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Turk Telekomunikasyon AS
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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 fourth quarter 2020 financial and operational results. [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.
Hello, everyone. Welcome to our 2020 full year results conference call. Thank you all for joining us today. Before starting the presentation, I would like to say a few words about the extraordinary year we left behind. 2020 was largely shaped by a global disaster. It has been almost a year we have lived with the pandemic and watched the entire world go through massive changes rapidly. The number of connected devices grew significantly, as data usage increased and demand from individual businesses and private and public bodies turned more sophisticated. Consumers demanded fast and continued connection at their homes, while corporates required high capacity, increased security and digital solutions.
On the other hand, public bodies look for seamless connection and interconnected systems to keep the pandemic under control and protect public health. At Türk Telekom, we played vital role in keeping Turkey connected. We are proud to have shouldered this responsibility with great success. At Türk Telekom, we depend on solid foundations and look into the future confidently. We will continue to focus on financial excellence, digitalization, efficiency, superior customer experience and agile management, while supporting the local society and environment through responsible practices.
Slide #3, net subscriber additions. Our total number of subscribers increased to 50.4 million as of 2020 with 827,000 net additions in Q4 '20. Our net subscriber additions reached 2.6 million in the full year. Broadband subscriber addition gained momentum in the last quarter. We acquired over 2 million new subscribers in the full year with 639,000 net adds in Q4, the highest ever quarterly and last 12 months net add performance. Hence, total broadband subscribers increased to 13.4 million as of year-end. The mobile segment was dominated by returned lockdowns and ongoing competition.
In Q4, we added 98,000 subscribers, bringing the full year net adds to 240,000. On the fixed voice side, we added 138,000 in the last quarter, once again, thanks to the increased fixed broadband acquisitions. Full year net additions reached 631,000, the highest level since the IPO.
Slide #4, financial and operational overview. I will briefly go through our financials and then Kaan will comment on them in detail. We delivered an outstanding financial performance in 2020. Our consolidated revenues increased by 20% to TRY 28 billion, depicting the highest annual growth since the IPO. Our operating revenues grew by 17% in 2020, ahead of our revised guidance of 16%. Fixed broadband segment supported the top line with highest annual revenue growth of 25% year-on-year.
Consolidated EBITDA rose to TRY 13.2 billion with an EBITDA margin of 46.8%. Net income reached the highest level in 2020, TRY 3.2 billion despite the unfavorable FX movements in the huge. We generated TRY 6.9 billion free cash flow compared to TRY 6.4 billion in 2019. Thanks to robust EBITDA performance. Our CapEx reached TRY 6.7 billion, reflecting the impact of increasing fiber investments and weaker lira.
And lastly, as of the year-end, we reported $46 million long CapEx position, while net debt-to-EBITDA declined to 1.15x following the actions taken to reduce the exposure of P&L statements to FX movements. As you remember, in 2020, we paid only 25% of 2019 net income due to the temporary dividend cap regulation. In January 2021, we announced our decision to pay additional TRY 601 million of dividend soon after the expiry of the restriction on 2019 dividend payments. This is to show our commitment to shareholder remuneration and our confidence in our company's robust financial standing.
Slide #5, fixed broadband performance. 2020 has been an impressive year for the fixed broadband segment. We acquired over 2 million new subscribers, and our total base reached 13.4 million. In Q4, our net adds peaked with 639,000. Our strong and widespread network, agile and effective decisions have been the biggest supporters in this success story. Our upsell focus to achieve sustainable growth continues unabated. Besides, we take into account the changing needs of both individual and corporate customers and offer them value-added services in addition to best-in-class connectivity.
As a result, fixed broadband revenues saw a record 25% annual growth, together with 14% ARPU increase in the year. In early 2020, we decided to accelerate our fiber rollout plans for the year. Our financial and operational performance and the fast evolved trends did not only confirm the steps we took in the right direction, but also encourage us to continue with our correct strategy. During the year, we increased our fiber subscribers around 2 million to 6.2 million. Our 331,000 kilometer long fiber network as of 2020 covers 81 cities of Turkey. Our fiber homepage now covers in excess of 26.8 million households compared to 21.9 million last year.
