Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2017-Q4

[Operator]

Good day and welcome to the Turkcell Fourth Quarter and Full Year 2017 Results Conference Call. For your information, today's conference is being recorded. At this time, I would like to turn the conference over to Korhan Bilek, Director of Investor Relations and Mergers & Acquisitions. Please go ahead.

[Zeynel Bilek, executive]

Thank you, Nicole. Hello, everyone. Welcome to Turkcell's Fourth Quarter and Full Year 2017 Results Call. Today's speakers are our CEO, Mr. Kaan Terzioglu; and our CFO, Mr. Bulent Aksu.

We will have a brief presentation. And afterwards, we will be taking your questions. Before we start, I would like to remind you to review the disclaimer of our presentation.

Now I hand over to Mr. Terzioglu. Please?

[Muhterem Terzioglu, executive]

Good morning, good afternoon, good evening. [ Foreign Language] from Minsk, Belarus where we will be making this quarterly and year announcement. Welcome to Turkcell fourth quarter and year-end 2017 results.

2017 has been a remarkable year of milestones and record results. Financial and operational results proved that digital transformation was indeed the right course of action for us and also for our industry.

Our group revenues grew 23.4% to TRY 17.6 billion, while EBITDA rose 34.8% to TRY 6.2 billion. The EBITDA margin of 35.3% was the highest since 2009. Our revenue growth rate was nearly the double of our main competitors in the Turkish telecommunications market. With increased customer loyalty, we have dramatically reduced the churn rate and recorded the best annual churn rate of the past decade. With 1.5 million net additions, total subscribers in Turkey at the end of the year has reached 36.7 million. Of this, some 242,000 subscribers have preferred Lifecell tariffs, where all communication needs are met by our digital services.

Mobile subscribers, who have signed up for 4.5G service, has reached 87% of the total. Benchmarks indicate that achieving this level just 1.5 years after the launch is strikingly successful. In 2017, we distributed TRY 3 billion in dividends corresponding to 11% yield on the day of the announcement. With this, we have paid out 54% of net income since 2010, in line with our dividend policy. Today, we also announced TRY 2.24 billion dividend proposal for the year 2017, which reflects our commitment to dividend policy.

Next slide. Let me start with an overview of our guidance and what we have delivered. 2017 has exceeded our expectations and plans. Accordingly, we raised our outlook twice during the year, and yet, the resulting 23.4% topline growth was slightly above the high end of the guidance range. This achievement is the result of a larger subscriber base with a higher postpaid ratio and higher percentage of 4.5G users; increased Multiplay, both in mobile and fixed businesses; and higher usage boosted by our digital services.

Similarly, with the EBITDA margin, we have already achieved this year what we set as our midterm target 2 years ago, primarily on strong topline growth. Bringing forward some future investments, we recorded slightly higher than anticipated operational CapEx-to-sales ratio. These investments have helped accomplish our targets a year ahead. We remain determined to decrease CapEx-to-sales ratio to 16% to 17% levels in the medium term.

Next slide. Now looking into the specifics of the fourth quarter results. Group revenues grew 15.4%, while EBITDA rose 26.8% to TRY 1.7 billion. The EBITDA margin was 37.3%, was the highest quarterly print since Q3 2008. Fourth quarter net income includes a onetime TRY 500 million tax settlement impact. This settlement eliminates the risks of numerous pending cases, mainly with the Turkish Treasury and potential disputes on treasury share, Universal Service Fund, ICTA contribution share and administrative fees for the periods until the end of 2017. Together with the unification of special consumption tax and the simpler tax code announced in December 2017, future tax-related risks are minimized.

Data and digital services revenues grew 22.9% year-on-year with continued expansion of the 4.5G customer base, rising smartphone penetration, which reached 72% and higher data usage. With a 14 percentage points yearly increase, nearly 56% of our mobile subscribers have preferred Multiplay services, and they actively used our voice data and at least one digital service.

In the digital services portfolio, the latest addition, Yaani, Turkey's search engine, has exceeded our plans, quickly reaching some 3.5 million downloads by early February. We are quite pleased with Yaani's performance and expected to meet its targets.

