Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the Turkcell's conference call and live webcast to present and discuss the Turkcell Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Ali Serdar Yagci, Investor Relations and Corporate Finance Director. Mr. Yagci, you may now proceed.

[Ali Yagci, executive]

Thank you, Constantinos. Hello, everyone. Welcome to Turkcell's third quarter financial and operational results call. Today's speakers are our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz. They will be delivering a brief presentation, and afterwards, will be taking your questions.

Before we start, I'd 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, Sedrar. Good morning, and good afternoon to all. Welcome to our presentation, and thank you for joining us.

In the third quarter, we recorded 22.3% revenue growth, and our EBITDA reached TRY 4 billion for the first time, implying an EBITDA margin of 43.1%. Growing 18% year-on-year, we recorded a net income of TRY 1.4 billion, an all-time high quarterly figure. Net income settled above TRY 1 billion run rate per quarter.

Our customer-centric strategy, diversified business model and focus on mobile and fixed network quality are the key factors of the sustainable performance, which was further supported by increased mobility in this quarter. This strategy has enabled us continue outstanding growth in total subscribers by 1.2 million, which marked the record of the past 14 years. In the first 9 months of the year, we gained a total of 2.5 million subscribers, further strengthening the subscriber base for the upcoming terms.

The ARPU trend remained robust at 12% for mobile and 10% for residential fiber. Lastly, this quarter, the revenue share of digital channels, in consumer sales, rose to 17%, increasing 5 percentage points year-on-year. We have also distributed the last installment of the 2021 dividend on October 27. In consideration of these solid results, we further increased our full year guidance, which I will celebrate on my last slide.

Next slide. Here, we see the operational performance of the third quarter. In all 3 fronts, mobile, fixed broadband and IPTV, we delivered a strong net add performance. On the Mobile front, we gained a net 464,000 postpaid and 643,000 prepaid subscribers. This outstanding performance was achieved through our customer-focused offer, innovative service portfolio and also supported by increased mobility, thanks to vaccination.

High net add performance in prepaid subscriber is due to the visit of Turks living abroad, after lifting of restriction in international travel. The average monthly mobile churn rate was at 1.9%, well below that of the last year. And we believe, around 2% market churn is a healthy level in this market.

Blended mobile ARPU rose to 58% -- TRY 58, a 12% increase, thanks to higher postpaid subscriber base, upsell to higher tariffs, price adjustments and increased data and digital source users. Also, our AI-based analytical capabilities, we observed strong upsell levels and the incremental than an upsell postpaid customer pacing, 2x that of same quarter last year.

In the fixed broadband segment, amid the prevailing demand for high-speed connections, with the back-to-school period, we gained net 60,000 fiber subscribers with our high-speed fiber Internet offers. Our rollout plans are on track as we exceeded 400,000 new home passes in the first 9 months. This quarter, we also welcome our 205th city in our fiber network. We are pleased to register a further 51,000 net addition to our IPTV subscriber, exceeding 1 million customers this quarter.

IPTV's penetration within the residential fiber subscriber reached 63% accordingly. Residential fiber ARPU rose to TRY 79, on 10% growth. 13% annual fiber subscriber growth should be taken into consideration, where we aim to manage a delicate balance between ARPU growth and net addition.

Next, an update on the data usage and 4.5G subscription trends. Average mobile data usage rose 12% year-on-year, to 13.7 gigabyte per user. The rise in data consumption was due mainly to higher content consumption, boosted by seasonality and lifted restrictions. Out of the 34 million subscribers signed up for 4.5G services, around 70% have 4.5G-compatible smartphones, still indicating growth potential for the upcoming quarters and implying further room for growth in data consumption. Overall, smartphone penetration is at 84%, with 92% of these units being 4.5G compatible.

Moving on to Page 6, we reap the benefit of our careful plan and first to provide best-in-class services, which is evidenced by the outstanding net add figures in this quarter. Our well-immersive, high-quality network and strong infrastructure is, once again, confirmed in the GSA report. With its risk spectrum assess and well-planned modern infrastructure, Turkcell is able to provide speed of up to 1.6 gigabit per second, which even exceeded the 5G speeds, provided by certain operators. With this capability, Turkcell ranks among the world's top 3 operators and is the fastest 4.5G network infrastructure in Europe.

