Turk Telekomunikasyon AS

IST:TTKOM.E

Earnings Call Analysis

Improved Revenue, EBITDA, and Subscriber Growth

The company saw its subscriber count climb to 52.9 million, with a notable increase due to mobile and fixed internet. Revenue jumped 78% year-on-year to TRY 22 billion, with expectations to reach the upper end of the guidance range of 67% to 70% for the full year. EBITDA grew by 58% year-on-year to TRY 8 billion at a 36% margin, supporting a net income that nearly quadrupled due to stable currency and tax incentives. The net debt to EBITDA ratio dropped to 1.56x. The company remains confident in delivering on its revised full-year 2023 guidance and expects continued revenue and ARPU growth, despite anticipating high inflation. Furthermore, they project a concrete progression in their fixed-line services concession agreement renewal in 2024.

Robust Subscriber Growth Amid Economic Headwinds

Despite facing high inflation, interest rate hikes from central banks, and market fears of a slow global growth, the company managed to continue robust subscriber growth. Total subscribers reached 52.9 million, with net additions of around 0.5 million during the quarter. Performance was particularly strong in mobile and fixed internet services, with the mobile segment adding 537,000 net subscribers, reaching 26.1 million. The fiber subscriber base grew to 12.6 million, representing an 83% share of the total fixed broadband base. The company's strategic focus on postpaid mobile services resulted in 1.4 million net subscribers over the last 12 months, marking the highest ever proportion of postpaid customers at 69%.

Revenue and Profit Surge with Operational Efficiency

The company's consolidated revenues surged by 78% year-on-year to over 22 billion TRY, which was slightly ahead of the full-year guidance range of 67% to 70% growth. This was due to strong operational performance, subscriber growth, and solid data consumption. The EBITDA also grew by 58%, resulting in net income that nearly quadrupled compared to the previous year's quarter. Noteworthy was the net debt to EBITDA ratio, which improved to 1.56x from 1.65x, demonstrating healthier financial positioning. The management remains confident in delivering on its revised full-year guidance.

Strategic Moves in Broadband & Mobile Sectors

In the face of pricing adjustments due to inflation, the company effectively managed its broadband and mobile segments. For fixed broadband, the company saw a strong subscriber base growth and upselling to higher-speed packages, leading to a year-on-year ARPU growth of 58%. The company anticipates a continued ARPU acceleration fueled by new pricing strategies and package upgrades. On the mobile front, rational pricing behavior and robust demand contributed to an 89% year-on-year jump in mobile revenue. Another round of price adjustments and a shift to shorter contract structures are expected to support ARPU growth in the following year.

Outlook and Initiatives for Operational Improvement

The company envisions significant potential in the medium term as it seeks to counter inflation effectively. Key initiatives include optimizing the fixed services concession agreement, refining operational aspects, and investing in technology, human resources, market position, and brand building for a sustainable future. Retirement programs and other operational strategies are projected to yield significant cost savings in the following year.

Financial Resilience with Exchange Rate Exposure Managed

Demonstrating financial resilience, the cash and cash equivalents held by the company total approximately 12 billion TRY, of which 43% is FX-based. The company's foreign currency position, excluding certain hedge contracts, was a short FX position of $240 million, showing cautious management of exchange rate exposure. Sensitivity analyses indicated both the risks and potential benefits of currency fluctuations on income. Nonetheless, the levered free cash flow remained robust at 1.9 billion TRY.