Next slide. I will now elaborate more on the financial results of the quarter and the full year. In order to normalize the impact of 4.5G, we consider our 2-year cumulative growth rate. In the previous quarter, we mentioned that our sustainable 2-year cumulative growth rate was above 30%, and it was realized as 40% in Q4. Excluding the one-off impact of the provision for tax settlement, our group net income doubled year-on-year to TRY 716 million in the fourth quarter. And for the full year, net income growth was 52.3 percentage points higher, reaching TRY 2.5 billion. Our capital expenditures resulted in a 21% CapEx-to-sales ratio, with a 2 percentage points reduction versus last year.

Next slide. Let me talk about the financial performance of Turkcell Turkey, which generates 88% of group revenues. In 2017, Turkcell Turkey revenues grew by 20.8% to TRY 15.5 billion on 34.4% EBITDA group with a 36.2% EBITDA margin. Including financial services, full year revenues grew by 23.8% with an EBITDA margin of 36.1%. In the fourth quarter, Turkcell Turkey's revenue growth was 13%. Including financial services, this growth is actually 15.2%. We recorded 27.7% growth in EBITDA to TRY 1.6 billion. Improved track record of collecting doubtful receivables contributed to EBITDA in fourth quarter. Positive effect will continue in the future periods.

Next slide. Let's elaborate on Turkcell Turkey's operational performance. We concluded the year with 36.7 million subscribers in Turkey with 1.5 million net additions throughout the year. Of those, 1.1 million were net postpaid additions. Accordingly, our postpaid subscribers now represent 54% of the total base. Our annual mobile churn has continued to decline, reaching 20.5%, the lowest of the past decade. This performance reflects increasing customer appreciation and the added value of our digital services portfolio.

Our fixed business continued to grow with 264,000 net additions, 160,000 of which were fiber. Our fiber network, which reaches 3 million homes in 19 cities, now have the capability to deliver speeds up to 10 gigabits per second. The number of subscribers currently enjoying the TV+ experience rose by 146,000 during the year. Mobile blended ARPU in 2017 grew by 11.7% to TRY 31.6. Successful implementation of our digital services-focused strategy, upsell performance, price adjustments and a favorable change in customer mix have all supported this rising ARPU trend. Fixed residential ARPU rose 4.9% year-on-year due to the rise in Multiplay customers with TV and price adjustments.

Next slide. We have promoted our services with a focused marketing strategy throughout the year. Our customers have greatly appreciated our pioneer campaigns, such as the legendary Shake & Win, which offers them more of Turkcell and its digital services portfolio. The new Turkcell shopping experience has also contributed to customer satisfaction. Our network performance, especially in terms of download and upload speeds, continues to have a very positive impact in our customers' experience of digital services. Moreover, independent studies confirm that Turkcell has the lowest mobile call drop rate globally. Thus, our customers are increasingly comfortable in promoting our services compared to those of our competitors. Accordingly, our Net Promoter Score continued to rise in the last quarter, cementing our position as Turkey's top operator.

Next slide. Let me provide further details on data and digital services, the main drivers of our strategy and growth. Turkcell Turkey's strong performance is mainly due to the demand for data and digital services, boosted by the 4.5G launch. Average mobile data usage more than -- rose more than 50% in a year to 4.3 gigabytes per user in Q4. The main driver of this increase is rising consumption of 4.5G users, which reached 6 gigabytes in December. 4.5G users generate almost 1.5x the ARPU of overall mobile subscribers. Since the launch of 4.5G, we have been adding almost 1 million compatible smartphones to our network each quarter. Still, out of 30 million customers signed up for 4.5G services, only 15 million have 4.5G compatible smartphones. This signifies that we have the potential of doubling our 4.5G users on our network.

Meanwhile, smartphone penetration on our network reached 72%, rising 8 percentage points within a year. Thanks to the smartphone portfolio at our stores and our flexible financing offers of our consumer finance business, 4.5G compatible smartphone has reached 68% of our network coverage.

