Turk Telekomunikasyon AS

IST:TTKOM.E

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. I am Jota, your Chorus Call operator. Welcome, and thank you for joining the Türk Telekom conference call and live webcast to present and discuss the first quarter 2021 financial and operational results. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

We are here with the management team, and today's speakers are CEO, Ümit Önal; and CFO, Kaan Aktan.

Before starting, I kindly remind you to review the disclaimer on the earnings presentation. Now I would like to turn the conference over to Mr. Ümit Önal, CEO. Sir, you may now proceed.

[Ümit Önal, executive]

Hello, everyone. Welcome to our 2021 first quarter results conference call. Thank you for joining us today. It has been more than a year we have lived and tried to cope with the global disaster. Nevertheless, the COVID-19 era has taught us many lessons in a short period of time. The pandemic has tested our capabilities in many ways, helping us to broaden our strength and know-how.

Data usage has grown dramatically across Turkey, both in fixed and mobile. Surely, the trends were amplified by the pandemic-driven changes, both at the individual and corporate levels. But we believe COVID-19 has set a clear and faster direction towards digitalization. Hence, our road map to sustainable growth urges us to continue with our fiber rollout plans, accelerate our digital agenda where we have clear and ambitious targets, and attain best-in-class customer experience.

Starting with Slide #3 on our presentation, net subscriber additions. Our total number of subscribers increased to 50.6 million with 198,000 net adds in the quarter. We grew our fixed broadband subscriber base to 13.6 million with 204,000 increase, in line with normalized demand.

In the mobile market, demand remained weak as lockdowns continued, and we added 103,000 new subscribers. On the fixed voice side, we lost 52,000 of our customer base together with lower broadband acquisitions.

Slide #4, financial and operational overview. I will go through the main highlights and let Kaan to comment on the details. Our outstanding financial and operational performance continued into the first quarter of the year. Our consolidated revenues increased by more than 20% year-on-year to TRY 7.6 billion.

Growth in operating revenues was 20% in Q1. Fixed broadband segment supported the top line with amazing 34% increase. Consolidated EBITDA rose 28% to TRY 3.8 billion as the EBITDA margin surpassed 50%. Net income more than doubled to TRY 1.4 billion, thanks to diligent FX risk management as well as our robust operating performance.

Our CapEx was TRY 1.3 billion, reflecting the impact of continued fiber investments and weaker lira. And lastly, we reported USD 100 million long FX position, while net debt-to-EBITDA remained flat Q-on-Q at 1.15x, following the solid actions taken to reduce the sensitivity of the P&L to FX movements.

We continue to keep up with our responsibilities to shareholders. We had our ordinary general assembly for the fiscal year 2020 on March 19. It has been resolved in the meeting that a cash dividend of TRY 1.9 billion will be paid to our shareholders.

Slide #5, fixed broadband performance. We recorded 204,000 net adds to our fixed broadband subscriber base in Q1, in line with our expectations of normalizing demand for new connections. That said, we expect to see another round of our additional demand from summer locations starting in late Q2.

Our tailor-made offers that target certain segments in addition to our mass campaigns and bundled offers helped new acquisition performance remain robust after a super strong 2020 demand.

Revenue growth peaked about 34% year-on-year, thanks to the contribution of more than 2 million net subscriber additions last year, continued acquisitions, portfolio adjustments and robust upsell performance. Our ARPU grew above 14%.

Last year, our fixed broadband top line growth was supported by a spectacular increase in new acquisitions. Our priority was to meet urgent demand that emerged from all corner of Turkey, manage capacity issues and ensure our customers' new routines run smoothly.

In the meantime, in anticipation of normalizing threat in demand over time, we equipped ourselves with a different top line growth strategy, which looked for ways to maximize the mix impact in 2021 and beyond.

Now I would like to take you through the details of our journey. Slide #6. With more than 2 million net adds last year, managing our huge subscriber base, customer retention and customer experience became more important than ever for sustainability and value maximization.

