Turkcell Iletisim Hizmetleri AS

IST:TCELL.E

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Constantinos, your chorus call operator. Welcome, and thank you for joining the Turkcell's Conference Call and Live Webcast to present and discuss the Turkcell's Fourth Quarter and Full Year 2020 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. Please go ahead.

[Ali Yagci, executive]

Thank you, Constantinos. Hello, everyone. Welcome to Turkcell's Fourth Quarter and Full Year 2020 Results Call. Today's speakers are, our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz. We have a brief presentation and afterwards, we will be taking your questions.

Before we kick off, 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, Serdar. Good morning, and good afternoon. Welcome to Turkcell Fourth Quarter and 2020 Results Call. We have concluded a year marked by challenges and uncertainties resulting in permanent change in everyone's life. Our results confirm that we have successfully weathered the storm. This was possible due to our diversified business model, fueled by our core competencies. Accordingly, we concluded the year on 15.8% revenue growth, generating TRY 19.1 billion, with our 42.2% margin, we exceeded our guidance level.

Overall, we generated the TRY 3.4 billion cash flow in 2020, mainly through strong operational performance. All this was possible on the back of solid growth in subscriber base of 1.1 million strong -- at 1.1 million, strong ARPU growth and the rising contribution of our strategic focus area. It's also worth to highlight that we exceed our target of 1 million net subscriber addition for 2020 despite the pandemic. I'm glad to see that the focus on our digital strategy is paying off, both for our results and for the benefit of our customers.

Next slide. Let's take a closer look at our fourth quarter performance. With good execution of our customer-centric strategy, we deliver our best quarterly revenue growth for the year 2020 at 17.8%. This corresponds to revenue of TRY 7.9 billion. EBITDA growth later was similar resulting in a 41.2% EBITDA margin. Our mobile subscriber base continued to grow in favor of postpaid with 464,000 additions. We have seen solid momentum in our fiber business with all-time high net addition in a quarter with 65,000.

Our digital channels gained wider use this quarter, over 14% of customer sales of Turkcell Turkey were generated through our website and digital operator application. Overall, we generated TRY 780 million of free cash flow during the quarter, confirming continued solid performance.

Next slide. I am glad to see that we delivered full year results that are in line with our initial guidance in February, beating our revised guidance as well. As was the case with many companies, we had to revise our guidance in April with a more cautious approach as the pandemic brought about significant uncertainties.

Yet by November, we had greater visibility for the year-end, revising our guidance upwards having displayed a healthy performance. We owe this performance to our diversified business model built on where the future lies. Our readiness to capture the rising demand for digital services and our ability to swiftly adapt to changing dynamics were integral to this success.

Next slide. Let's look at our operational performance. On the mobile front, in the fourth quarter, postpaid subscriber rose by 464,000, yearly 1.6 million additions marked a record level past 11 years. We continue to shift into a more valuable portfolio with 66% postpaid share, 4 points higher than last year.

Good momentum for our fixed wireless access product Superbox has continued. Accordingly, subscriber nearly doubled in a year to 591,000. Superbox stands out as a preferred alternative to fiber. Where there is no fiber, Superbox subscriber enjoyed the fiber-like speeds delivered through our mobile network. This year, ICTA required all operators to deactivate the lines of decreased customers. We have disconnected 194,000 lines in the fourth quarter. Excluding this, our churn rate has been nearly flat over the past 3 years at around 2.8%. Blended mobile ARPU rose to TRY 51.20 on an 11.3% increase with positive change in subscriber mix. Upsell to higher tariffs and rising data and digital service usage.