Next slide. Let's look at our performance in monetizing our data and digital services. Total data and digital services revenues grew 22.9% year-on-year to TRY 2.7 billion in Q4 and rose 51.2% yearly to TRY 10.3 billion. The main drivers of this growth were higher mobile data usage, rising smartphone penetration and a larger customer base. Our revenues from digital publishing; TV+; fizy, our music platform; Lifecell; and other digital services has helped to boost data and digital services revenue growth. Accordingly, data and digital services revenues corresponded to 67% of Turkcell Turkey revenues in 2017, 14 percentage points higher than 2016.

Next slide. In 2017, we sustained the success of our Multiplay offers and more and more customers preferred our services. As of the year-end, 56% of our subscribers are using at least one of our digital services in addition to voice and data, marking an impressive 14 percentage points yearly rise. Rising 15 percentage points year-on-year, 73% of our mobile revenue are from triple play customers. A triple play customer generates almost 3x the ARPU on the average of a single play customer and has a 20% lower churn rate. On the fixed side, 45 out of every 100 fiber residential subscribers has subscribed to our IPTV services. We aim to continue these trends on both fronts.

Next slide. Reflecting our 1440 minutes vision, number of minutes in a day aimed at positioning ourselves to meet all communication and digital service demands, we continuously monitor customer engagement levels. Currently, in addition to 31 minutes of GSM calls, our customers spent 63 minutes on TV+ application watching TV; 27 minutes reading Dergilik, which is a platform for digital newspapers and magazines; 24 minutes listening to music on fizy; and 13 minutes interacting over BiP, our instant messaging and communication platform. In 2018, we aim to introduce new services as well as increase the time spent on existing services through new features and offers.

Next slide. 2017 was a dynamic year for digital services. We introduced numerous additional features to existing digital services and launched new ones. Allow me to mention a few of them here. BiP, our integrated communication platform, has the differentiating feature of group video chat up to 6 people, a rich gaming platform and a social chat room. In December, BiP messages exceeded SMS messages on our network, confirming the logic of our vision. Recently, we integrated Paycell to BiP, enabling peer-to-peer money transfer via the application.

On the digital publishing app, the inclusion of newspapers widened the scope of the service and boosted monthly active users. Our music and video service, fizy, took first place in app stores in terms of the number of downloads subsequent to our exclusive album with the launch of Turkey's megastar, Tarkan.

Our subsidiary, Lifecell Ventures, sold its first digital service, lifebox, to Moldcell of Moldova in the last quarter. This is a milestone in our digital global expansion strategy and the first step in monetizing our digital services through operator-to-operator franchise contacts.

Next slide. These developments have generated success stories for each and every one of the digital apps across various KPIs. On this slide, you can see critical metrics. With 18 million downloads, BiP has become a platform for 71 million messages per day with 4.3 million active users. UpCall, which offers an enhanced calling experience, reached 2.3 million downloads. 837,000 customers actively use UpCall. Our digital publishing app, Dergilik, reached 4.6 million downloads. A monthly average of 7 million customers enjoyed the benefits of Dergilik, and the app has set a new record for digital publishing circulation. Over 9 million songs are streamed daily on fizy, our popular digital music platform, which has 2 million active users and double the volume of our largest competitor globally in the market. 1.5 million active users on TV+ application had 2.3 million session logins per day. lifebox has reached 1.4 million active users, uploading 39 documents or photos or videos per person per day on average. My Account, our key tool, to digitalize our connection with our customers, currently has 17.3 million monthly active users. My Account users have a 40% greater ARPU and 40% less churn.

Next slide. Turkey's native search engine, Yaani, has reached 3.5 million downloads to date. Yaani, designed to understand the unique syntax of Turkish and provide the best location-based results, has already 1.2 million active monthly users. Yaani is also fully integrated with Turkcell services to facilitate the lives of its user base. Along with our e-commerce platform, the monetization of Yaani will rest on 3 pillars. The first is conventional traffic management. Second is icons, Yaani's most favored featured. With one touch, any user can reach location-based restaurants, news, films and the weather. These icons offer an opportunity for those who wish to market their products and services targeted to customers. And the third is ad insertion based on customer behavior. Naturally, up on demand, we also offer our customers ad blocking services.