We built our approach on 4 main pillars: data analytics and research, marketing intelligence, digitalization and smart investments. Over the past years, we have made big [ progress ] in developing in our in-house -- over the past years, we have made big [ progress ] in developing our in-house customer data analytics tools. We formulated tailor-made marketing strategies in light of the detailed analysis of needs and usage trends of new and existing customers separately. We have gained significant efficiencies by determining our target basis, prioritization and better resource allocation in addition to improved churn management. This is a key milestone that ensures bigger contribution of mix to our top line growth persistency.

As a result, we realized pretty strong upsell metrics in Q1. Focus on high-speed packages remained at the heart of our marketing strategies through all sales channels. In January, we replaced 12 megabits with 16 megabits as our new entry-level package for both the new and re-contracted subscribers. Performance in upper offers was also significant, with 24 megabits and above packages comprising 44% of new acquisitions in the first quarter. Reintroducing this 35 megabits package in our portfolio played an important role in that performance. As a result, our ARPU grew close to 25% year-on-year.

The number of customers which moved to higher packages was 2% above last year's number in contract renewals despite a high base in Q1 '20. Finally, we recorded the highest ever quarterly number of speed upsells in Q1, which made 77% of total number of upsells in the period. Obviously, we are happy to see such strong KPIs, which proved the smart alignment of our investment and marketing strategies with financial performance.

Now Slide #7. Following our preparations on technology improvements and customer experience, we have also started migrating our subscribers from ADSL to fiber packages. Total conversion has reached almost 900,000 over the last couple of quarters. We will continue with this exercise over the coming period. Customers can now receive up 3x higher speeds post conversion. Surely, this paves the way for more speed upsells.

We recently kickstarted upsell offers with this group of customers, and we are seeing close to 30% take-up rates. We are working hard to broaden our growth opportunities in a sustainable way. In the meantime, we remain committed to serving our society in the best way we can and increasing Turkey's internet speed.

Moving to the mobile performance, Slide #8. In the mobile market, the dynamics of the market remained under pressure as the country spent first quarter mostly under lockdowns, with limited easing of measures [ here attached ]. The trends we observed in the mobile market were broadly in line with our earlier expectation bond. We saw some price adjustment in the market and followed these actions. While postpaid tariffs were revised early in the year, price revision in the prepaid segment came rather late in the quarter.

In lack of demand and main full subscriber growth, other operators introduced competitive acquisition packages into the market around mid-quarter. These were more short-term technical strategies on opportunistic basis, and we preferred not to respond.

We added 103,000 subscribers in Q, which included an increase of 165,000 in the postpaid segment. The prepaid base, on the other hand, continued eroding with 61,000 decline, primarily on the back of our strategy to focus on higher-value customers as well as postpaid division. Despite the ongoing unfavorable market environment, we managed to grow our mobile ARPU by more than 12% year-on-year, higher than 2020 levels thanks to the actions we have been taking.

Our mobile revenue growth rose to 13.4% from 12.8% in Q4 '20. We still foresee a broader recovery in the mobile business starting in the second half of the year.

Slide #9, mobile network. In our mobile business, we continue to focus on improving our network quality and customer experience. We keep investing across Turkey to increase capacity and coverage, and our efforts certainly paid off.

Opensignal, an independent research and analytics house focusing on customers true experience on mobile networks, listed Türk Telekom amongst Global Rising Stars and Global High Performers in its mobile network experience awards 2021.

Türk Telekom was the only operator from Turkey that ranked in the total of 5 categories. Opensignal placed Türk Telekom among the Global Rising Stars in 4 categories. It picked top 30 operators around the world on whose networks users have seen the greatest improvement in their mobile network experience.

In addition, Opensignal announced Türk Telekom amongst the Global High Performers in the voice experience category. Obviously, it makes us proud to see growing appreciation of our milestones by independent assessors as well as our customers.

Slide #10, 2021 revised guidance. We started 2021 stronger than we expected. We recorded higher-than-expected top line growth in corporate data in addition to fixed and mobile businesses in the quarter. As a result, we see solid ground to revise our 2021 guidance upwards on all fronts. We now expect our revenues to grow 16% year-on-year, our EBITDA to be TRY 15.4 billion, and our CapEx to be TRY 8 billion.