Moving to next slide. More time at home facilitated a good momentum for our fixed broadband business. Our fiber subscriber base grew by 180,000 net addition in 2020, 65,000 of which was gained in the fourth quarter. This fourth quarter performance marked a historic high. Including net addition ADSL and cable, our fixed broadband subscriber base expanded by 187,000 in 2020. The trend was similar in our IPTV business. Our customer rose 152,000 to 871,000, again with a remarkable performance in the last quarter with 60,000 net additions. Residential fiber ARPU growth was 8.6% in the fourth quarter, impacted partially by the strong base effect in the same period of 2019. Average monthly fixed churn rate decreased to 1.6%.

Next slide. An update on data usage and 4.5G subscription trends. Average mobile data usage rose 44% in a year to 13 gigabyte per user. The main driver were the rising share of.4.5G users and Superbox subscriber. Out of 31.8 million customers signed up for 4.5G services, 21.5 million have 4.5G compatible smartphones, still indicating room for growth. As of year-end, smartphone penetration was at 81% with 91% being 4.5G compatible. On a yearly basis, there were 2.3 million net addition of 4.5G compatible smartphones.

Next slide. This year confirmed the importance of telecom industry in our lives, and our motto continued to be that we are here for our customers. With this in mind, we address the changing customer needs via our offering with rich value proposition and innovative campaign. Our well invested, high-quality network made it possible for us to meet the rising demand also with the help of the smart capacity management. Further, our digital sales channels help us serve our customers even under the pandemic restrictions.

Overall, these key differentiated fundamentals of our company have played an important role in widening the large gap in Net Promoter Score even to the second best.

Next slide. Let me further elaborate our digital channel strategy. We have been determined to increase our sales through our digital channels, even before the pandemic struck. Indeed, the pandemic has provided a tailwind, triggered a change in the customer behavior. The number of visitors to our website reached 30 million, and there were 23 million, 3-month active user of our mobile application. The conversion rate doubled annually. Data plan purchase and Turkish Lira top-up transaction volume over this platform have tripled on an annual basis. Accordingly, 14% of customers -- consumer sales of Turkcell Turkey was realized on these digital channels.

To leverage our expert capabilities in this arena, in December, we launched Turkcell Pasaj, Turkey's tech and electronic marketplace. At Turkcell Pasaj a wide range of electronic goods from smart device to new generation technologies are offered from several leading suppliers with Turkcell assurance. We plan to differentiate with a focus on customer experience, promising best aftersales services.

Moving to next slide. The next 3 slides, we will discuss our strategic focus area. Firstly, our digital services. We have seen accelerated demand for our BiP application with rising concern over personal data security among the competition. BiP differentiates from peers acting on its data only with the users' permission. Also, data at BiP is kept at our certified data centers in Turkey. These facts have increased BiP's popularity, not only in Turkey, but also in certain countries of high population like India and Pakistan.

We plan to monetize this demand via collaboration with operators through BiP Multicloud, enabling them to integrate BiP so as to digitize their own customers. In addition, we launched a complementary product for our communication portfolio called BiP Meet to meet videoconferencing demand. In our TV business, we are now focused on expanding our presence on large screen with our partnership with TV producer and our TV+ ready products, this is 1 of our priorities for this year. This year also marked as a milestone in our digital service strategy as we have established individual companies for BiP, lifebox, fizy and TV+. This means management flexibility marks a step towards considering strategic moves in the medium run.

To sum up, this year, the stand-alone revenue from digital services rose 26% year-on-year to TRY 1.3 billion. The next initiative is our digital business services. The revenue from digital business services rose 30% year-on-year in 2020 to TRY 1.8 billion. The pandemic has clearly accelerated the digitalization of the business world. We see a strong demand across the whole spectrum of corporates from the public sector to SMEs. We took the lead in corporate digital transformation by being awarded over 2,300 projects with a total contract value of TRY 1 billion in 2020. Of these, 420 were system integration project for which we provided end-to-end solutions. We have a backlog in the amount of TRY 967 million from the system integration projects signed to date.

Also this year, we increased the number of global vendor partnership to 21 to strengthen cooperation. On health care front, we have reached a bed capacity of over 8,000 at 9 hospitals in total, continuing our market leadership of this sector.

