelerated by the pandemic has continued as user enjoy the convenience.

As such, transaction through our online channels, as well as through Paycell have displayed promising trends. Furthermore, demand for our digital services, particularly the TV platform, remains strong, motivating us to further enhance our digital services and solutions.

Moving to the next slide. Now some further details on our financial performance. We recorded a TRY 7.6 billion top line with an increase of 16% year-on-year. The first 9 month growth reached 15%. Such a performance was possible with our resilient and flexible business model. Our EBITDA reached TRY 3.4 billion on a 19.6% increase with a 44.4% margin.

The third quarter is seasonally a strong period. Moreover, operational cost saving triggered by the pandemic have contributed to a higher profitability. Net income was solid at TRY 1.2 billion, marking 51% yearly growth. This is the highest quarterly revenue we generated organically. We are pleased with our performance, which exceeded our expectation.

Next slide. Let's take a look at our operational performance. Our total subscriber base expanded by 382,000 net additions this quarter. In the mobile business, with our continued focus on cost-based segment, the base grew by 317,000. With this, postpaid share in the total mobile subscriber reached 64%.

The average monthly mobile churn rate was at around the same level as last year. We believe a 2% monthly churn rate to be a healthy level in this market. Blended mobile ARPU rose to TRY 52 on a 14% increase. This growth was a result of rising data and digital services usage, the shift to higher data plans and our new offers and tariffs designed to meet customer expectations. In the fixed broadband business, demand for our services has continued.

We gained a net 45,000 fiber subscribers with new tariff choices. Residential fiber ARPU growth was at 9.4% on a year-on-year basis. Further, we registered some 39,000 IPTV subscriptions during the quarter.

Next slide. Now some highlights on the performance of Superbox, our fixed virus access product. Superbox is a pioneer product in its market. With Superbox, we have addressed the rising demand for fiber speed home Internet. Our well-invested LTE network has proven its ability to provide this service without interruption.

Superbox subscriber reached 551,000 with a net add of 60,000 this quarter. With this, Superbox subscriber base was 2.5x that of a year ago. Strong demand has triggered price adjustment in our Superbox tariffs. Today, the minimum Superbox plan on shelf is TRY 159, up from TRY 99 a year ago. This increase should gradually reflect to its ARPU flow.

Next slide. We are ever focused on how to improve the lives of our customers and better serve their needs. This mindset leads us to create innovative offers. As such, this quarter, we launched 2 tariff plans with a new value proposition. Under Mega plans, our customer are offered the flexibility to buy large data plans that they can consume through a year.

Under Family and Friends plan, our customer can form team of up to 5 with whom they can share their data quota. Additionally, we continue to please our customers with our legendary Shake&Win campaign through our digital connection platform.

Overall, we have recorded, by far, the highest NPS score in the sector with our key strength in value proposition, network quality and brand loyalty.

Next slide. Digital channels play an integral part in our distribution network model. We serve our customers through our website and our digital operator application.

During the quarter, we remain focused on how to continue diverting customer demand towards these platforms. By doing so, we registered savings, particularly in sales expenses. As a result of these digital channels reached 28 million in a month, our conversion to sales ratio has doubled on an annual basis. The additional data plan purchases and TR top-up transaction volume over this platform have tripled on an annual basis. Accordingly, 12% of consumer sales of Turkcell Turkey was registered over the digital channels.

Even though mobility limitation were lifted in third quarter, digitalization trend and behavior driven by the COVID period had become permanent.

Next slide. Let's take a look at our performance in our strategic focus areas. First, the digital sources. Standalone digital services revenue increased 28% year-on-year this quarter. Paid user, a key revenue source, reached 2.7 million, marking 29% year-on-year growth. We introduced our secure and seamless video conference platform, BiP Meet, which is well equipped to compete with its global peers.

Moreover, the data generated by the BiP Meet is securely stored at our data center located in Turkey. We also introduced our TV+ ready products. It is the first Android TV solution in Turkey that is launched by an operator and capable of converting the television into a smart TV with a dongle.