While the change in EBITDA is driven by our higher top line growth expectation, the revised CapEx figure reflects high demand in telco services as well as the impact of FX rates. We managed to turn the challenges of 2020 into great opportunities by focusing on financial excellence and risk management, digitalization, efficiency and superior customer experience. We added on our strengths to strive for an even better performance in 2021. The progress we made so far and the brighter outlook we look into lend us the confidence we need to proudly face our customers, society and stakeholders.

Now I will hand over the call to Kaan to discuss our financial performance in detail. Thank you.

[Kaan Aktan, executive]

Thank you very much. Good morning, and good afternoon, everyone. We are now on Slide 12 with financial performance. Our consolidated revenues grew about 20% to TRY 7.6 billion year-over-year in this quarter. Excluding the IFRIC 12 impact, revenue growth was again 20%, thanks to the robust performance on fixed broadband and some pickup in mobile growth.

Fixed broadband segments supported the top line with 34% increase over a favorable base despite normalized trends in demand for new connections. ARPU rose about 14% over the quarter, owing to price adjustments early in the year and the superior upside performance. The mobile market remains subdued as lockdowns were on and off during the quarter. The long-awaited price adjustments finally arrived and we followed, but they lost efficacy on the market as the other operators turned to short-term opportunistic strategies, with competitive acquisition offers starting from mid quarter in lack of demand. We preferred not to respond and kept our focus on portfolio optimization, value creation and balanced growth. As a result, we managed to move the mobile revenue growth to 13.4%, higher than any quarter of last year, together with more than 12% blended ARPU increase.

In fixed voice, we lost some 52,000 net subscribers in the quarter, mostly in line with our expectations, following the normalized trend in fixed internet demand. Fixed voice revenues grew 1% annually, though, thanks to still significantly higher subscriber base compared to the same period of last year, owing to sizable net debt of last year full year.

On the TV side, bundled sales with fixed Internet was strong, but slower compared to prior quarters. And so our subscriber base remained flat -- near flat quarter-over-quarter. And it's our strategy to optimize the existing subscriber portfolio. As a result, our home ARPU increased 14% year-over-year and led to 10% top line growth.

Corporate data services were off to a strong start with almost 14% growth in Q1, supported by a wide range of corporate products. Finally, the international segment, which mainly includes the revenues of our subsidiary, Türk Telekom International, grew 52%, once again owing to dual positive impact of increased traffic and appreciation of hard currency.

Moving on to our operational performance. EBITDA rose by an impressive 28% to TRY 3.8 billion, ahead of our expectations. Full year EBITDA margins surged above 50%, representing almost a 3 percentage point improvement year-over-year. This reflects the significant contribution of our higher-margin fixed broadband business, together with the continued positive impact of COVID-19 savings on certain OpEx items. It is important to note that the support of both items on our margins will be less in the coming quarters because of high base in fixed broadband revenues, particularly in the second half of the year and the normalization in the OpEx kick in. Excluding the IFRIC 12 impact, EBITDA margin improved by more than similar 3 percentage points in year-over-year to 52%.

Operating expenses increased by less than 40% year-over-year. This is well below the increase in operating revenues as well as inflation. Looking at the highlights in the OpEx items, interconnection costs increased by 28%, together with the increase in Türk Telekom, international traffic volume and higher FX rates. Provisions for doubtful receivables dropped almost 20% year-over-year due to provision reversals, as collections accelerated following our actions taken on legal proceedings.

Cost of equipment and technology sales increased by 18% along with normalized broadband net additions. Other direct costs grew 23% year-over-year, driven by increase in litigation costs. Personnel expense rose 27%, mainly due to early retirement incentives and 22% increase in minimum wage. Finally, commercial costs remained subdued with mere 1% increase along with lower activity amidst lockdowns.

Coming to the bottom line, net income more than doubled to TRY 1.4 billion despite the unfavorable FX movements and the 93% increase in tax expense annually. Our rigorous actions on the FX risk management side, which we accelerated starting from fourth quarter last year, as well as the robust operational performance was nicely reflected to our bottom line. And lastly, CapEx was TRY 1.3 billion in the first quarter, reflecting the continued fiber investments and weaker lira.

Moving on to Slide 13 with the debt profile. Once again, we closed another quarterly reporting period with a strong and resilient balance sheet. Net debt-to-EBITDA remained flat quarter-over-quarter at 1.15x, hovering around the lowest levels by industry standards. This was mainly driven by the strong operating performance and diligent balance sheet management.