Next slide. Let's look at our techfin services. Financell, our consumer finance company, continued its steady growth in Q4. The consumer loan portfolio under Financell has reached TRY 4.3 billion. Meanwhile, the contracted handset receivables stemming from the period before we established Financell declined TRY 1 billion in 2017, as they are paid back on due dates. It is important to consider all consolidated receivables in working capital analysis for Turkcell with this in effect. To date, we successfully securitized TRY 300 million of Financell receivables and realized NPL sales. These actions, improving net working capital management and cash flow generation, were among the key motives while establishing Financell.

Paycell, our mobile payment services company that offers differentiated payment options, is seeing traction from 5 million customers. Users registered 1.2 million credit cards on Paycell app, which has exceeded 400,000 downloads in a very short timeframe. Paycell is available on various platforms like iTaksi, which is an Uber-like service in Istanbul; App store and online gaming. We note a transaction volume of TRY 350 million in 2017. Paycell services already available in Turkish Republic of Northern Cyprus and also will be introduced in Ukraine and later in Belarus.

Next slide. Turkcell International generates 6% of our group revenues. Our operations grew by 22% year-on-year to TRY 1.1 billion in 2017, with an EBITDA margin of 24.7%. Lifecell in Ukraine contributes to most of our international business with a 62% share. The rise in mobile data revenues, Lifecell revenues climbed 16.5% in TL terms. The EBITDA margin came in at 27.2%. In January, Lifecell was awarded 15 megahertz frequency band in 2,600 megahertz spectrum. Lifecell customers will soon start experiencing 4.5G speeds like in Turkey.

Moving on to Belarus. BeST revenues grew by 40.2% with an EBITDA margin of 3.8%. In the last quarter, EBITDA margin was 6%. Besides the rise in voice revenues, higher data usage with 4G led to growth -- revenue growth. BeST continued to increase the penetration of its digital services as well. Our Turkish Republic of Northern Cyprus operation, Kuzey Kibris Turkcell, recorded 16.4% year-on-year growth with a 33.5% EBITDA margin. As a side note, MNP, mobile number portability, was recently enabled in this country.

Next slide. Last, but not the least, we are glad to announce the signing of a binding agreement to sell Geocell, the Fintur operation in Georgia, in January this year. This transaction has no impact on our financials as our Fintur stake has already been classified as assets held for sale. Yet, this is an important milestone in our effort to divest our stake in Fintur completely. We continue to work with our partner, Telia, towards the selling of the remaining assets. And we'll keep the investor community informed on later developments.

Next slide. Delivering on our 2017 guidance, we have full confidence in our ability to continue double-digit profitable growth in 2018. This year, we expect 13% to 15% revenue growth for the group, mainly driven by continued growth in data and digital service and a higher contribution from our consumer finance business. With double-digit top line growth and continued operational efficiency, we also target an EBITDA margin of 33% to 35%.

Having successfully executed our 4.5G investment plans, we aim to lower our operational CapEx over sales ratio to 18% to 19% range. On top of the higher base we achieved this year, 2018 guidance is well on track with our 3-year targets we shared in February 2017 as well as in line with our goal to grow the top line above inflation.

In 2018, our top priority is to continue executing on our digital strategy with a view to gaining additional share of our customers, 1440 minutes in a day. I will now leave the floor to our Chief Financial Officer, Bulent. Bulent, the floor is yours.

[Bulent Aksu, executive]

Thank you, Kaan. Good afternoon and good evening to all participants. Let's take a closer look into the financials.

In Q4, group revenues rose to TRY 4.7 billion, up by 15.4% year-on-year. This is mainly coming from the higher data and digital services revenues of Turkcell Turkey. Turkcell consumer finance company's contribution to our top line in Q4 was TRY 92 million, while the Turkcell International added an incremental TRY 37 million to our revenues. For the full year, group revenues rose 23.4% year-on-year, while the main growth driver was Turkcell Turkey. With a steady rise in the loan portfolio, Turkcell consumer finance company's contribution to growth was TRY 421 million in 2017. Turkcell International's contribution was TRY 192 million.