Next focus area is techfin. The total techfin business revenue corresponded to 3% of our consolidated revenue. At Paycell, we pursue a dual growth strategy, capturing the huge business potential at both consumer and merchant fronts. For that, we take bold step in 2020, introducing new offering for member, merchant and customer new offerings. Besides the popular mobile payment solution, ready-to-use limit and 24/7 money transfer were amongst the new initiatives over this platform.

For merchant, we offer Paycell Android POS, a smart operating system, enabling the process of collection, inventory tracking and e-invoice over a single platform. It offers cost advantages to merchants, especially for SMEs. Going forward, we aim to diversify Paycell services and focus on commercial enterprises via our POS solution.

Next slide. Now let's take a look at our performance in the international markets. The Turkcell International grew by 33% year-on-year basis in the fourth quarter. Mainly on rise in voice and data demand, plus the positive impact of currency movement. Full year growth was at 27%. Lifecell Ukraine revenue grew by 22.8% in local currency term in the fourth quarter. This was mainly from subscriber based growth and the rise in voice and data despite the decline in roaming business. Lifecell Ukraine registered a full year operational net income for the first time.

Life:)Belarus registered 11.5% revenue growth with rise in voice, data and handset sales revenue. Life is the first and only company to offer digital remote subscription in Belarus. Introduced in the third quarter such subscription have reached 9% of the total.

Next slide. We have also strengthened our sustainability credential this year through important initiatives. I will discuss a few here. According to the results of our carbon disclosure project, we are the industrial leader in Turkey. We reflect our preference by securing a green loan amounting to EUR 50 million. We will use these proceeds for financing of green investments.

We reaffirmed our commitment by announcing the Turkcell environmental policy as well as our human right policy and domestic violence procedure. On the governance side, we put into practice the integrated value creation committee and sustainability committee inspired by international practices. These committees are responsible for determining medium to long-term action plans and overseeing their efficient implementation.

Last but not least, comes the example of having almost finalized our first integrated annual report. This reporting model enables us to present the environmental, social, and corporate information in a more holistic and transparent way.

Moving to next slide. I would like to say a few words about our focus on e-mobility. As Turkcell, we continuously invest in future technologies to grow our business. In this regard, opportunities that e-mobility arena offers are so immense that is the potential to become another strategic focus area for Turkcell. Our investment in Turkcell electric vehicle initiative is a solid step towards realizing this potential. This investment offers several opportunities, including integration of smart living solution into the mobility ecosystem, end-to-end mobility services and creation of smart charging system network. Turkcell will now only contribute to realizing Turkcell's ambition of being relevant to the 70% of Turkey's and Europe's car market, with its product portfolio by 2030. But also aim to be among the leading e-mobility players and take its share from the already $1 trillion dollar market in revenue.

Initially, our focus is on charging infrastructure. AI-based in car solution and integration of our digital services into vehicle software next. We believe that these EV initiatives have the potential to be value-accretive for Turkcell Group through value creation arising from synergies.

Before I end my presentation with our guidance, I would like to share some insight into our top agenda task in 2021. In our core business, as the integrated telecom player, we will further grow our subscriber base by adding another million of subscribers. We will be more active in fixed broadband where we aim to increase homepass with fiber by another 0.5 million. We will be more ambitious on our digital platforms and offer further customized value proposition supported by the use of artificial intelligence.

In digital services as well as growing the paid user base of existing portfolio, we will be more vocal in gaming business. Further, we believe we can do more by pursuing more B2B collaborations as well as taking BiP into the next level. In Digital Business Services, we will further increase our competency to strengthen our position as a digital transformation partner of cooperation. We trust that we can become the leader in information technology services market by the end of 2021.