We have been investing in our fixed network for a long time, extending it to every part of this country. This strategy helped us handle the surging demand from big cities to small towns, in addition, showed unforeseen 81% year-on-year increase in our network traffic in 2020. We kept investing in our infrastructure and added 69 terabytes per second of IP transport capacity, activated about 1 million new ports and passed additional 1 million homes via greenfield fiber investments.
Slide #6, mobile performance. In the mobile segment, we felt the pressure of the pandemic conditions throughout the year. The lockdowns, travel restrictions and stiff competition weighed on the mobile market. We recorded 98,000 net adds in Q4 and 240,000 in full year. Despite the unfavorable conditions, the number of postpaid subscribers increased by 1.1 million in 2020. On the prepaid side, we lost 882,000 subscribers mainly due to the pandemic-driven distortions and the cancellation of some subscriptions as per the regulations. Still, our prepaid ARPU grew 26% year-on-year Q4 '20 and 11% in 2020, led by price increases and new offers that encourage higher data usage.
Blended ARPU growth was close to 11% in Q4 '20, higher Q-on-Q but limited to 7% annually. The mobile market recovered partially with some price increases in the third quarter, but competitive offers in acquisition packages took center stage once again in the last quarter of the year. On our side, we avoided aggressive pricing as much as we could and focused more on balanced top line progression. As a result, our mobile revenues grew 13% in Q4 '20, a bit higher Q-on-Q. We did 11% revenue increase in a year shuttled by such negative developments and success. And we foresee better prospects in the mobile segment under normalized conditions, which will hopefully settle back in the near future. We left a challenging year behind. We will continue our core network investments to grow our capacity and service quality and get ready for 5G. As an integrated telco operator, we have a strong position in the market, and we remain committed to achieving a balanced and sustainable growth.
Now I would like to take you through some data on our mobile network. Slide #7. We have been investing in our network continuously to increase capacity and coverage and to improve customer experience. I am delighted to share with you the critical progress we made in this regard. In 2020, we continued to upgrade our mobile network and sites and increased capacity across Turkey. As a result, we started seeing remarkable improvement in service parameters, including upload and download speeds, call drop, outage, et cetera.
Our investments efforts on both optimization and operational enhancements carried us to the leading position. According to an independent third-party analysis, as of December '20, we outpaced other operators and reached the fastest LTE uploads and download speeds in Turkey. Another independent analysis shows that we are the #1 mobile operator in upload, gaming and voice experience. We are #2 in video and download experience, but trading on the #1 operators here.
As of today, we are very satisfied to see this picture. After we acquired a very advantaged spectrum portfolio, we invested wisely in our mobile services and reinforced our footprint with strong leadership in the fiber network. Surely, these results confirm the steps we took in the right direction and give us the courage to foresee a stronger positioning for our company in the mobile market.
Slide #8. 2021 guidance. We are determined to keep our growth momentum in 2021. The pandemic and its effects heavily occupied the global agenda throughout 2020. Despite the uncertainties, we generated strong cash flow, paid dividends and continued leveraging our balance sheet. We proactively reduced the exposure of income statement to FX movements. As a result, we achieved greater operational efficiency and strengthened our balance sheet against risks. In 2021, we expect our revenues to grow around 14% year-on-year. Our EBITDA to be TRY 15 billion and our CapEx to be TRY 7.7 billion.
Fixed broadband segment will continue to support top line growth with subscriber expansion, upsell and fiberization opportunities. We believe our mobile segment will improve together with the fading negative impact of the pandemic across the world. We will continue to invest in our core network and capacity, while focusing on our strategy to lead fiberization, 5G transition and digitalization of Turkey. We may have many challenges lying ahead, but our 2020 performance and financials speak volumes about our potential to deliver in the future.
As a closing remark, I would like to thank our employees for making 2020 a remarkable year for our company. I feel truly blessed for having the opportunity to lead such a vibrant and devoted team.
Now I will hand over the call to Kaan to discuss our financial performance in detail. Thank you.
Thank you very much. Good morning, and good afternoon, everyone. I'm now on Slide 10, with our financial performance. In 2020, our revenues is up by 20% to TRY 28 billion, which is the strongest growth rate since we first started publicly disclosing our financials. Excluding construction revenues [Technical Difficulty] 17% year-over-year, which is [Technical Difficulty] our 2020 guidance of 16%. In the last quarter, revenue growth accelerated to 22%, thanks to continued robust performance on the fixed line business and some stronger momentum in mobile growth. Fixed broadband segment supported to top line, the highest annual revenue growth of 25%. ARPU increased by 14% over the year, reflecting our efforts to find the right balance between pricing and mix.