Cash and cash equivalents were TRY 3.7 billion as of end of the first quarter, of which 83% is FX based. And lastly, the reported USD 100 million of long FX position as of this quarter compares to USD 158 million long in the last quarter. The net FX exposure included dollar equivalents of TRY 2.5 billion of FX debt and TRY 2.2 billion of total hedge position and TRY 370 million of FX cash. It is important to note that we moved to a more comprehensive risk -- FX risk management starting from fourth quarter last year, following our Board's decision to maintain an FX-neutral position in order to minimize the sensitivity of P&L statement to FX rate movements.

We now apply a more holistic approach to calculation of FX exposures. On the liability side, we include FX-denominated financial debt, FX-based lease obligations and net FX trade payables. On the asset side, we take FX denominated cash, hedging of financial debts under different instruments, hedging of net rate payables and the net investment hedged into our calculation.

Accordingly, our all-inclusive blended cost of debt rose to 13.6% in lira terms as of the first quarter from 12.9% in the previous quarter. All-inclusive blended cost of debt, captures the cost of lira and hard currency debt altogether. It also captures the hedging cost of the net FX trade payables. As you know, we have been hedging our net trade payables starting from fourth quarter last year. Around 150 basis points of the 13.6% blended cost of debt is directly attributable to these hedges under the hedging of trade payable. So excluding that, we should see around -- close to 12% blended debt for the financial part of our debt portfolio.

With the adoption of a more comprehensive FX risk management, the portion of shorter-term instruments in our hedge portfolio has also increased. Therefore, it will be reasonable to assume some increase in our blended cost of debt along with the increase in market interest rates in the coming quarters.

We are now on Slide 14. As mentioned, we are trying to maintain an FX-neutral position. The primary purpose is to minimize the impact of the FX rate fluctuations on the P&L. Accordingly, we have been taking additional protection and raising the protection of our existing hedged portfolio. Our efforts have nicely crystallized in the FX sensitivity analysis we report regularly in our quarterly financials.

According to the sensitivity of the P&L statement, assuming all as constant, a 10% in FX rates will have nears to TRY 13 billion negative impact on the pretax income as of the year-end.

Finally, the unlevered free cash flow was TRY 800 million, lowered year-over-year largely due to the reversal of the improvement in the net working capital last quarter, which reflects to be temporary. The fact that we reduced the payment term of FX-denominated trade receivables created a higher than usual cash out in the first quarter. This was a trade-off we accepted in order to reduce the level of FX debt and support FX risk management initiatives. This is basically a timing difference and will adjust itself in the coming quarters.

Another factor affecting the cash flow was the payment of early retirement incentives which materialized in the first quarter of this year and won't be seen in the following quarters. The ability to convert a meaningful portion of the operating profits to cash is a key strength of this company, and we don't foresee any deviation from this in the coming period.

We are pleased to have started the year stronger than we expected. The first quarter performance gives us confidence for the successful delivery of our revised and upgraded guidance for the year.

I think we can now open up the Q&A session. Operator?

[Operator]

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

[Ondrej Cabejšek, analyst]

Congratulations on a very strong start to the year. I have 2 questions, please. One on EBITDA because clearly, you've upgraded the guidance, but you don't see the margin from 1Q as sustainable. And if we look at the swing factor on a year-over-year basis, then the biggest one is coming from other items. Can you just give us a bit of color as to why that happened? And then consequently, why the margin for the quarter overall was so strong from that particular source? That's one question, please.

And second one, on your penetration side. So the share of them, as you indicated in your presentation, has basically halved year-over-year. I'm wondering if the acquisition rate on the -- on these entry-level tariffs are the same or if what you've seen over the past couple of quarters is people simply skipping them and joining up for the regular product to begin with? Or has there just been a higher conversion rate during the pandemic, but the acquisition rates, if you want to measure it on a monthly or quarterly basis, is more or less the same? And also with regards to the penetration tariffs, if you could share the rationale behind the increase and the speed on them.

[Kaan Aktan, executive]

Let me start with the first question. According to the guidance that we provided, yes, you're right, we foresee and I was clear in my part during the presentation that we should see a bit lower margin in the balance of the year.