In techfin, we will pursue dual growth strategy, we will expand service portfolio with wealth management solution, enabling trade of cryptocurrencies, local and global stocks as well as innovative customer finance solution. Financell will also grow through a more diverse portfolio with new products as well as new customer segments, such as residential, SMEs and corporates for these digital infrastructure need. Insurtech is another area where we intend to increase our presence in 2021.

Next slide. This is my last slide. I want to share our full year guidance for 2021. Obviously, uncertainty continues as to when the pandemic environment will end. We have built our business plan assuming a gradual normalization in the second half. Expecting another year of subscriber and ARPU growth and the rising contribution of our focus areas, we targeted top line growth within the range of 14% to 16%. With that, we aim to generate around TRY 14 billion EBITDA, maintaining our effective cost management. We will continue to invest our infrastructure at around 20% of sales, driven mainly by capacity and software investment upgrades as well as expansion of fiber infrastructure.

I now give the floor to our CFO, Osman. Hope you all stay safe.

[Osman Yilmaz, executive]

Thank you very much, Murat. Now let's take a closer look into our financials. Our performance in the fourth quarter has been robust, and this brought the full year revenue and profitability levels above our initial guidance. We recorded a TRY 7.9 million top line with an increase of 17.8% year-on-year in this quarter. Full year growth was 15.8% on the back of our diversified business model, suggesting resilience and flexibility in addition to the contribution from ever-increasing data demand.

Our EBITDA reached TRY 3.2 million on a 17.8% increase with a 41.2% margin. The bottom line rose to TRY 1.3 billion due to strong operations and effective financial risk management. Excluding the one-off items in relation to Lifecell Ukraine's deferred tax income of TRY 690 million and provision for legal cases, organic net income was around TRY 1 billion. For the year 2020, our net income reached TRY 4 billion at a 39% growth when one-off impacts are excluded. We concluded the year with an operational CapEx to sales ratio of around 18.5%, in line with our guidance.

Next slide. In the fourth quarter, group revenues rose an incremental TRY 1.2 billion. Of this increase, TRY 1 billion comes from Turkcell Turkey, thanks to a larger postpaid subscriber base, high growth in corporate segment and strong data demand. Higher equipment revenues backed by sales through the digital channel and corporate projects were the other catalysts of growth.

Turkcell International revenues increased by 33.2% to TRY 750 million, mainly with the contribution of our Ukrainian operations and the positive impact of currency movements.

For the full year, group revenues rose 15.8% year-on-year to TRY 21.9 billion. Looking at the details. Turkcell revenues increased by 17.1%, contributing TRY 3.7 billion. International subsidiaries contributed TRY 540 million, consumer finance revenues contracted by TRY 333 million given the decline in loan portfolio. Excluding consumer finance and our sports betting business that we exited last year, group revenue yearly growth, would they have been around 18.4% in 2020.

Next slide. In the fourth quarter, EBITDA rose 17.8% year-on-year to TRY 3.2 billion, thanks to strong revenue increase and lower G&A expenses. Increasing low-margin equipment sales led to a flat margin on a yearly basis. For the full year, EBITDA increased by 17.7% to TRY 12.3 billion with a margin of 42.2%. The EBITDA margin saw a 0.8% improvement.

The factors contributing to this increase are as follows: 2 percentage improvement in OpEx with lower overhead costs, travel and marketing expenses; 0.2 percentage point improvement in doubtful receivables against 1.5 percentage point decline in gross margin impacted by the rising cost of goods sold, mainly due to higher cost of new growth business. Turkcell International also contributed positively to the group with a 0.9 improvement in its EBITDA margin. EBIT rose 17% year-on-year to TRY 6.3 billion with a margin of 21.6%.

Next slide. Now more details on our free cash flow generation. On this slide, you will clearly note the positive trend and strengthening of our cash flow generation over the years. In 2020, we registered TRY 3.4 billion free cash flow, mainly on the back of rising EBITDA generation. Strong operational performance was the key driver of this success, while the decline in consumer loan portfolio also contributed on a working capital in a yearly basis.