By doing so, TV+ customer can access over 150 live channels, an archive of 5,000 videos on demand, in addition to music and game application at the Android market. Last but not least, our new service Lifebox Transfer is a fast, easy and secure alternative for data sharing. With this service, we suggest an alternative for those who wish to have their data stored in Turkey.

Next slide. As to our second strategic focus, namely digital business solution, our digital business solution registered 40% yearly revenue growth. TRY 938 million system integration project backlog is promising for the period ahead. We pursue a strategy of providing our customer an integrated service procurement from a single point.

As such, we launched Turkcell Multicloud service, which offer global cloud service procurement, peer-to-peer management and consultancy services. Our Secured Digital Signature and Turkcell Digital Archive Solution will enable the digitization of the process that requires signature and generating operational efficiency.

These services also contribute to our sustainable targets by reducing paper use. Also in the period, we have built new global vendor partnership, increasing the total to 20. All these efforts have encouraged to pursue our ultimate goal of becoming a leader in the integrated solution market.

Next slide. Now a few words on our Techfin services. Paycell sustained its revenue growth driven by continued demand for contactless payment in the pandemic environment. Accordingly, Paycell non-group revenue grew by 85% year-on-year. This quarter, we have introduced Paycell Android POS in a pilot scheme.

This device is the first in the Android POS market to have secured necessary approvals and will become a new business line for Paycell. Paycell Android POS has a smart operating system enabling the process of collection, inventory tracking and e-invoice over a single platform. It offers cost advantage to member merchant, especially for SME. In addition to QR code payment, all bank cards can be used with this device. The portfolio will expand with the inclusion of meal cards.

Next slide. And now an update on data usage and 4.5G subscription trends. Average mobile data usage rose 61% in a year to 12.2 gigabytes per user. The rise in data consumption was due mainly to higher content consumption, boosted by seasonality, the growing share of 4.5G users and Superbox subscribers. Out of 32 million customers signed up for 4.5G services, 21.4 million have 4.5G compatible smartphones, still indicating room for growth. This quarter, smartphone penetration on our network reached 80%, with 90% 4.5G compatible. There were 1.8 million net additional 4.5G compatible smartphones on a yearly basis.

Next slide. Let's look at our performance in the international markets, which generate 9% of the group revenue. Our international operations grew by 25.3% year-on-year. This was mainly on rising voice and data usage and the positive impact of currency movement in these countries.

Lifecell Ukraine revenue grew by 14.2% in local currency terms. Lifecell's bottom line turned positive in June for the first time. And in Q3, Lifecell generated net income for the whole quarter. The performance of the subsidiary in Belarus has improved with the partial recovery in voice and data revenues.

Yearly top line growth was at 1.4%, mobile ARPU grew 9.3% in the local currency term, with higher data consumption and demand for digital services, best launched postpaid tariffs upon demand from its customers.

Our subsidiary in Turkish Republic of Northern Cyprus recorded 18.5% revenue growth on the back of data and handset revenue despite continued pressure in roaming revenue.

Moving to next slide. A new era for our company began on the 22nd of October. The transaction and share transfer agreed among our major shareholders and Turkey Wealth Fund were completed on that date. As a result, Turkey Wealth Fund becomes the largest shareholder with its 26.2% stake. LetterOne raised its stake in Turkcell to 24.8%. With this change, our company now has a simplified ownership structure.

Long-standing shareholder disputes are over. We no longer have the uncertainties created by a 3-party controlling structure. Looking at this 26-year history of Turkcell, I consider this change as milestone. I trust that we will register great results for our company and our country in this new era with Turkey Wealth Fund. Turkey Wealth Fund has already declared its support for our strategy, and that it foresees great value at Turkcell.

I must also add that Turkcell will remain subject to CMB, SEC and SOX rules and to other regulation. We will continue to have 3 independent Board members, ensuring best-in-class corporate governance principles.

Next slide. I would like to end my presentation by sharing our new guidance for the full year of 2020. Taking into consideration our healthy 9 months performance, and our expectation for the remainder of the year, we revised our guidance upwards. Accordingly, we revise our revenue growth to 14% to 15%, EBITA margin to 41% to 42% and EBIT margin to 20% to 21%.

