Turk Telekomunikasyon AS

IST:TTKOM.E

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. I am Gaily, 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 2022 financial and operational results. [Operator Instructions] The conference is being recorded. [Operator Instructions]

We are here with the management team, and today's speakers, our 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 2022 first quarter results conference call. Thank you for joining us today. In this third year, the pressures of COVID-19 pandemic are still upon us. While the resurgence of number of cases in China threatens world economic growth, surging global inflation, amplified by the unforeseen Russia-Ukraine war, remains a big problem for all.

In Turkey, the businesses and the consumer heavily has the heightened uncertainty caused by the deteriorating macroeconomic environment as well as the geopolitical tension at global scale. On the bright side, the easing of pandemic measures and the significant drop in number of cases encouraged mobility and paved the way for faster normalization. Europe's stability secured at the beginning of the year was disturbed by the Russia-Ukraine conflict. Markets responded quickly to the unfolded crisis with a swift rise in the interest rates. We saw inflation climbing up to 61% as of March, its highest in the last 20 years. Demand for telco products remained rather resilient although we feel that the consumers need more time to absorb accumulating price revisions. The negative impact of the macro picture on demand has been limited so far compared to our expectations.

Besides the permanent change in need for digitalization, speed and data by the pandemic enables us to offer the fine blend of pricing and upselling to our customers. Recent macroeconomic developments affected our financial results. Still, our operating performance and the net income came in stronger compared to our first quarter budget, thanks to our adaptive measures and well-timed actions on revenue, cost and FX risk management.

Starting with Slide #3 on our presentation, net subscriber additions. Total number of Türk Telekom subscribers reached 52.2 million with 350,000 net additions in Q1 '22. Net subscriber additions were 1.6 million during the last 12 months. Fixed broadband subscribers rose to 14.5 million with net additions of 151,000, only a tad behind our expectation. Mobile subscriber portfolio reached 24.4 million with 334,000 of net additions during the quarter. Number of fixed voice subscribers declined by 107,000.

Slide #4, financial and operational overview. We completed the first quarter with strong revenue growth. Consolidated revenues increased by 25% year-on-year while operational revenues rose by 26%, slightly ahead of our guidance that sees 23% to 25% growth for the full year. Consolidated EBITDA grew by 8% to TRY 4.1 billion with an EBITDA margin of 43.5%, down year-on-year due to last year's high base and expectedly higher growth in OpEx compared to revenues. Excluding the IFRIC 12 impact, EBITDA margin was 45%. Net income was TRY 560 million, lower year-on-year due to larger net financial expenses recorded amid another 9% average rise in FX rates and volatile interest rates, which was partly offset by the tax income.

CapEx as realized at TRY 1.5 billion in the first quarter. We reported USD 390 million long FX position. Finally, net debt-to-EBITDA ratio slightly increased to 1.24x. We made a good start to 2022 with results meeting our expectations in some areas and mostly meeting them in others. We stick to our earlier guidance for the time being. It will be more plausible to monitor the macroeconomic developments and make healthier forecast in a more stable financial environment.

Slide #5, fixed broadband performance. Demand in fixed internet remained resilient relative to macroeconomic environment and price revisions. We added 151,000 subscribers in Q1, almost in line with our targets and expanded our fixed broadband base to 14.5 million in total. As the fibre powerhouse of Turkey, we raised the number of fibre subscribers to 10.3 million, which now comprises more than 71% of our FBB base compared to 37% as of 2019. Competition got stiffer in the fixed broadband market after we introduced our price revisions on December 1. Other ISPs did not follow us right away, leading to winded parities in the market. As a result, we have seen our wholesale net additions growing faster in the first quarter. Competitors' pricing actions started in January and continued into March, realigning the price gaps at prior levels by the end of Q1.

A robust recontracting performance throughout the first quarter on this backdrop was a remarkable success that underlines our valued differences from competition. 24 megabits and above packages made 56% of new acquisitions. As a result, first quarter ARPA was 8.5% higher Q-on-Q.