The major items of the TRY 3.4 billion of cash flow increase include EBITDA of TRY 12.3 billion, acquisition of tangible and intangible assets of TRY 7.3 billion, change in working capital of positive TRY 300 million with improved collection performance and higher payable days, payment of lease liabilities around TRY 1.3 billion and income tax payment of TRY 634 million. Our aim is to continue free cash flow generation in this year as well.

Next slide. Now some highlights from our balance sheet and leverage. As at the end of 2020, our total cash position decreased to TRY 11.9 billion from TRY 13.5 billion in Q3 and due to mainly dividend payment of TRY 800 million and currency appreciation.

In Q4, 6% decline in dollar TRY and a 1.3% decline in Euro TRY led to around TRY 500 million in our total cash position. As of 2020 year-end, group net debt was around TRY 9.7 billion with a 0.8x leverage ratio. Excluding the techfin business, this was at 0.7x, the same level as the previous quarter and the lowest in the sector.

Next slide. Let me provide you some color on foreign currency risk management and our liquidity strength. Our balance sheet remains robust with some $1.6 billion equivalent cash in hand with a long FX position of USD 132 million. We continue to hold the bulk of our cash in hard currency as a natural hedging tool. This is sufficient to cover our repayments until 2025.

In addition, we have secured committed lines of around $700 million in total in this year, which may be utilized in euro, dollar or RMB over the next 3 years. With hedging instruments in place, the share of FX debt declined from 78% to 43% as of the year-end. Our average debt maturity is around 4 years.

Next slide. Now let's take a closer look at our techfin company's performance and first with consumer finance business, Financell. In the fourth quarter, Financell's revenue declined by 28.1% to TRY 145 million on a shrinking loan portfolio. EBITDA fell to 23.8% to TRY 96 million. The EBITDA margin was up almost 4% year-on-year, thanks to an improving bad debt ratio this quarter. In 2020, the challenging environment led to fluctuations in the cost of risk ratio, although it ultimately declined to a normalized level of 2.4%. For the full year, net income increased by about 29% to TRY 241 million, thanks to recovery on cost of risk and lower expenditures on the back of process improvements.

Next slide. Paycell's remarkable performance has continued in Q4, monetizing the rising preference for e-commerce and cashless payment methods. 3 months active users of Paycell, hugely popular for its convenience and secure payment infrastructure, reached TRY 4.7 million. Generating revenues of TRY 80 million in the fourth quarter, Paycell ended the year at TRY 285 million on a 13% annual growth rate, with 62% growth, the non-group revenue share reached 66% in total.

Paycell EBITDA margin was at 52% in 2020. The largest revenue generator, mobile payment business more than doubled in volume in the fourth quarter. The number of active Paycell cards doubled to 473,000. Accordingly, transaction volume tripled.

Ready-to-use limit service has gained traction. Our customers have made purchases by transferring their mobile payment limits to their Paycell cards. On the merchant side, Paycell POS is set to grow over the coming periods. Merchants will benefit from cost advantage and efficiency by means of managing processes such as collection, inventory monitoring and e-invoice over a single platform using the Paycell POS device.

Next slide. I would like to end my presentation by recalling our approach to value creation at group level. As our results have shown, our business model plays out well under different macroeconomic cycles. This diversified business model built on growing individual businesses today not only generates strong free cash flow, but also unleashed a strong potential for actions towards unlocking the hidden values. These businesses have the potential to generate their own funding for future growth.

For now, we see our fiber business, our payment service business, and our tower business as likely candidates to take on the spotlight for strategic actions, as we have already mentioned at our Capital Markets Day in London in 2019.

Superonline is a unique, diversified fiber company suggesting strong growth potential. Given its size and potential, it stands out as the most likely candidate for an equity capital markets action as long as the market conditions remain favorable. Hence, we plan to start working on this in the upcoming periods. We will keep the market informed on developments in this regard in a timely manner. This concludes my presentation. We are ready for your questions. Thank you very much.