We expect to register an operational CapEx over sales ratio of around 19%. With this, we are glad to have come back to the target level we announced before the pandemic hit the world, bringing uncertainties. We owe this platform foreseeing the right strategy with an excellent team and offering the best-in-class service over a well invested network. I will now leave the floor to our CFO, Osman.

[Osman Yilmaz, executive]

Thank you, Murat. Now let's take a closer look into the financial performance. Our business displayed a solid performance in the third quarter. Group revenues rose 16.1% year-on-year, corresponding to an incremental TRY 1.1 billion. Of this increase TRY 996 million derived from Turkcell Turkey, thanks to strong data demand from both consumers and corporates, 5G postpaid subscriber base and continued momentum in digital business solutions.

Increasing use of our digital channels contributed to facilitating higher device sales. Turkcell International revenues rose by 25.3%, contributing TRY 133 million in this quarter, mainly with the contribution of Lifecell Ukraine and currency movements.

Turkcell finance company's contribution remains negative due to lower portfolio size as well as lower interest on the portfolio compared to last year.

Next slide. EBITDA rose by 19.6% year-on-year to TRY 3.4 billion with a margin of 40.4%. Our EBITDA margin marked 1.3 percentage point improvement on a yearly basis. This was mainly due to a solid rise in revenues plus lower G&A and S&M expenses. Third quarter had been a high season typically with increased usage during the summer period, and this was the case despite the pandemic environment.

On the cost side, lower selling expenses, very limited travel expenses, lower overhead costs under our continued remote working practice have all supported the margin expansion. Moreover, decline in doubtful trade receivable provision had a positive contribution to EBITDA in this quarter.

Our collection performance was strong despite cautious expectations in COVID environment. Meanwhile, increasing equipment sales had negative impact on the profitability margin level. Turkcell Turkey's EBITDA growth was stronger at 23.2% year-on-year, corresponding to an incremental TRY 554 million. The profitability margin improved with a 2 percentage point rise year-on-year to 44.3%.

Next slide. Now more detail on our free cash flow. On this slide, you can clearly see the positive trend and strengthening of Turkcell's cash flow generation over the years. In Q3, we have registered TRY 1 billion free cash flow, mainly on back of strong EBITDA generation.

I want to emphasize that our finance company's portfolio expanded by nearly TRY 100 million versus second quarter, so our free cash flow generation performance is not related with the change in finance company portfolio but the operational performance of Turkcell.

With this, the first 9 months free cash flow amounted to TRY 2.6 billion. The major items of this TRY 2.6 billion cash flow includes EBITDA of TRY 9 billion, acquisition of intangible assets of TRY 4.8 billion, change in operating assets and liabilities of negative TRY 130 million, payment of lease and liabilities of TRY 1.1 billion, and income tax paid of TRY 436 million. Our aim is to continue free cash flow generation trend in the upcoming periods.

Next slide. Now let's take a closer look at our Techfin company's performance, and let's start first with Turkcell finance company. In Q3, financial revenues declined by 41.9% TL to TRY 127 million on a shrinking loan portfolio and lower average interest rate on the portfolio versus last year. EBITA declined by 32.2% to TRY 97.3 million. EBITDA margin was up 10.8 percentage points year-on-year on the back of lower cost of funding and lower cost of risk, specifically this quarter.

As communicated in earlier quarters, we were expecting our finance company portfolio to stabilize by mid-2020 and then to start to grow gradually afterwards. We saw an increase of nearly TRY 100 million in Q3. Coupled with seasonality, pent-up demand in Q2 led to stronger sales in Q3 and continued remote education has created demand, particularly for tablets.

We also observed that smartphone demand was pulled forward with the expectation of price increases given the currency depreciation. Under normal conditions, we expect the portfolio to grow by 10% to 15% per annum going forward. Meanwhile, cost of risk decreased to 2.5% by improving 1 percentage point on a quarterly basis.