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. I am Maria, your Chorus Call operator. Welcome, and thank you for joining the Türk Telekom Conference Call and live webcast to present to discuss the third quarter 2023 financial and operational results. [Operator Instructions] 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 2023 third quarter results conference call. Thank you for joining us today. Large central banks post their rate hikes has signaled higher for longer interest rates amid declining sticky inflation outlook. And markets took their fairs, projections of slow global growth, Royal equity markets, oil price oscillated between supply cuts and soft demand outlook at home, after touching its lowest point in June with an 8-month slight down the peak, inflation resumed a swift run-up to 61.5% at the end of the quarter. In the meantime, CBRT surprised the market with an accelerated rate hike cycle, moving the bank's policy rate to 30%. Inflation continued to weigh on consumer preferences in general, but the wage hikes introduced in July and the summer spirit limited the potential pressure we think. As such, subscriber growth remained robust despite continued price revisions, both in mobile and fixed Internet within the quarter. Data consumption, re-contracting and upsetting the KPIs through which we gauge subscriber demand and resilience of our businesses have all performed strongly. Mobile and fixed Internet data usage grew by 22% and 7%, respectively, on an annual basis. In quarterly trends, charged by seasonality, mobile data usage has risen while fixed Internet data usage has fallen due to holidays and more time spent outdoor in summer months. Starting with Slide number 3 in our presentation, net subscriber additions. Total number of subscribers rose to 52.9 million with almost 0.5 million net additions during the quarter, thanks to strong contributions from mobile and fixed Internet. While fixed voice stayed on a contracting trend, TV mood vector expansion. Fixed broadband base increased to 15.1 million with 166,000 net additions, thanks to a strong July performance, a well-contained churn in the aftermath of sizable price revisions as well as reliable in new sales activity in the back-to-school period. Fiber base expanded to 12.6 million subscribers with 355,000 quarterly net additions. The share of fiber subscribers in our total fixed broadband base exceeded 83% coming from 76% a year ago. With the highest performance over the last 4 reporting periods, Mobile segment added 537,000 net subscribers in the quarter, reaching TRY 26.1 million. Postpaid base continued expanding nicely with significant 473,000 additions, highest since Q2 '19. Prepaid reversed course to growth with 64,000 net additions after 3 quarters of contraction. Totalization was also stronger compared to previous quarters. With that, the ratio of postpaid customers in our mobile portfolio peaked to 69%, its highest ever. Lastly, postpaid segment has secured 1.4 million net subscribers over the last 12 months. Fixed voice base continued its decline with another 237,000 subscriber loss, along with the strategy focusing on naked DSL sales.Slide number 4, financial and operational overview. Rising by 78% year-on-year, consolidated revenues surpassed TRY 22 billion. Excluding the IFRIC 12 accounting impact, revenue growth came in at 79% year-on-year, taking the 9-month growth close to 70% compared to our guidance range of 67% to 70% for the full year. Consolidated EBITDA grew by 58% year-on-year to TRY 8 billion on 36% margin. The quarterly pickup in pace of growth was owing to further acceleration in revenue generation and a 210 basis points improvement in margin. Operational performance nicely fed into TRY 4.5 billion of net income, which has nearly quadrupled year-on-year. A relatively stable currency at TRY 2.5 billion of tax income, driven by the revaluation of assets as well as the incentives on R&D and investment spending also supported the bottom line. Net debt to EBITDA dropped to 1.56x Q-on-Q, thanks to an improved operating performance and relatively stable currency environment. Higher top line growth rate in every following quarter remained an unbroken trend for the last 6 reporting periods and high catching EBITDA performance, together with the recorded tax income supported the strong bottom line expansion, both annually and quarterly. We maintain our ‘23 full year guidance, which we had revised last quarter with increased confidence in our ability to deliver. Slide number 5, Fixed broadband platforms. Fixed Internet subscriber dynamics varied on a monthly basis over Q3. July net add performance was stronger than we expected, August in line but week and September, again stronger. Overall, for the quarter, net additions came in higher than we budgeted for, both in the wholesale and retail segment. This was despite the fact that some demand was pulled forward into Q2 ahead of our pricing actions. Robust new additions, coupled with low churn, resulted in a strong start to the quarter in July. As expected, a seasonally acquired August, on the other hand, proved a weak month following our wholesale and retail price revisions. August new additions were stronger than we had accounted for, but the churn was also higher. The share of wholesale segment in net adds increased in August as pricing actions by the other ISPs came smaller and later or build to ours. Overall subscriber activity was integrated with back to school demand in September. Partial and gradual rebalancing of price panties following other ISPs pricing actions, led to a more balanced split in wholesale and retail net performances in demand. Pre-contracting performance was affected by the price revisions, but the quarter slowdown was limited. Upselling, on the other hand, was very strong and ahead of our expectations, thanks to solid demand for higher-speed packages. 