Having cycled last year's highest base, fixed broadband revenue grew above 22% year-on-year in line with our expectation. ARPU growth was 14.5% year-on-year with some gradual pickup Q-on-Q. An important development to share is the regulator's approval of our proposal to raise wholesale prices and meet significant pickup in costs with rising inflation. As such, wholesale port prices will be increased by around 67%, starting from 1st of June. We have made our preparations to adjust our wholesale and retail tariffs accordingly. As the leader of the market in fixed internet, owning the largest subscriber base, we aim to manage our portfolio with highest delicacy in order to optimize price revisions and subscriber evolution.

Moving on to Slide #6, introducing our new sales strategy in fixed voice. As a pioneer of technological change, we prioritize efficiency and adaptability at Türk Telekom. With increasing digitalization and declining traditional fixed voice services, we now focus on naked DSL sales in new acquisitions rather than WLR. We expect this new sales strategy to contract our fixed voice subscriber base by 675,000 in 2022, but have no impact on our consolidated revenues. In terms of revenues by line of business, we will see a shift from fixed voice to fixed broadband for about TRY 25 million. On the upside of this transition, we expect to save TRY 190 million on CapEx over the 3-year period through more efficient use of voice.

Moving on to mobile performance, Slide #7. Pricing motivation remained generally high in mobile during the first quarter. Some aggressive campaigns took their turns, but overall, we saw a rational market with pricing actions aiming to catch up with inflation. Both prepaid and postpaid segments introduced new tariffs in March following the revisions in November and December last year. The upcoming inflation data will be crucial on operators' pricing behavior in the following quarters. We recorded total of 334,000 net subscriber additions in Q1 '22, ahead of the expectation, with lowest churn rates both in the prepaid and postpaid segments. Subscriber growth was predominantly led by 300,000 postpaid additions, followed by 35,000 increase in prepaid. The portion of postpaid subscribers in our mobile base touched its highest level of 65.3%.

Our prime base reached 5.2 million subscribers with 49% year-on-year growth. The success of our mobile strategy around postpaidisation and premiumisation revealed itself a well-balanced subscriber and ARPU increase. Annual blended ARPU growth came in at 17.5%, thanks to our effective pricing strategy and segmented offers. Postpaid ARPU increased by 15% year-on-year while prepaid ARPU surged more than 22%. Accordingly, mobile revenues grew above 23% ahead of our expectation for the first quarter.

As you know, a new era for Türk Telekom has begun. Now let's take a look at our new shareholder structure on Slide #8. Q1 '22 has made it to a special place in our company's history. It has been marked by the share transfer between LYY and the Türkiye Wealth Fund where the former sold its 55% stake in the company. The deal has been closed on March 31, the same day our company's 2021 Ordinary General Assembly Meeting has been held and the new Board of Directors has been appointed. Accordingly, TWF has become the majority shareholder of Türk Telekom with a 61.7% stake owned. With the new shareholder and the Board of Directors, we unite under one common goal of meeting our responsibility to all our stakeholders without compromise. Going forward, we will stick to the best practices that have supported our company's operational and financial well-being. We will look for opportunities that will further strengthen its robust position in telco space, generate sustainable growth as global standards and improve its investment case.

In line with our commitment to remunerating our shareholders, it has been resolved by the general assembly that a cash dividend of TRY 4.95 billion will be paid to our shareholders starting from April 28. It is hard to think that 2022 will remain shy of further challenges, but we will stay focused on unleashing opportunities that arise at tough times through our strengths, know-how and powerful human capital. We are determined to empower our ecosystem. We lead digitalization in Turkey, pioneer 5G and beyond technologies and capture very attractive tech-related ventures.