Successful collection performance and continued improvements on risk assessment infrastructure were the main drivers of this decline. Integrating telco and financial data, we created the best-in-class calling mechanism with widest reach in Turkey.

Next slide. Our payment services company, Paycell, is well on track in monetizing the shift in consumer habits in favor of e-commerce and cashless payment methods. Direct carrier billing transactions nearly doubled while transaction volume through Paycell card is 3x of last year.

Quarterly growth rates in transaction volume of this business plan were also strong with 26% and 63%, respectively. It is worth noting that despite the fewer mobility limitations in Q3, we see prolonged trends in Paycell KPIs. Overall, Paycell revenues increased by 34% to TRY 78 million, EBITDA rose to TRY 47 million with a margin of 60%.

Non group revenues rose by 85%, with share of non group revenues reaching 2/3 of total. We saw strong demand for ready-to-use limit that we launched in July with TRY 30 million volume in this quarter. With this service, our customers can transfer their mobile payment limits to their Paycell cards in order to spend as any merchant credit card is accepted. As discussed, we have also launched Paycell Android POS in a pilot scheme in this quarter. This service will create more value to Paycell with becoming widespread in 2021 and beyond.

Next slide. Now some highlights from our balance sheet and leverage. As at the end of the quarter, our gross debt position increased to TRY 22.8 billion from TRY 19.8 billion. Currency movements led to around TRY 2.5 billion increase in total debt.

In Q3, dollar appreciated by 14% and the euro by 18%. As indicated, we do not net off our derivative receivables from debt. So our reported net debt in TRY terms rise as FX appreciates. As of Q3, net debt was TRY 9.3 billion with a 0.8x leverage ratio. Excluding the Techfin business, this was at 0.7x, same as the level with the previous quarter.

Within TRY 500 million rising net debt in Q3, currency effect was TRY 1.6 billion, while we generated TRY 1.51 billion cash from our operations.

Next slide. I will end my presentation by discussing our management of foreign currency risk. We have $1.7 billion equivalent cash in hand with 7% of it in hand currency. We deem this practice to be important as a natural hedging tool. With hedging as soon as in place, the share of FX debt had declined from 77% to 43% as at the end of Q3.

Our hedge contracts are cash flow based covering full maturity of related FX debt. We entered into these contracts mainly in 2016 and '17. So thanks to good timing, we had favorable exchange rates, and we are able to renegotiate strike levels if we see any potential in the market.

As of Q3, our net FX position is $31 million and we will continue to keep the position neutral in the coming periods.

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

[Operator]

[Operator Instructions]

The first question comes from the line of Cabejšek Ondrej with UBS.

[Ondrej Cabejšek, analyst]

Congratulations on a very good set of results . I had a couple of questions actually. So I was just thinking, if I look at your revenue growth, obviously, you outperformed on both revenues and EBITDA. But if I look at your revenue growth, I would say that the source of the, call it, better outperformance were from wholesale and other. I was wondering if you could clarify a bit where exactly so much of that growth is coming from. That's my first question.

Second question on CapEx. You're now moving your guidance to 19%. I wanted to clarify whether that is just a function of FX or whether there is some new investments coming through?

And lastly, just a comment, if you could, please, on your -- or rather not on your, but on competition because one of your competitors yesterday was saying that the competition seems to be picking up in the acquisitions market, specifically mobile. So if you could comment on what your view on that is? And what impact would you say that, that could have on your subscriber acquisition costs going forward, because clearly they were up again in the third quarter compared to what we have seen before -- even before COVID.

[Murat Erkan, executive]

Ondrej, thank you very much for the question. Good questions. Let me start with the revenue growth part. This was mainly driven by Turkcell Turkey's strong ARPU performance on the back of larger postpaid share and higher data consumption and upsell efforts. Equipment revenue backed by sales, particularly on digital channels and corporate projects also had a positive impact on Turkcell Turkey's strong top line performance.

Turkcell International revenue, which rose 25%, mainly with the contribution of our Ukrainian operation and the positive impact of currency movements, supported group top line growth as well. Meanwhile, we saw 15% drop in other subsidiary revenue. This was a result of the declining finance business revenue due to the contracting loan portfolio and declining interest rates.