35 megabits and above images made 49% of new acquisitions, helping move up 42% higher Q-on-Q, together with the retail segment price revisions enacted around mid-July. Average equity speed of our subscriber base was 42 megabits as of Q3 with 36% increase year-on-year. Close to 48% of our subscribers are now on 35 megabits and above packages compared to 33% a year ago. As expected, blended auto growth has accelerated to 58% from 42% acquired Revo, mainly owing to the wholesale and retail price revisions. We expect the acceleration in FPB ARPU to continue in the final quarter as activations and re-contracting continue and revised prices. We also consider revising retail tariff prices one more time and launching the 9 contracts structured before year-end to support inflation management and subscriber base optimization in the coming periods. Moving on to mobile performance, Slide number 6. Leaving a mixed [Indiscernible] behind mobile sector truly enjoyed summer. The sector dynamics turned more favorable with its normalization after the earthquakes and seasonality. Well-disciplined by inflationary pricing, mobile operators launched their new tariffs in August, sticking to dynamic pricing on a quarterly basis. On share price, the same team campaigns spread all over the quarter, but the offers have not been as aggressive as what we had seen in May, thanks to stronger subscriber dynamics across the sector, driven by a combination of favorable factors, including seasonality, wage hikes and summer. In this backdrop, the MNP market continued its grower year-on-year stayed near flat Q-on-Q. While [Indiscernible] is behind the annual variance and less aggressive competition described earlier explains the quite stable look. Q3 has been the eighth consecutive quarter we maintained our top place in networks, being the most preferred operator in the space on a constant basis. Seasonal factors and our continued strength in the MNP market support to activations in both segments. Competitive landscape in addition to seasonality led to a visible recovery in prepaid churn driving the overall churn rate lower Q-on-Q. [Indiscernible], on the other hand, moved marginally up from last quarter's low base but stayed close to its historic lows. 78% blended ARPU growth year-on-year, once again stood available inflation, thanks to accelerated 70% and 53% respective rise in postpaid and prepaid ARPUs. Stronger subscriber and data consumption dynamics in addition to pricing have all fed into the 89% year-on-year jump in mobile revenue despite a high base with 49% annual growth in the same period last year. Additional data package and top-up revenues in mobile grew by 107% and 93% year-on-year, respectively. We have recently revised both our postpaid and prepaid tariffs one more time in mid-October. Therefore, we expect strong ARPU evolution to continue in the final quarter of the year. Before I give the word to Kaan to discuss our financial performance in detail, allow me to share some important developments. Firstly, we are delighted to have recently published our 2022 sustainability report, team around stable transformation with communication. Our GRI compliance report provides detailed information on our sustainability approach and performance. Therefore, I encourage you to visit our Investor Relations website for this critical and rich content that we are proud to be sharing with our esteemed stakeholders. Secondly, needless to say, renewal of the fixed plant concession will be tapping our 2024 agenda. As you know, we put forward an application with the regulator or the renewal of the fixed line services concession agreement at the beginning of 2023. We Subsequently, we were asked by the regulator to draft a document describing the proposed framework of upcoming agreements. Accordingly, we have aggregated our opinions, recommendations and requests around the top and have submitted our proposed framework to regulators just recently. We applied a political inclusive approach in preparing destruction to create a value-enhancing and sustainable operating model for the advancement of Türkiye sector had to turn on altogether. We expect to see concrete progress on this priority topic in 2024. It is now time we ready ourselves to a fresh a robot starts to next year and seize every opportunity to continue strengthening our available assets, including our technology, human resources, market position and brand on our determined and a sustainable future. Thank you. Kaan. The floor is yours now.