One factor is definitely the OpEx trend that we foresee is somehow is giving us a higher OpEx growth in the coming periods. To be honest, there are still question marks about that because it's also linked to the way that the lockdown will ease itself, and we will somehow may lose the savings that we have under the current way of operating. But again, if you look at the first quarter OpEx performance, it's well below the revenue growth, but also it's lower than the inflation.

I think another factor is the level of the commercial expenses, which is really at the lowest point. It's almost the average quarterly spending of last year, which is repeating itself in the first quarter of this year. And we should expect an increase in the commercial expenses as we have the easing of the lockdowns and the channel starts functioning efficiently, effectively giving us, obviously, more business, at the same time, consuming more OpEx.

On the other line, the impact is coming from the sale of scraps and -- which includes mainly the copper. As you know, we have significantly accelerated our efforts for modernization of our existing network. It also includes a lot of copper-to-fiber transformation. And once we increase the level of investments in that area, we also have the opportunity to collect back the copper and sell in the market. And the copper prices is also helping us to have a higher number there.

So it's part of our business. Naturally, every quarter that we will have this transformation, we should occur some level of positive OpEx in that line item. And it should continue throughout the year as a function of the investments in fixed line business. Did I miss anything?

[Ondrej Cabejšek, analyst]

No. That is clear on EBITDA. Maybe if you can just clarify in terms of the sale of copper, is that -- does that work in a way that you pile up -- as you kind of take out copper from the networks, do you pile that up and sell it maybe once a year or is that a more continuous process?

[Kaan Aktan, executive]

No, it's a continuous operation. So we don't want to sit on a large amount of copper. So it became more visible, mostly with the copper prices becoming all time high.

[Unknown Executive]

Ondrej, can you please repeat the second question because you were referring to penetration and penetration numbers, but it wasn't really clear to us what you were trying to...

[Ondrej Cabejšek, analyst]

Yes, sorry. So the penetration tariffs on fixed broadband have [indiscernible]. So the share of them went from 8% to 4% in your presentation in your total subscriber base. I was wondering if that is somehow because people are not signing up for them anymore or because there was just a fair conversion rate, but the actual acquisition rate on the entry-level tariffs is still the same as it was over the past couple of years, so after the acquisition rates, basically?

[Unknown Executive]

Okay. First of all, I mean, the penetration campaign has been closed. I think it was the end of third quarter last year for the retail segment and the fourth quarter for the wholesale segment. So we are not acquiring new customers in that campaign anymore. But you are also right, the acquisitions on the other packages are also faster. So the portion of penetration package in that pie chart is literally, I mean, eroding and the others are offsetting that. Is that clear?

[Ondrej Cabejšek, analyst]

It is.

[Operator]

The next question comes from the line of Kim, Ivan with Xtellus Capital.

[Ivan Kim, analyst]

Two questions for me, please. Firstly, you upgraded many DSL customers still last quarter. So I guess 2 related questions, whether we should expect a similar pace in the quarters to come? And what sort of ARPU uplift you normally see when such upgrade happens?

And then secondly, on mobile, Turkcell had higher net postpaid additions, even though they have the highest pricing. Do you see that changing anyhow this year or next year? And what you can do to address that to improve your market share in mobile? We should probably want to do it. Any thoughts on that would be great.

[Ümit Önal, executive]

Yusuf Kiraç?

[Yusuf Kiraç, executive]

[Interpreted] As you know we have seen an extraordinary increase about TRY 2 million in 2020. Our main focus is, first of all, getting our customers with high-speed packages and then also continuously upsell to them by upgrading their speed so increasing the benefit that we get from our customers. It will be correct to say that in these two periods, we are using marketing intelligence more effectively in Türk Telekom. As you know, we have made a tariff revision as of 1st of April in 2020, and we closed 8 and 12 megabit packages, and we started to get the customers from 12 to 16 megabits at the entry level.

On one side, we are trying to renew our infrastructure and also renewing our offers. And also, we are trying to upsell to our customers. This way, we try to increase their speeds and our revenues. I don't want to share a number with you, but I can easily tell you that we still have a big upsell base in hand. And also generally speaking, as our strategy, I mean, outside your question, but on one side, we try to increase our ARPU -- I mean, increase ARPU growth, and also, we want to add new subscribers. So on one side, we're increasing the prices and also working on our upsell.