Next page. In Q4, EBITDA rose 26.8% year-on-year to TRY 1.7 billion. This was mainly due to a solid rise in revenues, OpEx management and improvement in the collection performance of [indiscernible] receivables and NPL sales. These performance NPL sales in Q4 had a favorable rate despite the increasing tenure and the size of the portfolio. Sales proceeds were recorded in Q4, and we will continue to sell NPLs in the future periods.

In addition, bad debt provision amount increased in Q4, reflecting a better collection performance. As a result, the quarterly EBITDA margin was 37.3%. For the full year, consolidated EBITDA rose 34.8% to TRY 6.2 billion. Strong revenue and the continued cost transformation program and lower G&A expenses led to higher EBITDA. To sum up, Turkcell Group delivered all-time high full year revenue and EBITDA in 2017.

Next page. In Q4, net income, excluding the tax settlement provision impact, was TRY 716 million, doubling in comparison to Q4 2016. The TRY 368 million higher EBITDA and the better FX results were the main drivers of this growth. For the full year, group net income, excluding the provision impact, was 52.3% to TRY 2.5 billion. Higher EBITDA and a TRY 251 million improvement in FX gain/loss, including the positive impact of the hedging transactions, were the main contributors to this increase. The tax settlement provision is booked under the other expenses.

To sum up, successful results in top line OpEx management and FX management led to record bottom line. As also announced today, our Board of Directors proposed a dividend amounting to TRY 1,240,000,000 for this year. This amount is in line with our dividend policy and has commitment in our recent disclosure on tax settlement, excluding the negative impact of aforementioned provision.

Next page. Now I would like to talk about balance sheet and leverage details. As of the end of 2017, our net debt position stood at TRY 7.8 billion, with a net debt-to-EBITDA ratio of 1.26x. Excluding the impact of the consumer finance company's loans, our telco-only net debt was TRY 3.6 billion and the leverage was sustained versus Q3. This level is below our 1.5x threshold. In this quarter, our telco-only net debt increased due to the TRY 1 billion final installment of our dividend payment. Net of this, our telco-only cash flow is positive TRY 584 million this quarter.

Next page. The main cash flow items of the full year, included the following: an EBITDA of TRY 6.2 billion, total CapEx of TRY 4.1 billion, net interest income of TRY 396 million, net change in the debt of TRY 1.5 billion, dividend payment amounting to TRY 3 billion and the final installment of 4.5G license fee of TRY 1.5 billion.

Next page. Now I would like to highlight the management of foreign currency risk. We operate in an emerging market. Therefore, management of FX is a critical topic that deserves appropriate focus. As Turkcell management, we place strong effort to this area, evidenced by our successful track record. As a hedging mechanism, we hold 78% of our cash in hard currency. In addition, we use cross-currency swaps to convert a large portion of our long-term foreign currency debt to fixed rate local currency liability. After hedging with swaps, the share of foreign currency debt exposure falls from 87% to 40%. We reduced our short FX position from USD 330 million to USD 144 million as of the end of 2017, still quite below our comfort zone of USD 500 million.

Next page. Last, but not least, we should remind you that we will be hosting a Capital Markets Day in Istanbul at the Four Seasons, Bosphorus, on March 14. At the event, we will provide an update on group strategy along with our 3-year outlook. Hope to see you all on that day. This brings us to the end of our presentation. Now we are ready to take your questions.

[Operator]

[Operator Instructions] And we will take our first question from Madhi Singh with Morgan Stanley.

[Madhvendra Singh, analyst]

A couple of questions. Firstly on the revenues, it looks like, in Turkey, revenue growth was a bit slower, especially also I think in the data and digital services space. So if you could explain why the growth rate seems a bit slower? And also, what was the actual growth in the digital services line, specifically?

[Muhterem Terzioglu, executive]

Thank you, Madhi. First of all, if you look to our fourth quarter, you will see that there's a baseline impact of Q4 of last year. Actually, our cumulative growth rate in Q4 has reached the highest level of 40%, if you would look to the numbers from 2015 to '17. So we are quite comfortable with the growth rate. You can see actually this on Page 6 of our presentation. So 39.9% was the highest we have seen over the last 5 quarters. It's natural that if you grow over a large number, the percentages look small, but the overall growth actually was very satisfying from our perspective. From now on, when we look to our data and digital services, I'm sure you will be always asking the same question to give us a little bit more granularity. However, if you would look into the -- our strategy in terms of digital services, our strategy is not to sell raw data. The more effort we put into digital services, we make our data more relevant to our customers in the form of TV, music, magazines, search engine capabilities, instant messaging. So I rather not go into the detail of what is digital services revenue or data. This is a combined value, and we reflect that in our packages. And this is the crux of our strategy itself.