[Kaan Aktan, executive]

Thank you very much. Good afternoon, everyone. We are now on Slide 8, financial pro top line growth further accelerated to 78% from last quarter's 67. Thanks, [Indiscernible] impact of subscriber growth pricing reconstructing and upselling on our core business revenues as well as continued robust trends in noncore services. This was generally a strong quarter shaped by holiday and back to school trends. Meanwhile, the performance was further uplifted by the acceleration of the fixed broadband ARPU and the strong performance of mobile ARPU denying a significantly high base from last year. Annual growth in fixed broadband revenue jumped to 63% from 45% of the prior quarter. Wholesale revenue growth was more significant as we are now able to reflect price increases on to other ISPs immediately after we receive regulatory approvals. Repricing retail customers to new price levels will be continue to exercise through recontracting. Therefore, we expect blended at to further accelerate in the coming period. it is 89% mobile revenue growth was strong, thanks to robust demand and rational pricing behavior prevailing in the sector. Postpaid trends remain extremely strong with both organic growth and increased preference towards postpaid tariffs by locals, either through switches from prepaid or in new activations. Fixed voice and TV revenue performance was led in comparison to fixed broadband and mobile, but managed to pay up quarter-over-quarter. Growth in TV is becoming more visible now, thanks to our new platform and strategy. We expect to see a stronger contribution from TV going forward. 82% corporate data revenue growth was also significantly above last quarter's 62%. Growth in other revenues on the other and maintained second quarter super strong performance with 130, 38% increase. Equipment ICT project and consenter revenues all positively contributed. Finally, driving a healthy growth in EUROTRANS International revenue increase was about 67% along with relatively stable era. Another round of price adjustments in mobile and fixed services as well as moving towards a shorter contract structure in fixed service in fourth quarter should strongly support next year's ARPU performances. It is important to note that on a relative scale, managing a declining inflation trend is clearly a preferred scenario for us compared to managing a rising trend. Therefore, we see significant potential in our operating performance in the medium term, to fight against inflation pool successful.Moving on to EBITDA. Consolidated EBITDA increased by 58% year-over-year to TRY 8 billion on an EBITDA margin of 36%, up 210 basis points quarter-over-quarter, thanks mainly to accelerated revenue growth and improved OpEx to sales ratio. While [Indiscernible] related items continue to weigh going on to EBITDA margin. A few other one-off factors supported. If adjusted for the quake related and other one-off factors, consolidated EBITDA will be TRY 7.8 billion with a combining margin of 35%. Excluding the effect accounting impact, EBITDA margin was 37%. On the OpEx side, rise in personnel cost has been significant with the July of HA, the increase in nonpersonnel costs slowed from last quarter. Increase in operating expenses was 91% year-over-year compared to 88% a quarter ago. Excluding the effect at cost, growth in operating expenses was 94%. Annualizing network and personnel expenses accelerated from last quarter due to some rise in unit energy costs and the broad-based wage increase. Provision for doubtful receivables almost doubled quarter-over-quarter with liquidation of the receivables under TRY 2,000 in compliance with the new legislation. Finally, commercial costs were also higher than last quarter with inflating spending in customer care and seasonally more intense advertising. It's worth noting that several employees have now opted for the newly introduced retirement program. [Indiscernible] will have no material impact on the P&L as we have provisioned for this. We will see the cash outflow in the last quarter. Overall, we expect these initiatives to generate meaningful OpEx savings next year.Coming to the bottom line. [Indiscernible] euro to near rate increased 6% down 3% quarter-over-quarter. Market interest rates moved higher alongside the tighter monetary stands by the Central Bank. The hedging costs normalized from elevated levels seen in the second quarter. In this backdrop, we incurred lower FX and hedging costs and interest expense compared to the prior period. The composition of our cash debt and hedge portfolio throughout the quarter as well as the amount of hedge transactions we are engaging played a role in reducing the hedging and interest cost, while leasable the FX costs. As a result, TRY 3 billion of net financial expense was significantly lower than last quarter, but slightly ahead of same quarter of last year. TRY 2.5 billion of net tax income driven by the revaluation of assets and R&D and investment incentives was larger compared to last quarter, mainly due to an increase in general corporate tax rates announced in July and higher rate applied for the revaluation of assets for the period. Putting this all together, we recorded TRY 4.5 billion of net income, growing by more than 280% year-over-year. Finally, CapEx was TRY 5.6 billion in the third quarter, of which TRY 250 million earthquake-related spending. Moving on to next slide, Slide 9, FX profile. Thanks to the progress in operating performance with relatively stable currency environment. Net debt-to-EBITDA ratio dropped to 1.56 multiple in third quarter from 1.65 a quarter ago. Cash and cash equivalents adapt to TRY 12 of which around 43% is FX based. This excludes the $280 million equivalent of FX protected time deposit that we look on the financial investments. The share of local currency borrowings within the total debt portfolio further declined to 18% from 22% a quarter ago. The FX exposure included probably equivalents of TRY 2 billion of FX denominated debt, TRY 2.4 billion of total hedge position and TRY 190 million of hard currency cash. The hedged amount included $28 million equivalent of FX projected time deposits, down from TRY 320 million in the prior quarter. We are now on the last slide, Slide 10. Our loan FX position was $570 million by the end of the quarter, excluding the ineffective portion of the hedge portfolio, namely the participating cross-currency contracts, foreign currency exposure was a $240 million short FX position compared to TRY 140 million short position a quarter ago. The FX analysis, we report regularly in our quarterly financial suggests, assuming all else constant, a 10% increase in FX rates will have around TRY 840 million negative impact on our income. On the flip side, the sensitivity analysis produces around TRY 860 million positive impact in case of a similar depreciation in era. Our levered free cash flow was TRY 1.9 billion compared to billion quarter ago and TRY 2.2 billion in the same quarter of last year. Heavier CapEx spending in the reporting period largely explains to quarterly and annual variance despite better operating performance in both comparisons. Well, this will conclude my presentation. We can now open up the Q&A session.