Our long-time invested customer-centric approach, which enables Turkcell to provide service, addressing customers exact needs, has made us a winner at the European Customer Centricity Awards. At Turkcell's team, we have realized over 100 projects that touched the hearts of our customers. Additionally, our key strength including data-driven personalized offer and extensive distribution channels, both physical and digital, stands up as core factors influencing customer decision-making.

With all of above, customers have continued to recommend Turkcell over the competition this quarter, even extended the wide gap with the second best.

Next, now our strategic focus areas. Let's zoom into digital services and solutions. The stand-alone revenue from digital services and solutions continued its strong growth at 31% year-on-year, reaching TRY 435 million. The paid user base reached 3.6 million, up 0.9 million from last year. We are delighted to have reached another remarkable milestone for our Digital Services as the IPTV user base exceeded 1 million in September.

TV+ has continued to increase its share in the TV market, reaching just above 13% in Q2. And it is the only TV platform that has steadily increased its share for the past 12 quarters. Content and product quality enabled us to increase prices, whereby the product enjoys rising retention levels.

With its robust infrastructure BiP, our instant messaging platform, provides seamless communication and has reached 27 million 3-month active users this quarter, triple from the same quarter last year. A 1/4 of the active user base is abroad, where the leading countries are highly-populated countries like Nigeria, Indonesia and Bangladesh.

Our constant effort in our digital services are improving the user experience of the application, and we achieve this by responding to our customer needs. For instance, new feature in BiP this quarter include the status posting and video group call with up to 15 people. On fizy, our digital music services, we have added over 120 podcast series.

Next slide. Next is the Digital Business Services. We continue to lead and trend digital journey of corporate in Turkey. This has resulted in a revenue TRY 499 million from Digital Business Services, this quarter. Of the total revenues, 75% are service revenue, which rose by 28% year-on-year. From the Service revenues, we have seen continued strong demand, particularly in data center and cloud business, cybersecurity services and IoT. We signed 575 new contracts, with a total contract value of TRY 221 million. Overall, backlog from the system integration projects signed to date is at TRY 832 million, which will be contributing to the top line in the upcoming quarters.

This quarter, we continued our product launch in cybersecurity and cloud services. Watchguard is an economic and flexible fiber solution that works in physical and virtual system, and is the first in the country. Object Storage is a cloud-based solution for the further support, the vision of keeping corporate data in Turkey.

Next slide. Last but not least, in our techfin focus. Techfin Services revenue rose to TRY 281 million or 37% year-on-year growth. Paycell shows another remarkable quarter, capping 6 million active users and a 30% rise year-on-year. The revenue saw 53% year-on-year growth, mainly with traction in the pay later product. We start to monetize POS solution, which includes virtual and physical Android POS services. We have installed 1,700 devices at the local SMEs and also launched our virtual POS solution with 900 e-commerce merchants, including Turkcell sales channels. This quarter, Financell revenue rose 28% year-on-year due to higher interest rate and support from emerging insurance business.

Financell continues to finance technological needs of a broad range of customers, including individual residentials, SME and corporates. To date, we have scored 11 million customers, and we have 24% market share in consumer loans below TRY 5,000. One of Financell key strength is the assigned right limit to the right customer, based on Turkcell [indiscernible] data. We have recently launched a new credit model based on machine learning. Initial results indicate higher approval rates and higher limits, without negatively impacting the historically low cost of risk levels.

Next slide. Let's look at our performance in the international segment, which now generate 10% of group revenues. In this quarter, international revenue grew by 39% year-on-year, thanks to the expanding subscriber base in all 3 regions. Higher mobile data consumption and the positive impact of currency movement, organic growth and excluding the currency impact, was at 18%. Our Ukraine business has continued its strong operational performance in this quarter by reaching 8.9 million mobile subscribers, on a 14% rise year-on-year.

Revenue growth, in local currency terms, was 24% yearly, exceeding 12% for the last 4 quarters. This business has seen a 4.6 percentage point EBITDA margin improvement year-on-year on the back of limited interconnection costs and well-controlled operational expenses.