[Operator]

[Operator Instructions] Our next question comes from Tarun Mittal with EVS.

[Operator Instructions] We have a question from Dalibor Vavruska with Citigroup.

[Dalibor Vavruska, analyst]

Just a quick question on the new digital services like you launched the last year, the search and the payment services. Can you give us some idea where do you see the revenue generated from these services, perhaps in the medium term or even if you have any kind of idea in the shorter term or this year even though there maybe probably more and more difficult? And also secondly, if you can elaborate a little bit on the cost side. It seems like the margin -- I mean, the revenue growth, as it was mentioned earlier, was kind of closer to expectation, but the margin was a bit better. So if you can maybe comment on that?

[Muhterem Terzioglu, executive]

Sure, Dalibor. Our services, Yaani and Paycell, actually these 2 services are the cornerstones of our monetization plan for e-commerce platforms. Yaani is our credentials management platform as well as our advertising revenue generation tool. So with Yaani, we will provide 2 key values to our customers on the merchant side and the consumer side. On merchant side, credentials management is the core thing. And for -- traffic management is the way that we plan to also monetize advertising. With regard to Paycell, this is a very straightforward monetization. We do have both carrier billing capabilities as well as wallet capabilities and peer-to-peer payment capabilities. So Paycell's monetization is core to us. It is a growing business with very healthy margins. And this is -- we consider this as a major growth of our Techfin services line this year. On Yaani, we are very happy with the early performances. We have reached 1 million users in 9 days. We expect actually to reach 25%, 30% market share in the total search, and of course, corresponding share of the digital advertising space as well on mobile platforms. We have -- I won't go into the details, but we have double-digit revenue targets for Yaani this year, and Paycell is -- probably be reaching more than that.

[Dalibor Vavruska, analyst]

Double-digit revenue target means -- if I can ask, that's in Turkish lira, double-digit million number or is it a...

[Bulent Aksu, executive]

TL to dollar range.

[Operator]

We'll take our next question from Tarun Mittal with EVS.

[John Kim, analyst]

It's actually John Kim from Deutsche Bank. If I could ask about CapEx. It looked a bit heavy in Q4. I'd like to know if CapEx profile is just lumpy in nature and what we should consider over the next 2 or 3 quarters? And lastly, on the CapEx topic, what percentage of your base stations are fiberized at this point in time?

[Muhterem Terzioglu, executive]

Thank you very much. Let me start with the CapEx, basically, outlook. We are experiencing a strong demand-based growth. And of course, that naturally comes with an opportunity to accelerate our deployment in terms of network densification. And we have grasped that opportunity, and we're slightly above our target, although 3 percentage point less than last year. We ended up with 21%. We target actually 18% to 19% range this year in the next 4 quarters to come. And onwards, we are targeting 16% in midterm on CapEx-to-sales ratio.

In terms of fiberization of our base stations, we have almost 1/3 of our base stations on our fiber backbone. And in the future, through joint investments in the telecom space on fiber, we intend to focus fiberization of our base stations as a first priority.

[John Kim, analyst]

What do you think an economically viable target level is [indiscernible] today? Where would you like to take that over the next couple of [indiscernible]?

[Muhterem Terzioglu, executive]

Economically viable actually is also a function of sharing infrastructure. And according to our current plans, actually with the contributions from Vodafone, Turksat and ourselves, we believe this will be quite economically feasible and also commercially valuable input for us.

[Operator]

[Operator Instructions] We will take a question from Anna Kazaryan with VTB Capital.

[Anna Kazaryan, analyst]

I have quite a short question. As your digital services play more and more significant role in your revenue generation, could you please clarify what taxes do you pay for this revenue? For example, do you oblige to pay special communication tax on this kind of revenue?