All in all, we still have a huge upsell base and capacity for 2021 and 2022. So we believe we still have a good upsell opportunity here. On the Turkcell side, we have shared this in our previous investor call but in the beginning of the year, we have seen that all operators were in the aim of increasing their prices, and we have followed these price increases. Around the mid quarter, we have seen that the other operators adopted a strategy on increasing their subscriber numbers.

As I have said in my speech as well, we are focusing on improving our capacity and coverage, and we have a customer approach, which turns around value, I mean, value-oriented customer approach, which is also appreciated by independent institutions. I mean for all operators, particularly for Turkcell, we believe that acting solely on subscriber-oriented game would not serve a realistic understanding for the sectors. We will be preserving our confidence stance by, of course, following the market conditions as well, I mean, considering that we are very happy on our success on the revenue side anyway.

[Operator]

Our next question comes from the line of Vengranovich Alexander with Renaissance Capital.

[Alexander Vengranovich, analyst]

Two questions from my side, so more like strategic, I think. So first, you mentioned that data centers will be one of the areas of your investments this year. Can you remind us on your ambitions in this area and certainly market segment? How big is the market currently? And where do you see your position? And where do you see your position in 5 years? That's the first question.

And the second question is on your fixed voice business. So you, obviously, have started to [ move ] the customers, it's a well-expected trend. I'm just wondering how do you expect this pace to evolve going forward? And what sort of measures are you trying to take in order to convert these customers into other products in order to avoid the negative impact on the top line?

[Yusuf Kiraç, executive]

[Interpreted] As you know, Türk Telecom is the operator owning the highest number of corporate customer bases. And corporate revenues also takes a big share among our top line revenues. I mean considering our customer segments, including SMEs, large accounts, specific accounts and also a very big account, which makes a public segment, we are serving to this big segment proof and data centers become a natural part of our business.

I mean, currently, with our data centers and the ones that we are investing right now, we are serving more than 1 million customers. The accelerated digitalization with the pandemic has increased the data center needs of our customers from all segments. We are getting demand for data center services from our customers intensely. I mean our data center investment will continue strongly on top of our core services. I mean, we are adding ICT services, cloud services as a complementary service to our core services and data center is a very important part of it. The digitalization of the SMEs is an important agenda item for us for going further.

Similarly, the biggest e-trade companies of our country are also working with us. I mean, we are serving them for their hosting needs and everything. I mean, not a day passes by without us getting a demand for a capacity increase for the data center services of our customers. Also owning a data center plays an important role when it comes to alliances and cooperations and partnerships with global cloud players. So we are trying to put ourselves in the readiest position possible.

[Gulsen Ayaz, executive]

Okay. Let me jump in there for the second question. I think you're referring to the normalized trend in the fixed broadband acquisitions. And let me tell you that firstly, we were growing this business in the past year. So we will continue to do so. And the reason why we showed those 2 slides in the presentation, particularly, was to show how we are planning to grow this business in the coming period.

And I think it's a little bit different going forward because if you look into the fact, we've now reached 68% penetration level -- household penetration level in Turkey. And this number, remember, was about 47% 4 years ago. So we have identified this gap in the market and invested heavily, and we are now reaping the benefits. And we think this number can easily go up to 75% level then judging by the comparison of our peer markets and Turkey's demographics. That is one thing. So this is still an opportunity for us.

The other thing is, we are doing a lot of exercise behind the scene. So the numbers that you are seeing, the ARPU growth are not simply a function of simple demand or pricing. There's a lot of muscle flexing behind to create that growth. And I think this is another area for Türk Telekom to benefit from, if you like, speed penetration. Because if you compare these levels that Turkey is around these days, there is another area of gap with the peer markets. So I think this is a clear area for us to grow in 2021 and beyond. That's for sure.

And if you look at our first quarter results in the upsell performance, Mr. Önal has, I mean, talked about some numbers there. We haven't really, I mean, shared the number clearly, but the number of upsells we've seen in the first quarter was quite an interesting number, I can tell you. And 77% of that number was coming from pure speed upsells and 24% of that -- of the acquisitions were about 24 packages -- 24 megabits packages.