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. We are now on Slide 10 with financial performance. Our consolidated revenues grew by 25% year-over-year to TRY 9.5 billion in the first quarter. Excluding the IFRIC 12 impact, revenue increase was close to 26%, which is ahead of our full year guidance. The top line performance was mostly driven by strong support from fixed broadband, mobile and other revenues. Fixed broadband revenue grew about 22% on last year's highest base of 34, along with ongoing subscriber growth and early pricing actions in December and January. We observed a competitive fixed broadband market in the first quarter, where other ISPs followed the price revision led by Türk Telekom with a longer-than-usual lag. Despite the macroeconomic pressures on the consumer, net acquisition only slightly missed our expectations, owing to accelerated gains in the wholesale segment and its first quarter market dynamics.

Market prices settled around the revision. It will be by the end of first quarter. Hence, we expect to see a more rational and balanced market in the upcoming quarters. We believe that plan revision in wholesale prices together with higher-than-expected inflation, which is now already above 60%, will be important factors to support our view.

ARPU growth was 14.5% year-over-year with some gradual pickup quarter-over-quarter. Our pricing and upselling strategy through customized offers should be supportive of ARPU growth in the remainder of the year. In the mobile market, it will be fair to say that the operators' commitment to catching up with the inflationary pricing was its highest even though some aggressive short-term campaigns impacted the market from time to time. Higher-than-expected net adds were largely driven by the postpaid segment exceeding 23%. Mobile revenue growth reached a new peak, thanks to the expanding subscriber base, consecutive price revisions as well as our strategy, which is targeting postpaid and premium segments. Mobile topline was nicely supported by the 7.5% annual ARPU growth while we observed a 3.5 points leap quarter-over-quarter.

Number of fixed voice subscribers declined more than -- by more than 100,000 during the quarter as we started promoting the naked DSL over WLR. Fixed voice revenue maintained its stable progression with 2% growth. Home TV subscribers remained broadly flat quarter-over-quarter at 1.5 million, 17% annual ARPU growth was led by tariff revisions, but was ahead of the fourth quarter level and has been the main driver of 14% overall revenue increase. Growth in corporate revenue also accelerated to 18% while the 74% increase in other revenue was predominantly led by equipment sales, ICT project revenues and call center revenues.

Now moving on to our operational performance. Consolidated EBITDA rose by 8% year-over-year to TRY 4.1 billion with EBITDA margin of 43.5%, flat quarter-over-quarter, but lower year-over-year due to an inflated OpEx base mainly by personnel, energy and commercial costs. Excluding the IFRIC 12 accounting impact, EBITDA margin was 45%. Even though we managed to deliver solid revenue growth, the immediate effect of inflation on costs resulted in contraction of the EBITDA margin annually. Still, the EBITDA margin came in slightly ahead of our expectations. In the first quarter, operating expenses increased by 42% year-over-year to TRY 5.4 billion. Excluding IFRIC 12 cost, growth was 45% year-over-year.

Looking at the main highlights in the OpEx items. Interconnection costs increased by 21% along with weaker lira and increased traffic, but also some decline in per unit cost. Tax expense increased by 22%. Provision for doubtful receivables is up by nearly 13% with a healthy pickup on collection sides. Cost of equipment and technology sales grew by 14%, along with weaker lira, but slower broadband additions. Other direct costs grew by 45% with the pickup in shared revenues and value-added services revenues. Commercial costs increased by 40%, along with inflation and normalization after pandemic.

Network and technology expenses rose 93%, mainly due to increased energy prices, maintenance works and weaker lira. And finally, personnel expense increased by 44% with the effect of minimum wage and inflation adjusted salary increase. It seems revenue growth could be driven higher by inflation compared to our guidance, but we will be taking prudent steps towards guidance revisions, mainly because we see some upside risk on the cost side in the coming period. Hence, we stick to our earlier guidance for NAV given the complications around forming healthy forecast by domestic and global macro uncertainties and ongoing Russia-Ukraine war.