In local currency terms, Belarus revenue declined 2%, due mainly to lower handset sales, which, on the other hand, affected the EBITDA margin positively. In Belarus, we focus on digital subscription. In the third quarter, 1 out of 5 new customers opted for Life :) through digital service channels.

Our subsidiary in Turkish Republic of Northern Cyprus recorded strong 24% growth with rising voice revenues and data usage due to increased mobility after the recovery of education services and tourism in the island.

I would like to end my presentation by sharing our new guidance for the full year. Taking into consideration our outstanding 9-month performance and expectation for the remainder of the year, we once again, revised our guidance outlook. Accordingly, we raised our revenue growth guidance to around 20%. Generating real revenue growth in a high inflationary environment, we revised our nominal EBITDA expectation to around TRY 14.5 billion and expect to register an operational CapEx over sales ratio at around 21%.

Lastly, as you remember, we held our last Capital Market Day back in November 2019. Since then, COVID-19 pandemic has significantly impacted our industry and the way we do business. These necessities passed to revisit our plan and target, in relation to the core business and strategic focus area. We plan to organize a Capital Market Day after the announcement of full year 2021 results, where we aim to reveal our revised 3-year business plan and targets. We will make necessary announcement regarding the details of the event, in time.

I will now leave the floor to our CFO, Osman, for the financial discussion.

[Osman Yilmaz, executive]

Thank you, Murat. Now let's take a closer look into our Q3 financials. In Q3, we recorded a TRY 9.4 billion top line and 22% year-on-year growth, thanks to subscriber base expansion, higher data and digital service revenues, coupled with contributions from international operations, techfin and equipment sales. The first 9-month growth exceeded 21%. Our EBITDA reached TRY 4 billion level, on a 19% increase. Net income was solid at TRY 1.4 billion, marking 18% yearly growth, mainly driven by solid top line growth. The bottom line has settled consistently above TRY 1 billion with the contribution of disciplined financial risk management. We are pleased with our solid performance, which exceeded our expectations.

Next slide. Now some details on revenue and EBITDA developments. This quarter, with contribution of all segments, we generated TRY 1.7 billion incremental revenue, TRY 1 billion derived from Turkcell Turkey. This was possible with a larger subscriber base, ARPU growth and upsell efforts with price adjustments.

TRY 258 million from international subsidiaries supported the top line, mainly due to robust subscriber and ARPU performance of Ukrainian operations as well as the positive impact of currency movements. Our Techfin segment had a TRY 76 million positive impact. Paycell and Financell has supported this with an annual growth of 53% and 28%, respectively. The other segment contribution of TRY 334 million was mainly driven by increased equipment sales.

This quarter, our EBITDA margin was at 43%.The main factors behind the 1.3 percentage points marginal contraction year-on-year were as follows: first, minus 0.6 percentage points from gross margin, impacted by our energy businesses, increased cost of goods sold and rising radio costs due to higher energy prices; and secondly, minus 0.7 percentage points from S&M expenses, mainly due to increased selling expenses, on back of record-high net adds during the quarter.

Next slide. Now a few words on our balance sheet and leverage. Our total debt increased by TRY 700 million in this quarter, mainly due to the currency movement, and cash position of around $1.4 billion equivalent, which is mainly in FX, covers our debt service until 2025. We maintained our leverage below 1x in this quarter, despite the second installment of the last year's dividend, amounting to TRY 862 million. Excluding the financing business, this was at 0.8x, the same level as the previous quarter.

We generated just over TRY 1 billion of free cash flow, thanks to strong operational performance as well as relatively lower CapEx in this quarter.

Next slide. Now I will go into the management of foreign currency risk. We continue to hold the bulk of our cash in hard currencies as a natural hedging tool. With hedging instruments in place, the share of FX debt declined from 83% to 51%, as of the end of this quarter. Our hedge contracts are cash flow hedge and covering the full maturity of related FX liabilities. We were in a long net FX position of $122 million as at the end of Q3, and we continue to target a neutral-to-long FX position going forward.

Next slide. Now let's take a closer look at our fintech companies performance and start with our financing business, Financell. As we communicated before, in line with our expectations, the negative trend in Financell's portfolio ended in Q2, and the growth has gradually started. Revenues rose by 28% year-on-year, on the back of higher average interest rate on the portfolio versus last year and growing insurance revenue. We expect to sustain the loan portfolio at around TRY 2 billion by the year-end.