[Muhterem Terzioglu, executive]

Let me ask Bulent to answer that question, because the nature of digital services are actually diverse and every one of them has different applications. Bulent?

[Bulent Aksu, executive]

As Kaan mentioned that, according to the nature of the digital service, there is a special consumption tax or there is no special consumption tax. And there is a less VAT ratio or a higher VAT ratio. But -- for example, for the -- our digital magazines, there is a 1% VAT; and for other digital services, 18% VAT. For special consumption tax, there is a 7.5% special consumption tax for some of them. But some of them are exempted from the special consumption tax.

[Anna Kazaryan, analyst]

And could you clarify, for example, what average tax rate pay for your data service revenue or -- yes.

[Bulent Aksu, executive]

Digital service revenues?

[Anna Kazaryan, analyst]

Digital service revenue, yes.

[Bulent Aksu, executive]

Yes, there is a treasury share plus the special consumption tax. We can say that's approximately 25% total tax over the digital services.

[Operator]

[Operator Instructions]

[Muhterem Terzioglu, executive]

We have a question from the web. What? Yes. We have a question on the web from [indiscernible] from PAAMCO. He is interested to know more about the G&A improvement in Q4. Is this a one-off? What will be the normal level of G&A sales ratio going forward?

In Q4, we had made changes in the way that we have provided for [ doubtful ] receivables, because practically, the experiences we have seen with a license credit financing operation plus improvements on our nonperforming loan treatments have allowed us to actually better visibility into the future. Bulent, can you give some more color into that?

[Bulent Aksu, executive]

Yes, actually -- and under the normal conditions, excluding the one-offs, our G&A expenses to revenue is around 4%, as Kaan mentioned that. In this quarter, we have NPL sales, and because of the better performance of our [ doubtful ] provisions, we revised [ doubtful ] provisions assumption. But according to the normal conditions, excluding the one-off, it's around 4%.

There's another question. Can you please elaborate on TRY 590 million revaluation gain? What was the number in 9 months 2017?

Just a second. It's around TRY 240 million in 9 months 2017.

[Muhterem Terzioglu, executive]

It's about the hedging operation, I assume? Yes.

[Bulent Aksu, executive]

It's including the hedging operations.

[Operator]

And we have one question over the phone from Dalibor Vavruska.

[Dalibor Vavruska, analyst]

Kaan, just one more, if I can, on this, as you say, selling the digital franchise globally. You mentioned this example with Moldova. What are the plans in this area? I mean, how important it should be for investors at this point?

[Muhterem Terzioglu, executive]

So first of all, if you look to the way we have transformed our business over the last 3 years, investing our R&D resources to development of OTT services with telco capabilities has been a key driver of our success. And we have noticed that around the world, there are telecom companies who are still behind this type of transformation processes. So we are actively seeking partners in different parts of the world where we can bring our technologies like BiP on instant messaging, fizy on music, TV+ on TV, lifebox on cloud services, Yaani for search capabilities and also Paycell and partnering with them to transfer our know-how. And this is part of our digital growth for global landscape. Rather than asset-heavy investments around the world for telco assets. We're going to be growing through digital services in a franchise model. So it is an important part of our future growth potential. And therefore, we have a company, Lifecell Ventures, and this company will be actually at the GSMA conference in Barcelona with its own solutions portfolio and basically talking with other telcos around the world, especially in emerging markets. Anyone of you in Barcelona, please don't hesitate to come to our stand.

[Operator]

And at this time, we have no further questions in the queue. I would like to turn the conference back over to our speakers for any concluding remarks.

[Muhterem Terzioglu, executive]

Thank you very much for participating on our call. I really look forward to having you all on March 14 in Istanbul for our Capital Markets Day. You will be able to get the next midterm outlook from us as well as having better understanding on the impact of IAS 9, 15 and 16, because important changes coming in terms of International Financial Reporting Standards, where we will elaborate more and provide you a better guidance, short and mid-term. Thank you very much for participating.

[Operator]

And once again, ladies and gentleman, that concludes today's conference. We appreciate your participation today.