Coming to the bottom line. Q1 net income declined to TRY 560 million, along with the rise in financial expense, which was partly mitigated by TRY 270 million of tax income. Net financial expense was TRY 2 billion in the first quarter, slightly below previous quarter's figures as implied by the sensitivity analysis of last quarter. We incurred further FX losses and more hedges have become ineffective, with a 9% average increase in FX rate quarter-over-quarter. Moreover, the Russia-Ukraine war caused another wave of instability, leading into significant volatility in interest rates. A fluctuating interest rate environment throughout the quarter also affected the swap costs.

On the positive front, we have started restructuring our participating cross-currency portfolio, but the frequent volatility in financial market imposed a gradual and cautious approach in order to optimize the cost of the whole exercise. We aim to resume our FX eutral position as markets restore stability.

Moving on to Slide 11 with debt profile. Our net debt-to-EBITDA increased to 1.24x, only slightly higher than the previous quarter despite further weakness in lira and expectedly moderate EBITDA growth. Still, our ratio compares favorably to industry averages and continues to remain within our internal comfort rate. Cash and cash equivalents were TRY 8.4 billion or 87% is FX base. This doesn't include the TRY 3.4 billion of FX protected time deposit and highly liquid assets that we book under financial investments according to the IFRS reporting rules.

We ended the year with $390 million loan position in hand compared to $240 million as of the last quarter. The net FX exposure included equivalent of TRY 2.3 billion of FX debt, TRY 2.2 billion of total hedge position and TRY 0.5 billion of FX cash. As you can see on the bottom right chart, the hedge amount includes $220 million equivalent of FX protected time deposits, which has recently been introduced by the government. The new instrument comes in with a free option, providing full protection against fluctuations of FX rates. During the quarter, we had healthy access to lira loans, and we increased the share of local currency borrowings within the total debt portfolio. Maintaining healthy liquidity both in lira and hard currencies will be another priority for us.

We are now moving on Slide 12. We stick to our target of maintaining an FX-neutral P&L. Our primary purpose to minimize the impact of the FX rate fluctuations on the P&L and increase the visibility of the bottom line performance remain unchanged. The volatility in the FX markets declined significantly, and the swap rates came down at the beginning of the year, although we started restructuring our swap portfolio, this picture was really distorted by the Russia-Ukraine crisis. Once again, we face very limited liquidity and high costs. Instead of restructuring our long-term hedge portfolio at amplified costs, we are now baking up our FX risk management targets with short-term instruments. The FX sensitivity analysis reports regularly in our quarterly financials suggest that assuming all else constant, a 10% increase in FX rates will have TRY 1.1 billion negative impact on our pretax income. On the flip side, the sensitivity analysis close to TRY 1 billion positive impact in case of a simple depreciation in lira.

Finally, the unlevered free cash flow was a negative TRY 456 million in the first quarter on lower contribution from operating activities, which were affected mainly by the high cost inflation, but also on significantly high payment schedule realized over the quarter. The 2 factors together suppressed the free cash flow generation beyond the usual low seasonality we observe in first quarter. Hence, it will be reasonable to expect an improving cash flow performance in the rest of the year together with the revenue outlook that we have just shared.

This concludes my presentation. We can now open up the Q&A session.

[Operator]

[Operator Instructions] I would like to inform you that Türk Telekom will have translation during the Q&A session.

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

[Jonathan Kennedy-Good, analyst]

Three questions from me. First of all, the indication for a price increase of over 60% on the wholesale side. Just trying to get some sense of how that would impact your retail pricing and why you haven't increased your revenue guidance on the back of what seems to be legislated increases in price.

And then secondly, in terms of customer behavior that you've observed in the first quarter, as these customers bring new contracts, what kind of behavior have you seen amongst the cohorts, i.e., are people down-trading to save money in a difficult economy or are the renewals at higher ARPUs, how the customers behaving?

And then finally, just would like some color on the impact of this currency protected time deposits, which seems to have boosted cash flow quite significantly in the first quarter. If you could give us some explanation there, I'd appreciate that.