EBITDA rose by 24% to around TRY 120 million with a margin of 73%. The 2.3 percentage points margin contraction is due to the base effect, as we saw some of our receivable -- debt receivables in Q3 2020. As a result of strong collection performance and improvements in the customer portfolio, cost of risk has been declining since the start of this year. Cost of risk has remained nearly unchanged, at 0.3% for this quarter.

Next slide. Lastly, our payments business, Paycell. In line with the global trends, Paycell users continue their payment habits in the post-pandemic period, which is reflected in Paycell's solid operational and financial performance. Paycell continued to see increased recognition with the contribution of rising active customers and merchant numbers in Q3. In fact, Paycell's 3-month active users reached 6 million and the number of merchants hit 14,000.

The most popular product on our platform, Pay Later, delivered another strong performance in Q3. Pay Later volume rose by 84%, to TRY 455 million year-on-year. Transaction volume of Paycell Card has increased to sixfold of the same period last year and reached TRY 657 million.

As you may remember, at the beginning of the year, we launched Android phones for our corporate customers. Focusing on virtual POS as well, we shifted to cell payment channels, to Paycell's virtual phones, providing a revenue channel for Paycell and saving for Turkcell. Thanks to our increased focus on this business, POS transaction volume reached TRY 475 million in this quarter.

Overall, in Q3, Paycell revenues increased by 53% to TRY 119 million, 55% of which are non-group revenues. EBITDA margin was at 46%, impacted by increased human capital investments and seller S&M expenditures. With its unique product range and disruptive nature, Paycell has already taken its place among regional fintech leaders. As disclosed earlier, we are seeking growth capital to scale this business further in Turkey and then globally.

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

[Operator]

[Operator Instructions] The first question is from the line of Kennedy-Good, Jonathan with JPMorgan.

[Jonathan Kennedy-Good, analyst]

My first question on Paycell, could you give us a sense of what the total payment value across the platform is at the moment and the growth rates there? And then just wanted to understand, why bill payments have declined during the quarter? That's the first question.

Second question, I wanted to understand how your pricing strategy is evolving at the moment, given inflation rates and whether you can push mobile ARPU growth at higher rates than what you've seen at the moment? Or whether that's hoping for too much into the new year?

[Murat Erkan, executive]

Okay. Jonathan, thank you very much. For the first question, regarding total payment, it is around TRY 500 million, it's up and down, around TRY 500 million. And the bill payment is -- because it moves from physical channel to the digital channel. So that's why you might see the plan as we see growth, but when it moves to the digital channel, we can get it.

For the pricing strategy, obviously, to be able to grow the business, there are two options in your hand. One of them is growing subscriber base, and the other one is the growing the ARPU. So we would like to push both of them. This is our strategy since two, two and a half years back. So we would like to push ARPU, and on the other hand, the inflation was increasing more than expected by the market.

So our initial plan was, in terms of inflation, it's not going to grow that much. But we're adopting ourselves based on pricing. But as you know, we have a contract with the customer for 12 months. So it will take some time to catch up the real inflation, but we're going to push to reach on inflationary pricing. As I mentioned, it was quite fast, in terms of our expectation, but we will catch it up.

But on the other hand, I would like to emphasize our customer growth because if you want to pick one, I would prefer on the customer growth side because at the end of day, we can create more value from one customer, especially we have other businesses like Paycell and Financell and digital services and so on. If we catch customer, we can easily increase their ARPU level in near term. So that's why we would like to continue on the [indiscernible]. So regarding growth rate, it is around 85% for payment in Paycell. 84% range, yes. Sorry, I came back to first question...

[Operator]

[Operator Instructions] The next question is from the line of Kim, Ivan with Xtellus Capital.

[Ivan Kim, analyst]

Three questions from my side, actually, if I may. Firstly, on 5G auction, when do you expect the 5G auction? And what spectrum do you expect to be sold, this is C-band and 700 megahertz? That's one. Two, on capital intensity in '22. So how do we think about it, compared to '21? Do you think capital intensity will increase in '22, compared to '21, given where lira is? And then thirdly, on Paycell's take rate, it's pretty high, 3% in 2020 and like 3.5%, and if you look at the third quarter of '21. Where do we expect the take rate to evolve when it's -- when the business scales?