We also stopped our sport betting operation in Turkey by the end of August 2019, which had a negative impact on other subsidiary revenue as well. Excluding the finance business and sport betting operation revenue, our consolidated revenue growth would have been 19% in Q3.

For the second question regarding CapEx, we implemented discipline and selective management without compromising quality in terms of coverage and capacity. By selective, we mean making new investments based on subscriber metrics while prioritizing locations having high revenue generation potential.

However, on the face of the recent volatility in Turkish lira as well as our continuing investment, we revised our guidance and now we are targeting the higher end of our initial guidance, which is around 19%.

Regarding the competitive environment, actually, our strategy comprises different initiatives than our competition. We focus on creating higher value and richer experience to our customers by offering differentiated products and services.

Hence, rather than competing on price, we focused on additional value to be offered on to our customers. Our strong NPS scores and customer addition performance confirms that our strategy is paying off. Appreciation of our value proposition by our customers also enabled us to implement inflationary pricing.

In the third quarter, we registered an ARPU growth performance which has 2 percentage points above inflation and double the nearest competition. Going forward, depending on the pace of inflation, we would be reasonable to expect our ARPU growth to be in a range plus or minus a couple of percentage points around inflation level.

Actually, as far as -- I guess the -- for the wholesale side, you asked for FX effect, yes, we have foreign exchange FX as well. But on the wholesale side, we have also some local currency level. On the other side, I believe I already explained the equipment, digital sales, and corporate equipment as well.

[Ondrej Cabejšek, analyst]

If I may, one short follow-up on the enterprise revenues. So those seem to be very strong, but usually, those are sort of, by their nature, usually come in sort of larger projects with pretty big upfront cost, meaning low margin, but it seems you've also done very well on the margins. So can you just talk a bit about the nature of these? Are they, for example, cloud is better by nature, higher margin? Or any comment on that would be helpful.

[Murat Erkan, executive]

For -- I mean, we already -- actually, initially, you said that for the corporate market, we are going to focus in higher profitable areas, which are cloud business, security, IoT and that type of business. So yes, we are entering into project sites and we are going after, for instance, health care hospital business. But all of them has a part of data cloud and other solution as well.

So I think we are focusing very much on the enterprise segment and then profitable side of enterprise segment as well.

[Ondrej Cabejšek, analyst]

I apologize to everyone on the line. Can you just please clarify in terms of the subscriber acquisition costs that I asked earlier, they seem to have jumped up again quite a bit in the third quarter. What is the outlook for those in the coming periods?

[Murat Erkan, executive]

Yes. To be honest, with the normalization of our mobile customer acquisition increased 38% compared to previous quarter and third quarter, while fixed customer acquisition rose 16%. These are the main drivers behind the increased subscriber execution costs.

[Operator]

The next question comes from the line of Ibragimova, Dilya with Citi.

[Dilya Ibragimova, analyst]

Congratulations on the strong results. I had a couple of questions on the similar theme where Ondrej was. First, maybe looking at the device sale. So if I'm looking at the -- there has been strong increase, but if I'm looking at the gross margin, especially year-on-year, there has -- there's very -- or relatively little dilution. Can I just ask whether the device sales coming at positive margin? Or maybe the margin on those are improving? And also, maybe if you have a breakdown share of equipment sales that are attributable to corporate segment, please?

And my second question is on service revenue. It looks like quite a bit of growth in mobile service revenues driven by prepaid. I just wanted to check whether how much of that is driven by pricing that you have put through in July -- June, July? And how much of that is driven by maybe higher consumption of data as consumer is just working from home and studying from home?

[Murat Erkan, executive]

Okay. Thank you very much, Dilya. First of all, regarding devices and the impact of the gross margin, so we are not doing devices just for sake of the revenue increase. Every device that we are selling to our customer has related adjacent revenues as well, which are mainly profitable revenues. If you look at stand-alone device margin, it's, like, between 6% to 8% level. But it brings higher profitable revenue next to these devices and also increases customer stickiness and create new opportunities in -- especially in the enterprise markets as well.