[Operator]

[Operator Instructions] The first question is from the line of Cabejšek, Ondrej with UBS.

[Ondrej Cabejšek, analyst]

Congratulations on the strong year. I have a question around CapEx, mainly and probably going into fiber. But -- so you are guiding for an increased CapEx to sales intensity for 2021. Can you just break down for us a bit, what part of that is driven by the fiber plan to pass another 0.5 million homes, what part of that would be driven by some of the ICT initiatives that you've been highlighting over the past couple of quarters?

And then on fiber itself, is this an indication of you going into -- rather reaching more homes, say, inorganically rather than through regulatory means? So is this the kind of new normal for Turkcell growing house -- homes passed over the next couple of years?

[Murat Erkan, executive]

Ondrej, thank you. Thank you very much. For the CapEx side, there are multiple elements in for the CapEx. Let me start with the mobile side. We will invest in capacity increase in Turkey. The continued strong demand for our data and digital services, this is driven by the increasing number of data consumption for household users. We will continue to provide high-speed and quality household internal services over Superbox in 2021, which is well appreciated by our customers.

Please note that Superbox stores lead to additional TRY 1 billion annual revenue. We will also invest into our 4.5G network in Ukraine, while expanding our network deployment in Belarus. Furthermore, fiber penetration in Turkey is still low compared to other developed markets. Majority of the broadband connection in the country are based on ADSL technology that is copper.

It is not sufficient to meet the quality connection needs of customers, especially in the pandemic area. Hence, we believe that there is additional need for fiber investment, and we will increase our fiber footprint in 2021 by 500,000 homepasses. Meanwhile, as you mentioned for the ICT investment, we will continue to invest our data center investment in 2021. But this is for the CapEx and the CapEx portfolio.

Regarding fiber footprint, actually, this is -- instead of calling them inorganically, we call it organic approach. So obviously, joint fiber investment is important for Turkey to be able to reach every place in Turkey. While this joint fiber company is going to establish, we would like to invest in our fiber area and this is going to be organically and obviously, what you say, this is new normal for Turkcell. We want to continue adding more homepass year-over-year, especially next maybe the 3, 4 years level.

[Ondrej Cabejšek, analyst]

Can you maybe just elaborate a bit on the 0.5 million, what kind of homes are these? Are they untapped entirely currently or are they -- where there are some kind of networks already in place? Or will you be pricing for market share in these areas? And is 0.5 million per year the kind of run rate that we should be expecting over the next 4 years, as you say?

[Murat Erkan, executive]

Yes. First of all, we would like to expect 0.5 million run rate if we achieve more than 0.5 million it's very welcome. Regarding what kind of homepass, there are 3 types of homepass. One of them, the existing zone that we invest, this is expansion for the existing zones we already deployed. There will be new -- totally new greenfield areas, also possible, but probably at least half of them will come from existing zone. Maybe 1/3 of them will come from the new greenfield area and the other will be using new technologies, which we call e-homepass where we have fiber at the base station level, I mean mobile base station. We can expand this through this base station area with the e-homepass investment.

If -- I would like to give you some more breakdown into our CapEx, probably 35% of them will go to the fiber, a 5% for the data center, 50% for the mobile and 10% other.

[Operator]

The next question is from the line of Mishra, Nikhil with HSBC.

[Nikhil Mishra, analyst]

Thank you for the presentation. Couple of questions. First is on your tech and device e-commerce platform Pasaj. So can you give us what are your ambitions regarding that? And how do you -- how big do you see it becoming, let's say in next 3, 4 years?

And secondly, again on asset monetization, apart from the 3 key areas, you mentioned, like Global Tower, Paycell and Superonline, which other areas do you see in the future, which other assets do you see yourself monetizing in future?