[Murat Erkan, executive]

Thank you very much, Ivan Kim. First of all, regarding 5G road map auction. Obviously, there is no official time line for 5G by the regulator. There are a number of explanation or a number of announcements coming from Ministry, but obviously, we have to wait for official announcement. 5G is vital technology. We would like to facilitate this, the only digitalization of industry and contribute to the economic development of our country.

However, we believe there are some issues that are need to be addressed for the healthy launch. First is the fiber connection of base station. Currently, similar to the low household penetration, fiber connectivity of base station is not enough for the full-fledged transition to 5G. Secondly, we believe we have not reached a desired localization rate in the development of 5G network equipment. We think, localization rate can only be reached around 20%, 2023. This could be even lower for the core network and base station level. Therefore, we believe there are some risk for the full-fledged transition to the local 5G network.

Regarding the license costs or CapEx side, first of all, auction structure is not clear yet, and we don't have an official timeline, which limits us in making an estimate regarding a possible CapEx or [preconceived] payment. The difference between 4.5G and 5G is that 4.5G was that great leap over 3G, in terms of speed, particularly for the individual user.

Therefore, we need some time to see how it's going to end up probably end of this year. For the CapEx plan 2022 and allocation, we have not finalized our budget planning for the next year, and we will give 2020 guidance when we announce our full year result. But I don't expect a major increase on the CapEx side, even a little bit decrease, because we spent CapEx earlier than expected this year, and we get a positive result due to the FX fluctuation.

So next year, probably we're going to spend a little more CapEx on the fixed line, on the fiber side, a little less on the mobile. So more or less, we're going to -- we would like to keep similar levels on the CapEx side. Sorry for the third question, could you repeat the third question? It was regarding Paycell, but I couldn't catch the third question.

[Ivan Kim, analyst]

Yes, of course. On Paycell, just a quick question on its take rate. So basically, if you take Paycell's revenue and divided by total payment volume. So it's pretty high, by international standards, 3% in 2020. And if you look at the third quarter '21, it's 3.5%. Also I was just wondering, where do you expect that to settle, when the business scales?

[Murat Erkan, executive]

Okay. Let me give the word to Osman. He will answer your question.

[Osman Yilmaz, executive]

Yes. actually, Paycell started its business with -- as a business unit within the group and then it became a stand-alone company. And now we are expanding Paycell revenues outside of the group. And now, more than half of the revenues are coming out of the group. Actually, the intensity of revenues over total turnover is partly on back of the two factors.

First factor is group revenues. And the second, but more important factor, is our lending business, Pay Later business. Many -- the prepayment companies do not have this pay-later business, which is relatively more profitable part of the fintech business. You can see some international examples.

There are companies, fintech companies, payment service companies, which are on the processing of payments and doing remittances. And on the other hand, there are pay-later businesses, which have higher profitability and higher growth scale. We are a combination of both.

We either have a high volume turn -- high turnover. On the other hand, we have a higher profitability, thanks to our strong penetration in prepaid sale network. What we are aiming going forward is to, first, to penetrate in overall Turkish market. We are expanding our footprint, outside of Turkcell Group. We are aiming to double our customer base in a couple of years. And then, we want to expand regionally and then later on, globally. This is why we are seeking growth capital for this business. But we will not be doing that at the expense of negative EBITDA or negative profitability. We will keep the healthy balance sheet while doing this growth.

[Operator]

The next question is from the line of Cabejsek, Ondrej with UBS.

[Ondrej Cabejšek, analyst]

I have one follow-up and three questions, if I may. The follow-up pertains to the fiber connectivity on towers, that you mentioned, as a kind of prerequisite to, you think, running the 5G auction properly. So can you expand on that? Does that mean, perhaps that you are, kind of -- or you would be, kind, of pushing for a some kind of large-scale regulated fiber access, needed across the market, to connect base stations across the operators for 5G to really be successful? Is this what you mean?