[Operator]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. I would like to inform you that Türk Telekom will have translation during the Q&A session. [Operator Instruction] One moment for the first question, please. [Operator Instruction] The first question is from the line of Adam Rouse, with T. Rowe Price.

[Adam Rouse, analyst]

Just one question regarding your refinancing plans, the upcoming Eurobond refinancing, I believe, for the next year. What are the plans regarding that? And just how you feel about your capital position overall?

[Kaan Aktan, executive]

As you know, as you mentioned, we have a media last year, the repayment of $500-million-dollar bond. For the time until very recently, I will say, our base case scenario would include the financing of the Eurobond payment with the existing cash plus we have around EUR 175 million unutilized ECAs committed but unutilized, which for this we should be eligible until mid-next year. And beyond that, we are also negotiating for new contracts for additional ECA deals. We have currently the TRY 7 billion authorization from the Capital Markets Board for issuing local currency loans. This is again utilized. So that will be the base case for addressing the financing of 2024 Eurobonds. But having seen a better market environment in the bond market and new issues coming almost every week. So we are also considering to have an issue in the form of regular dollar bond or maybe a [Indiscernible]. But the timing is still not defined clearly. Obviously, that should also take into account not only 2024, but 2025 expiry of our second Eurobond. So any time before we have the payment of 2024, if we have that issue, that would also help us to finance the 2024, as mentioned under the scenario that we will be able to procure the financing of 2024, even without having this new issue, but we will feel more comfortable for 2025, if we have this in the early months of 2024. This answers your question?

[Adam Rouse, analyst]

Yes. Maybe just one more question for me on a different topic. Would you be able to sort of reaffirm your 2023 guidance or maybe update the guidance in terms of revenue growth and EBITDA margin? And also, if we're looking forward to 2024, any views and sort of where would you like to see the EBITDA margin profitability going forward?

[Kaan Aktan, executive]

Well, we confirm the both metrics in our guidance. So obviously, we have a strong revenue momentum in this quarter, which we should be able to get to the upper end of the revenue growth guidance. And for the EBITDA, we had every quarter starting from the first quarter, we had a better performance. So we the revenue growth is definitely supporting the margin improvement. So we already made several price adjustments, which we also mentioned during the presentation, that would also take us to a strong momentum in ARPU growth in both major business lines. So these are all helping. But at the same time, we still have the inflation expectations for this year above 60% and next year is 40%. Actually, our OpEx base is email by the periodical adjustments in the person in the wages. So we should also expect another one at the beginning of the year. But all in all, I think we should have a better in the margin next year. But obviously, the exact picture will be more clear once we have the guidance for 2024. Again, we assume that there will be -- the macro policy will stay the same, the tightening will still be in place and the inflation trend will be weakened. So these are the expectations or this is the parameters of the environment with which I define the margin expectations. But for this year, again repeating myself, we are confirming the guidance.