[Murat Erkan, executive]

Okay. First of all, regarding our e-commerce platform, we would like to establish marketplace for electronic and technology markets specifically. Because this is where we have expertise, where our customer has strong trust on us. So we would like to be #1 player in this technology and IoT area of marketplace. This is -- how big, obviously, during the pandemic, we see strong demand and increase. We were planning to have -- 12% total sales of consumer will come from digital side, but what we see that it already reached 14% end of 2020. So we're going to revisit our targets. So we want to go as much as we can in this aspect, I think sky is the limit. We'll push more on the e-commerce platform on the marketplace side.

For the asset monetization, obviously, Superonline, we already declared that a couple of years ago, what we can do, but there are other potential. So as I said before, we have a diversified business model comparing operation, driving growth and strong cash generation.

We believe that the growth business in our portfolio had the potential to finance their operation. In this context, we make constant strategic options, including capital market action as well as private equity. For now, we see our fiber business, our payment services business, fintech and tower business as likely candidates for such a strategic action. In your question, the payment services is probably the next 1 for this candidate.

We will keep the market informed on development in this regard in a timely manner, and we also see that the established companies from digital services. So these companies are also potential for the further possibilities, like BiP, lifebox, fizy, TV+. But these are more long run things.

[Nikhil Mishra, analyst]

Okay. And any time line for these, particularly these 3 assets – well, these 3 asset monetization, Paycell and Superonline. Is there any time line for these?

[Murat Erkan, executive]

I mean, the time line is not definite yet because we're discussing with our Board and our shareholders the best timing for this. So as soon as we finalize the time line with the management with the Board, Board of Directors, will come with the right time. Obviously, market condition is -- strongly depends on this timing. So we'll see, but we want to see something in this year. By the way, we're going to get ready anyway. So -- but it depends on market condition as well.

[Operator]

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

[Jonathan Kennedy-Good, analyst]

Three questions from me, if I may. Could you comment on potential impacts of continued upsell opportunities on Turkish ARPU growth? Obviously, very strong ARPU growth last year. Just trying to understand if as economy is opening up we could see or expect ARPU growth ahead of inflation again? And then second of all, could you comment on how much CapEx is required to support Super online as it stands at the moment? And then finally perhaps if you could comment on some of the developments in the prepaid pricing markets and how that is developing from a competitive perspective?

[Murat Erkan, executive]

Okay. Thank you very much. For the first question, as you know, inflationary pricing is a key pillar of our strategy and business model. Our price actions are reflected in pricing with a lag due to the contracted nature of our business. We expect our ARPU growth to be in a reasonable range around inflation level. And as everybody knows, inflation is the trend of decreasing mode. So while the inflation is in decreasing mode, it is really difficult to increase the pricing level.

But we would like to be in line with plus or minus a couple of point percentage around the upcoming quarter. So we don't want to be above the inflation -- too much above the inflation or too much below the inflation. So we're going to stick inflationary pricing as a strategy. And our upsell performance was remarkable so far. We have the right action on raising the price with customized offer using our analytical capabilities. This resulted in a solid ARPU growth in prepaid segment in the fourth quarter as well.

It is also worth noting that this connection of inactive prepaid lines had a positive impact on prepaid ARPU growth. So there are demands, especially when the economy gets better. It creates opportunity to increase upsell and other things as well. So regarding Superonline, how much CapEx is required, 35% of the total CapEx in 2021 will be made to support our Superonline fiber business in total CapEx.

So I believe I already responded regarding prepaid pricing market and shaping competitive in a first question level. So for the market size, everybody, all the competitors are focusing on postpaid market and clearly shows that we are the winner of postpaid market so far, and we would like to keep this going.

[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.

[Ali Yagci, executive]

Thank you, everyone. This is the end of our call. Thank you all for taking the time to participate in our call. Thank you very much.

[Murat Erkan, executive]

Thank you very much. Bye-bye.

[Operator]

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