And then the three questions. I believe you mentioned 400,000 homes passed in terms of fiber year-to-date. Can you give us an idea, in terms of the take-up on that footprint so far and where this takeup is coming from, whether these are greenfield customers or whether you're perhaps taking market share in some areas?

Second question, if I may understand, in terms of your CapEx guidance, you are now guiding for the lower -- I know it's not a huge difference, but the lira having depreciated again in the fourth quarter. what has changed in your plans? And third question, a quick one on Ukraine, please, some -- one of your peers is looking at doing something with their towers in Ukraine. Is this also an area -- I know you're doing that in Turkey, but is it also something that you're looking at in Ukraine?

[Murat Erkan, executive]

Thank you very much. One, for the fiber connectivity, in Turkey, overall for -- I'm talking about all operator, reaching to the base station with the fiber is around less than 40%. And even incumbent operator has less than 50%. So in this case, without fiber reaching to the base station, it is difficult to give proper 5G services. On the other hand, for existing base station numbers like around 100,000 per whole operator, probably when we go to the 5G, is going to be, maybe 10x higher than the base station. So the fiber connectivity and fiber reaching fiber with the proper connection, this is mandatory, I believe.

Regarding 400,000 home pass years day sector, which means first half of this year, so -- which is front-loaded investment. So this is going to help us to address the CapEx guidance level. So for the CapEx guidance, even though we see a dramatic increase on the FX side, but we don't want to change our guidance. For the Ukraine, actually, I have no idea what the peers are doing, on the tower side. So we -- I don't want to comment on things that I have no clue about it.

[Ondrej Cabejšek, analyst]

If i may, just a quick follow-up, in terms of the connectivity. So you mentioned sub-50% of towers, even for the incumbent, for the market, about 40%, but what is your proposal? And what do you think needs to be sorted for the 5G auctions to make sense, at this stage?

[Murat Erkan, executive]

Obviously, we publicly announced our proposal. Turkey needs common infrastructure company, common investment portfolio, because if everybody invests on expensive fiber side, it doesn't help countries' economy, it doesn't help the services side of it. If we invest CapEx underground, we will probably run out of money to give services to the customer -- digital services, I mean. So that's one proposal on the table, let's have common investment on fiber. Let's compete on the services side, not the infrastructure side, because infrastructure competition is all growth competition.

[Ondrej Cabejšek, analyst]

Understood. And if I can hit one final one, what do you think needs to happen for a common infrastructure company to be a reality in Turkey? What do you think needs to happen?

[Murat Erkan, executive]

I think the right way and intelligent way to establish this thing. I think the Ministry has the vision to implement such a common infrastructure company, and there is the intention to do so. So we'll see what's going to happen. But I think the vision is there, the vision of the Prime Minister -- sorry, President, is there. The vision of Ministry of Transportation and Communications is there. So I think, this is the wise way.

Telecom concession has uncertainty. Recently, the Ministry of Communication also told that this uncertainty sometimes blocks some of the things. But I think reasonable people understand that Turkey needs common fiber infrastructure.

[Operator]

[Operator Instructions] The next question is from the line of Nagy, Nora with Erste Group.

[Nora Nagy, analyst]

Only one question from my side, please. Do you plan to take the fixed assets revaluation out by new legislation so that to use that as a deferred tax income release, as we have seen in case of Turk Telekom.

[Murat Erkan, executive]

Okay. Let Osman to take this question.

[Osman Yilmaz, executive]

Actually, we disclosed same implication in our Q2 financial, and there are further opportunities on our balance sheet, which we are evaluating further. And we will decide on this issue in our year-end financials.

[Operator]

[Operator Instructions] The next question is a follow-up question from the line of Cabejsek, Ondrej with UBS.

[Ondrej Cabejšek, analyst]

Just one follow-up, please, in terms of the other headlines that we saw today with you looking for monetizing the Fintech business, is it still the case that you prefer a strategic partner, who would help you develop this business, from a minority perspective? Or are you in a different place compared to the past couple of quarters where you were kind of suggesting this would be the preferred option?