[Adam Rouse, analyst]

And maybe just finally, do you have to move to inflation accounting from next year? And if you do, what would be the impact on some of the key metrics like labor rate ratio?

[Kaan Aktan, executive]

Well, the discussions are still also inflation accounting, obviously, there are 2 aspects on it. One is the regulatory accounting, which impacts our tax base. And the other reporting sites is the numbers that we are disclosing on a quarterly basis. But there is no decision -- final decision on the rent. So we also expect to see some clarity because we are already very close to the year-end. And we have very limited time to adapt to the rules of the new accounting. And before we have these decisions in place, let me have the flexibility to not guide you with any numbers related to the impact of the inflationary counting.

[Operator]

The next question is from the line of [Indiscernible] with AK Investment.

[Unknown Analyst]

I have kind of a follow-up on the first question. The first one is about the guidance. I mean keeping the same guidance to be -- you've already seen a conservative for the fourth quarter. Is there any particular reason where we see slower growth or the margin pressures?

[Kaan Aktan, executive]

In terms of the revenue growth, obviously, we will start repeating a stronger base coming from the last quarter of last year. That's one factor that kind of limiting the full year revenue growth. And in terms of margin performance, I think we see that there should be a positive trend going forward, but we should also take into account the seasonality in our margin performance. When you look at the last quarters of each in the past, you will see that we have a margin erosion in the last quarter, almost every year. So some of the spendings are mainly accumulated in the last quarter. So all this is creating a margin drop from third quarter. And third quarter, especially the strong quarter. There is also a seasonality for a better performance in the third quarter. I mean, the tourism and the impacts of foreigners and everything is also adding to our margin normally. Then we have a drop in the fourth quarter. And the guidance -- our guidance, current guidance takes into account all those factors.

[Unknown Analyst]

And the second question what might now perform the next year. Now we have a very significant tank on the wholesale tariff in the fixed broadband in July. So when we expect to see the full impact of those sizable [Indiscernible]. And also your consolidated margins mostly suffer from erosion in the fixed broadband. I mean because of longer time longer contract series also stable wholesale study. I mean next year should we expect significant turnaround, especially from this inflationary environment in terms of rate growth and other things.

[Ümit Önal, executive]

Well, wholesale price increase in itself is critical for us, not maybe because of the impact on our consolidated financials, but also the impact it creates on the retail price levels because wholesale is the cost that we share with all ISPs, including our own retail business, meaning an increase in wholesale revenue, which is included to an increase in our cost service providers also pushing the market at retail level at a higher price level. So we immediately see the impact the wholesale revenue increase starting from the first month, we had the price increase because there are no contracts or fixed price commitments at the wholesale level. But just before that, you should also take into account that we had a significant retail price increase in fixed broadband. So those 2 factors are both impacting our revenue performance, which is also reflected to the ARPU performance of the of the overall fixed broadband business. Going forward, yes, we had a price adjustment at midyear. But the price adjustments at wholesale mostly it resets from the higher cost increase. So cost increases that took place before the price adjustments. It's not forward-looking. It's backward-looking. Meaning, even from the date we had the price increase their changes in our cost base, which will be the case going forward, assuming there will be inflation in place, impacting our costs. So obviously, we will be reporting this trend to the regulator and expect to see further adjustments in a sensible meaningful time frame without losing much margin on this business because the cost side was impactful in our wholesale margin. Now we are trying to recover from this lower level and additional cost increases, we believe that should be reflected even in a kind of automatic formulation, without expecting a one-off adjustment decision from the regulator. We should say the best case scenario, we should have a formula in place, which take into account the major cost items that we incur in our wholesale business and in just all sales prices in a predefined time frame that will give clarity to the market. We know that ISP sometimes gets surprised, although there is cost inflation everywhere. They may be surprised from price adjustments in our wholesale business. And if you have this clarity and the formula, I think that will be in the benefit of the whole sector. But as you mentioned, we have the contract issues, one news in this -- from today that we will have a shorter contract term which will be announced in the coming months. So we will get to a 9-plus 9-month contract lower by 6 months in total. And we already incurred a lot of price increases. So when it comes to repricing our existing customers, there is a significant headroom right now, which we follow very closely, which means directly automatic price adjustments once the contracts are terminated and repriced even if you don't have any price change at the retail level, but I think there are already plans for implementing subsequent price adjustment end of this year and next year. So that we have the revenue and ARPU in real term back to where it was before this inflationary trend started.