So this is how far we got, and then I think we have got more to go. You're seeing also in one of the slides ADSL to VDSL or fiber conversion, and that's another important area for us because it's simply paving the way for more upsells for the future years.

[Alexander Vengranovich, analyst]

Yes. I got you. I just -- I was referring more to the fixed voice segment, where you've lost like around 50,000 subscribers over the quarter. So I just wanted to understand what sort of dynamics should we expect in fixed voice going forward. And I think like last year, most of the inflow of the customers there was really driven by the broadband, right? And this year, we can probably expect to see a stronger trend of shifting of fixed voice customers to mobile via disconnecting the fixed voice lines while staying at fixed broadband product with you. Am I right to think about that this way?

[Gulsen Ayaz, executive]

It's correct and fair. And we have never pushed that product as a growth area for us going forward. It's obvious that it has been coming down. And the -- I mean, I think around 10 years ago, this was 30% of our wins. And today, it's about 10% of our wins. For us, I mean, to maintain the fixed line business revenues at a stable level is what we [indiscernible] to the guidance that we have provided. So yes, I mean, the number of acquisitions still not go there, but it's not our focus area anyway.

[Operator]

The next question comes from the line of Mandaci Ece with Unlu Securities.

[Ece Mandaci Baysal, analyst]

Congratulations on the good bottom line and operational results. I was just wondering about the continuation of this financial expenses going forward. You just said that, given the short-term component in your hedging contracts with the increasing rates, if I'm not mistaken, we might see some higher financial expenses. So looking at the current market rates and compare to first quarter numbers, could you please provide some insight that how much we should expect financial expenses roughly for the second quarter? Could it be around TRY 700 million levels on a quarterly basis? That is my question.

And secondly, could you also provide some insight on the effective tax rate that might be recorded for 2021, given the recent increase in the corporate tax rate and your deferred tax asset base?

[Kaan Aktan, executive]

Let me start by saying that it wouldn't be fair to give you an exact number at this time of the year about our future quarterly FX expense, but let me give you a few highlights. Less than 30% -- as far as I remember 28% of our total hedging portfolio is consisting of the short-term instruments, which are mostly impacted by the increasing interest rate trend of the lira, and part of it is already impacted by that. They are short in maturities. They are converting and reprice with the new rates. And they are partially impacted already as of the end of the quarter.

I mean it will be very far end limits, but last year we had around TRY 4 billion, including the FX loss, total financing cost. So it will definitely be much, much lower than this number. But you shouldn't expect a very large deviation or increase from its level in the first quarter. We just tried to be open and transparent and said that -- but you shouldn't also take it as a run rate for the remaining part of the year. So you should have a factor included in that. And I think you will have enough numbers or highlights to make this happen or to calculate because, as I said, [indiscernible] impacted of the total hedging cost and close to half of it has already been repriced.

And for the second question, can you repeat the question? It wasn't clear here.

[Ece Mandaci Baysal, analyst]

Yes. Of course, I was just wondering what could be the effective tax rate for the following quarters, given the recent increase in corporate tax rates officially in -- by the Turkish government and based on our deferred tax asset base.

[Kaan Aktan, executive]

I think that's 20% to 25% for this year. As well as there is another decision for limiting the deduction of financial expenses based on the structure of your balance sheet. So it's a quantitative legislation. So impact is still being discussed here internally. But about all in all, I think you should see an effective tax rate, including the impact of all these changes, closer to the official rate.

[Ece Mandaci Baysal, analyst]

So for full year, 25% on average effective tax rate would be meaningful, right, to assume?

[Kaan Aktan, executive]

Yes. This is what I was trying to say. We should be closer to that official rate in our effective tax rate.

[Operator]

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

[Nora Nagy, analyst]

Only one is for me about your CapEx guidance for full year '21. How much of lira depreciation is included in that guidance? Did you increase the depreciation level, which incorporates the guidance?

[Kaan Aktan, executive]

Well, we assume this is -- I mean, so the term of assuming the FX rate is not relevant, so we just run our sensitivities around it. And when we calculated the CapEx guidance, so we assumed a higher rate than today to be on the safe side. That will be around another -- close to 10% uplift, but this is a sensitivity analysis. This is not an assumption. This is not a forecast. This is just the way we calculated our potential CapEx spending, and we adjusted our CapEx guidance accordingly. So there is still a headroom in the level of the FX, which takes us to the current guidance level.