[Murat Erkan, executive]

Okay, thank you. First of all, regarding the monetization or strategic partnership things, it was a secret. It was -- we were talking about strong line, we were talking about our tower business. We are talking about Paycell and fintech side. So I think, this is a good opportunity. And we are planning to offer minority stake, and the partner we're looking for, should, ideally, be able to contribute to Paycell's growth story, not only provide growth capital. We should be able to share know-how, make expansion plans and make sure that the business further evolves and potentially gets ready for an IPO in the next couple of years.

[Operator]

The next question is from the line of Demirak, Kayahan with AK Investment.

[Kayahan Demirak, analyst]

On the Paycell side, do you have some kind of the valuation range for the stake sale? And the second question related to the first remark about inflationary pricing and the current inflationary environment. If I understand right, do you expect the blended ARPU growth at least to converge to -- somewhere close to inflation? And the third question is about Ukranian operations. I think, for the past couple of quarters, the operations are performing quite well. I mean could you give us some color on that? I think particularly subscriber additions are strong because of market share gain or market is growing.

[Murat Erkan, executive]

Thank you very much. First of all, regarding Paycell, obviously, one of our -- Paycell is one of our most important and very good asset. Not just Paycell, also, we have other assets as well. We disclosed the company's financial and operational metric every quarter in our presentation. And quite -- we were quite open to the market as well. And we all know that fintechs and payment companies around the world, enjoy the quite-high multiples, and thanks to the disruptive nature and unique growth profiles.

And these companies are mostly having negative EBITDA, which makes their valuation to be based on their revenues. But our Paycell has a positive EBITDA margin, with strong growth profile. As this diversified business model involving group and non-group revenue, as well as individual users and merchants. Both in terms of revenue growth and EBITDA margin, Paycell is a unique business. So everybody can do the math for the valuation by using the global revenue and EBITDA multiples. That's the valuation of Paycell, per global average.

Regarding about inflation in pricing, ARPU growth and so on, I think I tried to explain that. We would like to keep our ARPU in line with the inflation increase. As I said, our initial plan was not expected that much increase on the inflation side. So to be able to adapt the inflation increase, sometimes we need time. So I believe that we're going to catch the inflation. I hope inflation is not going to go same speed as we see it today.

So we can catch this in a while. But on the other hand, we shouldn't forget that we are gaining customers, 2.5 million customers from year -- at the beginning of the year. So this customer -- when we get the customer, we put them in the system and provide upsell opportunities for this customer and sell other products like Paycell, digital services, TV and so on.

So it will take some time to get acceptable ARPU level for the customer who come recently. So we have quite important system in terms of using AI and other technology customer centricity and so on. We're going to get to the acceptable level.

Regarding Ukraine operation, we actually -- this is not the result of last quarter. We have focused on Ukraine last couple of years. We invested in the area where we have weak network and capture the customer. So we're probably going to continue on the customer side in a similar level. But I would like to remind that our subscriber growth is 14% year-over-year, our ARPU growth is 9%. It's above the inflation of Ukraine, plus we are being better than the competition, and we are gaining market share in terms of revenue, in terms of customers as well. And we're growing almost double percentage point versus the competition. So we're going to keep grabbing market share, and our expectation is there as well.

[Kayahan Demirak, analyst]

And as a follow-up on the subscriber additional gains there, do you think we can see [indiscernible] additional development like 1 million earlier or rather more realistic number for the next year?

[Murat Erkan, executive]

To be honest, we are in telecom business. We are in the technology business, we are in services business, and we are in techfin business and so on. So to be able to successful on this area, you need to get more customers. So our gaining customer strategy will continue. We hope to see another 1 million next year. As I mentioned, this year is outstanding here, and having such a customer is very important for next year revenues as well because you gain this year, you spent subscriber acquisition cost this year. But you get the real revenue for next year. So I think the strategy is in line. We are executing well, on the operations side. And we hope to continue this level.

[Kayahan Demirak, analyst]

Congratulations on the good results.

[Operator]

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

[Murat Erkan, executive]

First of all, I would like to thank everyone to join our conference call. I hope to see you in our Capital Markets Day at the end of -- actually, next -- beginning of next year. So thank you very much. Have a good day.

[Ali Yagci, executive]

So this concludes our call. Thank you for joining. Have a nice day or evening. Thank you.

[Operator]

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