[Unknown Analyst]

About the index in the wholesale prices, I think you have mentioned about this in the previous [Indiscernible] logical pricing system for this wholesale prices as well. The underwriting margin. Is there any progress on the regulatory front as far as you can think?

[Kaan Aktan, executive]

We came up with this idea. We also explained our case. And they also share the similar concerns because having this one-off discussion is not very easy, not only for us, but also for them. So they seem to be willing to get something around this formula, but I think it will take time for them to have a decision. But we already expressed our views. They know what we think and how they may proceed going forward with the formula. At this started in communication.

[Unknown Analyst]

I think one final thing, so long, not inflation accounting, is there any -- I mean, if you were to imply lines economy, is there any chance of reversal of the deferred tax income you recorded in the past 1.5-2 years?

[Kaan Aktan, executive]

I mean, again, inflation accounting impact of it, I think it's a very, very complex case. And there is still no decision around application of it, whether it's in the tax front or in the reporting from. But you're right that our balance sheet includes sizable amount of fixed assets and subsidiaries to telecom level when it comes to tax calculation. So there are the other aspects that may have an impact on the end result. But again, we will really be very clear to identify the expectations that will come from it because it's also important for our operating performance. It will be a key component. It is at light. So until that side allow us to work on it. And then when there is a decision no later than the guiding announcements of last year. I hope there is a decision because it will be late enough. We will have a clear understanding and also give that outlook to you.

[Operator]

[Operator Instructions] The next question is from the line of Ignebekcili Murat, with HSBC.

[Murat Ignebekcili, analyst]

I have a couple of questions. Let's go one by one. The first one is about the donations regarding the earthquake. Türk announced 2 installments of donations, 1.75 each third quarter and first quarter of 2024. What is your plan because you already announced that you make a donation? Any details about the dimension timing amount whether it's going to be in cash terms or maybe you're going to have some of the expense you made already. Details, please.

[Kaan Aktan, executive]

You asked -- the other question -- I think I got a few questions.

[Murat Ignebekcili, analyst]

The second one is about fixed line concession agreement. You mentioned also in the press release that 2024, you will be able to resolve issue. Can you learn about your expectations about this, please? And that's the second question. And third question is about the CapEx guidance. The CapEx for the first quarter seems to a bit higher than usual. Do you see any of risky CapEx guidance for the full year? We saw already very high for third quarter. And the final question is about mobile ARPU levels. How much of the pricing update has been reflected on your subscribers? I mean, compared to, for example, last year same period, the current offers, the contracts you offer how much price year done last year, let me say. So the ARPU level is 70% higher compared to last year. I'm trying to just figure out how long this pricing can continue? How much you have in your backlog. You see my point?

[Kaan Aktan, executive]

Let me start from the first question. So the donation is -- will be made in installments. So we are still -- we don't have the exact plan for the payment date, but it won't take long, but it may be a location that may be a location between this year and next year or early next year. But our estimation is included into our guidance already. So at the same time, donations, cash donations, plus we also incur expenses related to the benefits that we provide to the institutions in the region and also to the people living in the region. So we also believe that those benefits have to be taken into account when it comes to calculating TRY 2 billion. But again, that's something we are trying to clarify with the related parties. Again, the overall summary from this, it will be by installment, some this year and some early next year. But it's within our guidance. For the CapEx part, we are still confirming the guidance. But again, if there are changes, especially FX because they are very much affected by the FX levels. So in the remaining few months of the year. So we'll see how it will progress. But overall, we believe that we can maintain the guidance level.