[Kaan Aktan, executive]

No, for the first question, there is no wholesale price increase for the port prices, which is one of the components of wholesale price for the broadband service. There is also a transmission component, which is roughly in terms of pricing stayed flat. All in all, when you combine those 2 components together, you will see -- we should see a 30% to 40% cost increase that will be imposed on ISPs.

So normally, we should expect price adjustments or their appetite to be larger to go in line with the price adjustments that we will apply in midyear. But again, they were a bit behind the -- in terms of the timing of the price adjustments when we had pricing activity at the end of the year, we saw that they put a certain lag to follow our pricing. But what we should normally expect is now they will have more motivation to follow the price adjustments. Normally, we start the price increase and since we have the leading position in that market, but now they will -- they should be following that.

To be honest, that was partially included into the initial guidance. The fact that we should normally have a wholesale price increase sometimes in this year. And as we mentioned also in the beginning of the call, so we still have uncertainties to come from the -- that may come from the cost side. And although we see some opportunity in the revenue forecast, we stayed and not -- and decided not to change the guidance at this time of the year. So this is why we have it.

So in terms of the reaction from the subscribers, especially for the newcomers to the company, we saw that -- we saw a partial trading down. But normally, that's something that we always experience when we have a sizable price adjustment, which is maybe more -- which gives a better direction as how the existing customers reacted to the pricing changes in that part, so the customers that are already using our services so we didn't see such trading down [indiscernible] continue to give existing services or we've been able to upsell them with higher speeds. So again, when subscribers are changing their operators or they are becoming a customer for the first time, such price increases normally we push them towards cheaper and lower capacity, lower speeds or lower total offers.

That's something that we experienced in the past, and it was the same thing this time. But again, we would normally expect them to be upsold to higher speeds whenever they feel it's necessary. And can you remind me the third question that you asked? What is it?

[Jonathan Kennedy-Good, analyst]

Just on -- yes, just on Page 12 of your presentation, there's some commentary around the currency protected time deposit and the positive impact that it had on cash flow. Just trying to understand what exactly that financial instrument is and some color around how it's evolved in the quarter.

[Kaan Aktan, executive]

So that's an instrument introduced basically by the ministry -- by the Treasury and the Central Bank. We executed transactions through commercial banks. But at the end of the day, it says that when we convert our U.S. dollars to lira and put it as a lira time deposit to the bank, the Treasury or the Central Bank, it depends on the choice of the product, they'll cover the change in the FX rates when the time deposit expires. So it's like, in a way, an option that you can use if the FX rate -- I mean, the expected interest income on that lira is lower than the change in the FX rates, so you get the FX rate difference. If the vice versa, you get the regular interest rates, which means you are always protected again the FX rates although you convert your dollar to lira.

There is a second benefit. Since it's converted in lira, if the FX rates go down, you still stay at the same lira, which means in the dollar term, you improved or increased your dollar equivalent value of the time deposits. But because of the nature of the instruments, we have to record it as a financial investment rather than a cash in bank. So we try to be highlighting this fact in different parts of the presentation because we tend to see that as part of our cash balance. But technically, it's recorded as a financial investment, which created a negative impact on the cash flow, which we also highlighted that the impact is -- should not be considered as a real cash-out from operations. It's a technical adjustment.

[Operator]

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

[Ondrej Cabejšek, analyst]

Question on margins first. You mentioned obviously inflationary pressures, but then you're also mentioning some base effects where last year, you had, I guess, reduced costs in some ways compared to the usual run rate because of COVID. So just curious in terms of margin was down between 6% and 7%, which is kind of in line with what the full year guidance implies, so just curious how you break down that decrease year-over-year in terms of the base effect versus inflationary pressures? And what does that mean for the rest of the year? Because I think -- if I understand your guidance correctly, then what you are saying now is basically that the impacts of inflation would maybe completely take over in terms of the year-over-year margin developments as the year progresses. Is that correct?