In the fourth quarter, fixed broadband revenue growth surged to 32%, together with the exceptional net add performance throughout the year and the ongoing contribution of ARPU improvement. Mobile revenue grew 11% year-over-year in 2020 as the focus shifted to the fixed line services amid lockdowns and travel restrictions. We also experienced this competition on the mobile market throughout year. Our focus remains on portfolio optimization, value creation and balanced growth. As a result of which, we managed to move the mobile revenue growth to 13% in the final quarter together with 11% blended ARPU increase.
Fixed voice revenue growth is at 3% year-over-year in the fourth quarter and 1% in the full year, thanks to continued solid fixed broadband demand. On the TV side, we added 18,000 home subscribers in the last quarter, thanks to increased Internet bundled TV sales. ARPU growth is at 6% year-over-year in the last quarter. Overall, our TV revenue is up by 10% in the full year.
Data service revenue was solid with 13% growth in the full year, supported by a wide range of corporate products including IP, VPN, network standard, ICT solutions, data center services, smart cities project. Our international segment, which mainly includes the revenues of our subsidiary, Türk Telekom International, grew 34% in the full year, mainly due to increased traffic and appreciation of hard currency.
And lastly, I would like to highlight the notable performance of our subsidiaries. Our subsidiaries, namely Argela, Innova, Sebit, Assistt and TTI set off another year full of great achievements. Third-party revenues of these subsidiaries grew around 56% and made 8% of our consolidated revenues in 2020, which is comparable to a 6% of the prior year. These revenues led 18% of annual growth in the group 2020 consolidated revenues.
Now moving to our operational performance. Our EBITDA rose 19% to TRY 13.2 billion, ahead of our guidance. Full year margin was 46.8%, reflecting our strong revenue growth and disciplined OpEx management. Excluding the construction revenues impact, EBITDA margin increased by 28 basis points year-over-year. It's worth highlighting that COVID-19 related OpEx savings has about 50 basis points positive impact on full year on EBITDA margin. The accelerated top line performance was reflected to TRY 3.5 billion of EBITDA in the final quarter, which was further boosted by the contribution of 1 of third-party vender compensation. Our full year EBITDA margin will be 46.4% if we exclude the provider. Operating expenses increased by 21% year-over-year.
Looking at the highlights in the OpEx items. Interconnection costs increased by 23% year-over-year, mainly due to increase inter telecom, international traffic volume and higher FX rates during the year. Personnel expense increased by just below 13% year-over-year, which is below the 2020 annual inflation rate. However, you see 10.7% quarter-over-quarter increase in the last quarter, mainly due to early retirement incentive program. Network's technology expenses has a growth of 25% year-over-year, mainly due to depreciation of Turkish lira, increased energy cost and technology repair and maintenance costs.
Cost of equipment and technology sales increased by 74% year-over-year according to strong broadband net addition and surge in product base, equipment and license sales. 40.6% year-over-year in tax expense was led by higher frequency and treasury fees, which is attached to mobile revenues. Provisions for that on the receivables increased by just below 45% in the year on account of volume and price increases in device sales and the small one-off expense we took in the last quarter owing to our methodology change. In the last quarter, other costs turned to positive, which is led by some of one-off compensation revenues from a third-party vendor I just mentioned.
Coming to the bottom line. In the last quarter, tax expense decreased to TRY 78 million from TRY 117 million of the same quarter of the prior year. The group recognized a deferred tax income of TRY 180 million, mainly due to telecom mobile carryforward losses and unused incentives. Net income grew 32% to TRY 3.2 billion and reached its highest level despite the unfavorable FX movements throughout the year.
And lastly, CapEx was at TRY 6.7 billion in the full year, slightly above 2020 guidance of TRY 6.6 billion, reflecting the impact of increase in fiber investments and weaker lira.