[Operator]

The next question comes from the line of Ignebekcili Murat with HSBC.

[Murat Ignebekcili, analyst]

I think you mentioned about copper wire sales at some point. My connection was bad. I couldn't hear accurately. How much contribution of your pretax earnings have from copper wire sales in first quarter? And how much should we expect for the full year?

[Kaan Aktan, executive]

So it's a byproduct of the modernization efforts that we continuously exercising. So the copper network is being transferred to a fiber network, and the byproduct sometimes, not always in some topologies is we can recollect -- reclaim the copper. So we don't give the details in the OpEx in the sense -- in the form of like the proceeds from the copper. But as we move, we continue having those investments in place. I mean, you can look at the impact from other line item in our OpEx that we incurred last year as well as this quarter. I think it should give you a clear guidance or direction.

[Murat Ignebekcili, analyst]

Do you record that -- those sale proceeds under investment income [indiscernible]?

[Kaan Aktan, executive]

It's coming as an adjustment to the OpEx item, which is called other.

[Murat Ignebekcili, analyst]

It's under OpEx? Okay.

[Kaan Aktan, executive]

Yes. And again, it's part of our routine operation. So it's not new. It's not specific to this quarter. It was there in the past, and it is there in this quarter.

[Murat Ignebekcili, analyst]

Yes, I think my memory doesn't serve me right. Because in the past, in like 5, 6 years ago, too, you were doing this practice. But I remember you were classifying it under other operating income or investment income. Okay. My bad memory then.

[Kaan Aktan, executive]

So it was an adjustment to OpEx.

[Operator]

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

[Ondrej Cabejšek, analyst]

One follow-up on the mobile segment, please. You mentioned price increases, which this time around you led and you're also highlighting all of the nominations for the awards for improved networks. So my question really is, can we expect Türk Telekom to be a bit more confident now about in the future also leading the market with price increases? Or was this some kind of one-off where you saw an opportunity in a particular segment? Any comment on that would be welcome.

[Yusuf Kiraç, executive]

[Interpreted] Our motivation to reach our fair share in the market by also increasing the prices is still valid. We are trying to do [ debottle ] some of the optimum level as much as possible. Of course, the independent institutions appreciating our service quality makes us more confident. I mean, it's not possible for us to run the revenue growth strategy only on pricing. In order to create higher ARPU growth, we are implementing our sales and marketing strategies to take advantage of the growth and upsell effects of our valuable subscriber base in 2021. I mean, therefore, we are trying to follow the reality of the market, and our strategy that keeps us away from price-oriented gains and competition, it's still valid, and we will try to keep it as it is as much as possible.

[Operator]

[Operator Instructions] The next question comes from the line of Atligan, Gökhan with JPMorgan.

[Gökhan Atilgan;JPMorgan;Analyst, analyst]

I just wanted to check if you have any updates you would like to share on the expiration of the concession agreement.

[Yusuf Kiraç, executive]

[Interpreted] I mean, I can clearly tell you that we don't have any [indiscernible] we can share with you as of now. This issue is not currently on the agenda of the public or more specifically on our agenda. In the concession context, I mean, before Türk Telekom [indiscernible] concessions expiry, we have the mobile license as you know in 2023 and 2026. So those are the critical dates for the mobile licenses, I mean, for 2 different instances in 2023. Maybe other operators would like to add some other answers for this question. For now, we believe our fixed concession is still very away from our deadline.

[Operator]

Mr. Gökhan, are you done with your questions?

[Gökhan Atilgan;JPMorgan;Analyst, analyst]

Yes. I am. Maybe one quick follow-up is, even though it may not be mentioned by the regulator or it may not be topical among the public, the deadline remains 2026 for the end of the concession privileges, correct?

[Yusuf Kiraç, executive]

[Interpreted] Yes.

[Operator]

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

[Gulsen Ayaz, executive]

Thank you, everyone, for joining us today. We look forward to sharing our next quarter results with you next time. Thank you very much. Bye-bye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]