For the hike in prepaid ARPU growth, we implemented price increase to bundle offers as well as data packages in the prepaid segment at the beginning of the third quarter aiming to reduce the price gap between prepaid and postpaid. Moreover, we followed a proactive approach to prevent possible churns that will be triggered by the price adjustment with customized and exclusive offering using our analytical capabilities.

This resulted in solid ARPU growth in prepaid segment in the third quarter. Actually, you asked for equipment sales share, it was 10%.

[Dilya Ibragimova, analyst]

So 10% of all device sales....

[Murat Erkan, executive]

Corporate revenue. Sorry for coming back to the first question.

[Operator]

[Operator Instructions]

The next question comes from the line of Demirtas, Cemal with Ata Invest.

[Cemal Demirtas, analyst]

Congratulations for a very good result. My question is about the prospects for 2021. Could you give any indication about the trend for 2021. Any significant change in the outlook? What -- roughly what are your expectations?

[Murat Erkan, executive]

Cemal, thank you very much. I think to be able to prospect from now, it might be a little bit difficult, especially in the COVID environment. So no, there are some revenue rely on the -- for instance, roaming revenue rely on the COVID situation because if the COVID goes earlier, we would see the roaming revenue come back in the same level, even maybe higher.

So as of today, we are working on -- heavily on 2021 prospects. It is not easy job, by the way. But we will provide guidance soon in February with fourth quarter results. But believe me, we are working hard on the prospect for 2021 these days.

[Operator]

We have a follow-up question from the line of Ibragimova, Dilya with Citi.

[Dilya Ibragimova, analyst]

Yes. I had 3 actually. If I may. First is on margin or maybe cost structure, this quarter, specifically, do you if -- I understand that some of the costs may have been lower because of the lower commercial activity, for example, sales and marketing. So if we were -- if the market was open as normal, where do you think your EBITDA would have been?

And second question is on roaming. Is there any roaming revenue in Turkish revenue this quarter? And my third question is on your guidance, top line guidance, which implies 11%, 15% growth in the fourth quarter, which seems conservative considering that it tends to be stronger quarter in device sales and the run rate that we have seen so far.

Is it -- are you just being cautious in your outlook, you mentioned that some of the device sales have been -- have moved forward as people rush to buy equipment before inflation. Is that -- or are you just being conservative?

[Murat Erkan, executive]

Thank you very much. Let me start with the margin side. I mean, third quarter is the high season for telecom market in Turkey. It was historically like this. And this is due to increased usage during the summer period, and this was the case despite the pandemic environment. On the cost side, lower selling expenses, very limited travel expenses, lower overhead costs under our continued remote working practice have all supported the margin.

Moreover, decline in doubtful trade receivable provision had a positive contribution to the EBITDA in this quarter as well. Our collection performance was strong despite cautious expectation with COVID environment. We believe that we will be within our guidance range for the full year, which is between 41% to 42%.

As you know, digital sales channel is a focus area for Turkcell. The increasing share of digital channel leads to savings in the selling and subscriber acquisition expenses as well. The pandemic environment had a positive impact on this trend and we believe this become permanent even in normalization period. We believe that we can sustain the savings on the selling side.

On the marketing side, we either postponed or canceled part of marketing expense due to pandemic. This will bounce back to normal levels when things get back to normal, I would say.

For the top line guidance -- sorry, for the roaming revenue in Turkey this quarter, as I indicated that our roaming revenue decreased by 33% year-over-year. So roaming part still -- obviously, we get some roaming revenue, but it decreased dramatically versus last year.

For the top line guidance, we increased the top line to 14% to 15%. I believe this is a reasonable achievement because last year, fourth quarter was also quite strong quarter. And I think we will try to hit the higher end of the guidance, but I believe we can do this. As you said that people rush to buy equipment. This might be case. And also the increase of the foreign currency, I believe, will reduce the customers buying the terminal equipment. This -- and in the third quarter, the Turkish -- the terminal price was in Turkish lira. So we expect to increase in the terminal side as well.