[Unknown Executive]

[Foreign Language]

[Unknown Executive]

[Interpreted] Allow me to elaborate on this ARPU question. At increases the dynamic process and the full base of our customers is reprice. So it is not easy to tell that percentage of our subscribers are repriced and the remaining part is it's not very correct. And you know that for the last 6, 7 quarters, our prices and our ARPU has been increasing on an increasing trend, and they have been repriced and they are reflected to the base -- on an ongoing cycle. So this is -- we can expand our dynamic process.

[Unknown Executive]

[Foreign Language]

[Unknown Executive]

[Interpreted] And lastly, I can tell you that these price increases will continue at a level not below inflation.

[Unknown Executive]

[Foreign Language]

[Unknown Executive]

[Interpreted] Related to concession, as I mentioned in my speech, we put forward an application to the regulator for the renewal of the fixed line services concession agreement at the beginning of 2023. And afterwards, we were asked by the regulatory authority to draft the document describing the proposed framework of the upcoming agreement. And accordingly, we have collected our opinions, recommendations, and we closed around the topic and have submitted our proposed framework to the regulators very recently.

[Unknown Executive]

[Foreign Language]

[Unknown Executive]

[Interpreted] For us, the renewal of the concession is not an issue, just related to Telekom. Do you consider it as an important item for the development of Turkey for the sector and [Indiscernible]?

[Unknown Executive]

[Foreign Language]

[Unknown Executive]

[Interpreted] Our expectation is to positively concludes this renewable issue within 2024.

[Unknown Executive]

[Foreign Language]

[Unknown Executive]

[Interpreted] And that 2024 is a long year starting from January to December. So our motivation is to conclude this subject item as soon as possible, and we are working totally aligned with the regulatory authority on this matter.

[Murat Ignebekcili, analyst]

Questions about the FX position. In the press release, you mentioned that the longer expansion of $570 million. But excluding the impact of portion, it is $2 million short. Now assuming we enter 2021 with this sort of balance sheet and say, the Turkish lira devaluates in line with the expected inflation, which is 35%,40%. Would you have hedges work completely or we see some slippage and higher than implied FX losses?

[Kaan Aktan, executive]

Well, in the current portfolio, almost there is nothing left, which will create a gap between the hedge position and the effective hedge position. So if there is further devaluation of the era, there won't be any significant addition to that difference, which creates the gap between the 2 positions that I mentioned. But that also take into account the assumption that we will be able to enroll all the short-term hedge contracts going forward because we are mainly depending to forward and the contract from the local market in order to hedge ourselves. But other than that, so there shouldn't be any surprising changes in the hedging position and related FX cost. And we also give this 10% sensitivity in our reporting, I think you can take reference from that sensitivity analysis.

[Murat Ignebekcili, analyst]

So it's mainly in the balance it is much more positive compared to last year. And maybe if you can share more detail, you disclosed that the FX and hedging losses totaled TRY 1.75 billion for the third quarter. Can you separately tell us how much of it is hedging loss and how much is FX loss?

[Kaan Aktan, executive]

FX losses -- I mean, I don't want to give you numbers that were not disclosed in the reporting, but we give the sensitivity analysis and FX are basically aligned with the sensitivity. And you also see that we don't change the net exposure dramatically from one quarter to another. There are some changes, but in a limited basis. So the FX was is very much with sensitivity analysis, the difference is coming from the cost of hedging in soon. And from time to time, it was the case in the second quarter. The parameter is true, which we calculate the mark-to-market of these instruments are changing dramatically. That may also create some additional cost or sometimes benefit. It was a benefit in the first quarter. It was a large negative in the second quarter and a slight benefit this quarter. But all in all, it comes to the same place is they offset each other. But from quarter-to-quarter, you may see volatility coming from the mark-to-market calculation of this large hedging portfolio. But other than that at this limited FX loss, the remaining part is coming from the cost of hedging.

[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.

[Unknown Executive]

[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.

[Unknown Executive]

Well, thank you, everyone, for joining us today. Have a nice day.

[Operator]

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