[Kaan Aktan, executive]

Well, normally, I mean, just by looking at the mathematical exercise, not taking into account what happened in the cost base because of the inflation, the pricing activities that we -- or adjustments that we had in the last 4, 5 months, we will see this quarter as the lowest-margin quarter. So cost impact occurs immediately, especially for the people-related costs because they were all adjusted in the first quarter. And the energy prices, it was immediately impacting our cost base. And so cost items like customer service or sales cost, they also have a large people-related cost item integrated. So they were all going up in the first quarter, whereas, as we mentioned several times, the pricing actions will be impacting our revenue throughout the year as the contracts expire and customers are exposed to higher prices.

In that sense, we can say that a major reason for the margin erosion was due to this symmetry between the revenue increase and the cost base increase. We had last year 1 to 2 percentage point benefit on our cost base due to the COVID-related, in a way, lack of activity in our system. So that's partially reversed in the first quarter. But again, the major impact was coming from the inflation.

[Ondrej Cabejšek, analyst]

And second question, if I may, in terms of just FX risk management. So the exposure to 10% lira depreciation that you highlight in your risk statements, I think you mentioned in your report that you plan to decrease this exposure in the very short term. So just curious how you're thinking about maybe managing this with respect to whatever internal maybe targets you have for the full year net income because, obviously, there's a payoff of costs associated with these hedges as well as the depreciation rate? So how are you weighing those 2 things? And what kind of targets do you have internally for -- I know you don't guide for it, but what kind of targets do you have maybe on a year-over-year evolution of your net income?

[Kaan Aktan, executive]

So we don't normally guide for the net income. As you know, we only guide for the operating margin. So it's -- since we have now a certain level of exposure to the FX rate, so it's difficult to set a target or give the forecast. But we can tell that as we -- that position in last year, which was a tax net position. And after that, there happened to be a very sizable devaluation of the lira. And we have now an exposure because of option embedded swap agreement. But our intention is to go back to that currency natural position as fast as possible, but within the limitation of the market in terms of availability of such instruments and the liquidity on such instrument.

It may take more than 1 quarter to get to that level. Once we execute such restructuring, it was the case in the past, we incurred some one-off charges. Plus, depending on the level of the interest rates at the moment of the restructuring, we may have an uplifted interest cost going forward. But again, all these parameters are very difficult to forecast at the moment, but it will be compared to last year. So these activities, whether with the restructuring or we let the exposures in place, that should put some pressure on the net income in the remainder part of the year. So comparing to the level of the net income in last year.

Another factor, which was not part of the question, but now it's becoming more and more visible in our P&L, it's the tax line. So we -- in the first quarter, we incurred a positive or a tax income rather than a tax expense, which will be normal outcome in any quarter. This is because of the fact that the government now because of the high inflation gives us the possibility to revalue our fixed asset, which means there will be more depreciation expense. These are the statutory accounts, by the way, not the IFRS or Turkish accounting standard account, which we are reporting here. That creates more depreciation expense, which means more tax benefits going forward.

Another component is we have been provided for different CapEx projects with investment incentives, and these investment incentives are also revalued with the change in the inflation. So those factors are, in a way, providing benefit to the net income. And the -- so far, looking at inflationary expectations, we would also expect them to be impacting in a similar manner our P&L in the remaining part of the year. That's another factor to consider for this net income.

[Operator]

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

[Cemal Demirtas, analyst]

My question is about the strategic outlook of Türk Telekom and possible actions by the Türkiye Wealth Fund. In an interview in which the Türkiye Wealth Fund CEO, he mentioned that SPO might be one of the priority in the future. And I wonder if there is any time line of that and is there any just indication about the solution to the licensing issue which will expire by 2026? So any development or a time line you can share for maybe next 2, 3 years, what could be changing in the company to get prepared for a possible SPO?