Just one more addition is regarding roaming revenue. In total, it is 2% of Turkcell Turkey revenue. So it has such an impact.

[Dilya Ibragimova, analyst]

Sorry, just to confirm, this quarter, the roaming revenue was 2% of total Turkcell Turkey...

[Murat Erkan, executive]

No. No, historically, roaming revenue is around 2% of Turkey revenue. But this quarter, it decreased to -- sorry, just let me -- okay, this is the same. In this quarter, it is 2% of Turkcell total revenue, the roaming revenue for the third quarter.

[Operator]

[Operator Instructions]

We have a follow-up question from the line of Cabejšek, Ondrej with UBS.

Mr. Cabejšek, can you hear us?

[Ondrej Cabejšek, analyst]

Apologies, I was on mute. I wanted to have -- ask a question on the consumer finance business. So clearly that's -- the loan book of it has sort of bottomed out but I believe it's bottomed out quite below what you were sort of expecting it to reach about a year ago. So I wanted to ask whether that is intentional, for example, relating again to your focus on profits or marginality on devices or whether that was simply something natural that the COVID situation, for example, may happen? Can you comment on that, please?

[Murat Erkan, executive]

First of all, at the beginning of the year, our -- in Turkey, the regulation has changed for the installment -- number of installments in the device business. So it reduced 3 installment for the price of TRY 2,500 range, and 6 installments, lower than TRY 2,500 range. So this impacted our finance business, top line and number of device credited to customer. The main reason of this is not intentionally, it is due to the regulation.

[Ondrej Cabejšek, analyst]

Okay. But so you can confirm that despite this happening earlier this year, we've sort of annualized that or it's in the base now, and the growth, like you said, should come sort of in line with revenues from where we are today?

[Murat Erkan, executive]

Yes, we see that hit down to the, like, middle of the year. And now we are recovering. But obviously, going forward, we can expect 10% to 15% portfolio growth on an annual basis.

[Ondrej Cabejšek, analyst]

Okay. And one more follow-up, please. On the prepaid market, you said you -- if I understood correctly, your strategy would be to sort of converge prepaid to postpaid pricing, logically, that would be making the prepaid services more expensive, how confident you are that the market is going to call you on that one? Because one of your medium-term targets is also to be adding 1 million RGUs per year. So are you not scared of market share losses in this segment?

[Murat Erkan, executive]

To be honest, we would like to close the gap between prepaid and postpaid pricing because -- so that customer would like to move to the postpaid environment rather than prepaid environment, which is more sustainable, more ARPU and more stickiness for us.

So this is intentional job that we're doing during the year actually. This is the case, I think. As for the 1 million target, we -- I think, obviously, the COVID environment impacted the customer acquisition side mainly. We didn't see foreigner to come to Turkey and acquire more mobile lines. This has impacted, but we would like to get as much as we can to the 1 million target.

[Ondrej Cabejšek, analyst]

Okay. And if there is no one else on the line, maybe 1 follow-up on TV, please. Your competitor yesterday announced a new suite of TV services with more content. Is there any reaction or potential reaction from your side in terms of how you run the TV business at Turkcell?

[Murat Erkan, executive]

Yes. Our TV business is quite strong, and year over year growth is also quite positive on our side. For the -- I didn't know what the competition announced, but one of the richest content is in Turkcell TV+. Actually, we announced new things like TV+ Ready, which means we can attack the competition broadband infrastructure by using OTT bundled box.

So this is also, I think, one of the important achievements on our side. So for the content side, I believe we are the probably -- we have the richest content in Turkey in terms of -- in terms of TV content. Obviously, we don't have local Turkish league rights, but I believe our competition doesn't have anyway.

[Operator]

Ladies and gentlemen, there are no further questions at this time. I would now turn the conference over to Turkcell management for any closing comments. Thank you.

[Murat Erkan, executive]

Okay. This is the end of our call. Thank you all for taking the time to participate in our call. Have a nice weekend. Thank you very much.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your phone. Thank you for calling and have a pleasant evening.