[Ümit Önal, executive]

[Interpreted] First of all, let me tell you that our majority shareholders have very positive opinions and outlook about our company. And that actually was the main motivation in terms of purchasing our shares. For the new period, we expect the main motivation to be increasing the value of the company, as you can hear from the explanations as well. And as we have mentioned, we can also see the horizon set for the extension of the concession. The removal of the uncertainty about the concession is of critical importance in terms of both the time remaining for the expiration of the concession and Turkey fiberization and the upcoming transition to 5G technology.

And also, the sovereign investment of Turkey highlighted the importance to be able to make long-term plans. I mean, this issue should be sorted out. So all this give us an idea about the direction of the subject matter and the high motivation around it. As you know very well, the free floating shares of the company is quite low. And again, as you know, the sovereign invest fund has said that they don't have a plan for a block sale, but they think that a secondary public offering could generate interest from foreigners -- foreign investors. I mean, all these give us an idea about the exciting developments are ahead of us going forward.

[Operator]

[Operator Instructions] The next question is from the line of [indiscernible] from AK Investment.

[Unknown Analyst]

So I have only one question. Where do you see the ARPU growth next year given your inflationary projections both in mobile and broadband? I mean, we understand that this -- the inflationary pricing takes time because of the long-term nature of the contracts. And I think next year we will have high inflation rebase with around at least 50%. So do you think that the next year, the ARPU growth will catch up the increase in the cost base because of the current inflation?

[Ümit Önal, executive]

[Interpreted] I will try to explain your answer separately both for fixed broadband and mobile. For mobile, if you consider the new acquisitions, the price increases happened from last year's March to this year March is around 50% to 60%. For 2022, we expect the inflationary market conditions to prevail and operators, including us, of course, make price revisions accordingly. And we will continue to take the actions according to the dynamic market positioning. Maybe more clearly, I can tell you that it would be realistic to expect the mobile ARPU level for 2022 around 20% level.

On the fixed broadband side, we have made our price revision for the new customers in December 2021. For the current customers, we have made our price revisions in January 2022, but other ISPs did not follow the price revision immediately.

And more than 90% of our customers are in contracted basis. And we have an approval that we have been making on the ICT and the regulatory authority for some time, and it has been approved and it will be entering into force as of 1st of June. We started to feel the effects of the pandemic as of the second half of 2020. So we have acquired a high volume of customers and contracted them in the second half of 2020. So their contracts will be expiring in second half of this year. That's why we expect this will create a big ARPU opportunity in terms of the contracts.

While recontracting, of course, we also expect the upsell and also high-speed expectations to make a positive impact on ARPU. All in all, we can clearly state that the ARPU on fixed broadband in 2022 to be above 20% level.

[Unknown Analyst]

If you can sum up, what does that mean for the next year's ARPU growth in mobile and the fixed broadband? I mean, you should have some kind of predictions given the actions you take in the end of last year and the half -- half of the last year. Some indication will be great for the next year? And also, I'm assuming that the inflationary pressures, persistent I think, maybe because of the -- or the global headwinds, do you think it would be possible to cut the duration of this fixed broadband contract to 12 months instead of 2 years?

[Ümit Önal, executive]

[Interpreted] I mean, it is not very easy for us to give you a guidance for forward. I mean we cannot share our prediction for 2023. It would be very early, but we will be implementing wholesale price increases as of 1st of June, and we are following the dynamic pricing actions. So there will be the effects of the new contracts and the recontracting. Also, we will enjoy the upside opportunity. So we can easily say that we will enjoy over 20% of ARPU and revenue increase for 2022. We also know that there will be a higher and accelerating momentum in the second half of 2022. We believe that it is going to have an impact into '23 as well.

For the self-contracting schemes, we always consider different kind of pricing strategies. But first, we will see the general implementation. We are very good at adapting ourselves to the dynamic market conditions. We are right now closely following the market dynamism. What is important for us to ensure is sustainable ARPU growth and also a subscriber increase.

[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.

[Unknown Executive]

Thank you, everyone, for joining us today. Enjoy the rest of the year. Thank you. Bye-bye.

[Operator]

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.

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