Moving now on to Slide 11 with debt profile. We ended the year with a strong and resilient balance sheet from Q3 to Q4, our net debt decreased by TRY 1.7 billion, and came in to the level of TRY 15.4 billion. Net debt-to-EBITDA declined to its lowest level by industry standards to 1.15x from 1.35x of Q3, mainly driven by strong operating performance and diligent balance sheet management. Cash and cash equivalents were strong with TRY 5 billion as of the year-end, while 81% of our cash is FX based. The blended cost of FX debt, inclusive of hedges increased to just above 10% in lira terms based on the 2 factors. Firstly, the market interest rates climbed up with tighter monetary policy; and secondly, we continued to carry out new hedges or restructured the existing contracts in the final quarter of the year.
And last, we reported USD 46 million of long FX position as of the end of Q4 compared to USD 211 million of short FX position as of the end of Q3. The next FX exposure turned to a long position as a result of -- after a TRY 2.3 billion of FX debt, $1.8 billion equivalent of various derivative instruments and $554 million equivalent of FX-based cash.
We are now on Slide 12. Our net FX exposure declined systematically over the last 2 years. Additionally, we raised the effective protection -- effectiveness of protection of our existing hedge portfolio in the last quarter. I'm pleased to tell you that to show our commitment to diligent balance sheet and bottom line management, we completed 95% of restructuring exercise for the entire hedge portfolio by the end of 2020. As of today, it is 100% complete, with the latest transaction that we placed during the first quarter of 2021. This means that we are now fully protected at much higher FX rates. This is well reflected on the FX sensitivity analysis we report regularly on our -- in our financials on a quarterly basis. The sizable reduction in the sensitivity from third quarter to fourth quarter is a direct outcome of additional protection we took in the final quarter of the year.
According to the sensitivity of the P&L statement to FX movements, assuming all as constant -- stay constant, a 10% increase in FX rates will have only TRY 59 million negative impact on the pretax income as of the year-end, compared to a negative close to TRY 1 billion as of the end of the third quarter.
Our aim is to maintain an FX-neutral position throughout 2021 and beyond. With the additional hedging and restructuring activities, we increase the predictability of our net income and dividend streams considerably.
Finally, the unlevered free cash flow generated in 2020 is up to TRY 6.9 billion, 8% higher than the last year. Strong EBITDA performance offset the impact of increased CapEx spending due to accelerated fiber rollouts. 2020 was an extraordinary year for the whole world, and we are proud to have completed the year with solid numbers. We aim to demonstrate a similarly strong performance in 2021.
Operator, we can now open up the Q&A session.
[Operator Instructions] The first question comes from the line of Cabejšek Ondrej with UBS.
Congratulations on a great year. 2 questions for me, please. First 1 on CapEx. The guidance as compared to consensus is quite high. So I was wondering, is this still a demand-driven fiber? If so, are we approaching the stage where you are confident to say that should there be an upgrade to your revenue and EBITDA targets again throughout the year. CapEx, unlike in the previous year would stay quite similar? Or are we now approaching a stage, for example, where more CapEx is diverted into 5G, and so the CapEx and sales ratio within your guidance, should you perform better on the top line is unlikely to change?
And second question, please, a bit connected. In terms of you now showing these very encouraging statistics in your mobile network quality compared to your peers. Is encouraging you perhaps to be a bit more, let's say, confident in terms of price increases and converging pricing a bit more to the market leader?
Thank you very much. Let me take the first question and then the second question would go to our CEO. I mean, prior to the year-end closing, we were clearly saying that we should expect a similar percentage to revenue in terms of 2021 CapEx. I think this is where we have achieved the guidance that we announced. We are definitely spending effectively in fixed line throughout the year in 2020. We had around 5 million home passes, with greenfield investments with transformation of the existing networks to fiber. And we will continue to invest in fixed line. Maybe it's a bit lower speed compared to 2020. But at the same time, we will have some additional investment that will come from the ICT or technology part because we have been using our idle data center's capacity to provide services after the increased demand from corporate and government accounts.
And clearly, we will start spending or investing in both brownfields, which means capacity increases and also a greenfield investment for data centers. I think this factor is just -- slightly compensating a bit reduced fixed line. But overall, same percentage to revenue will be spent to CapEx, I think. The demand and the return that we are getting from our business launch and also the healthy cash flow generation definitely gives us confidence that there is a strong return on -- to invest in this business, in our core business, and we have the means to do so. So let me pass to our CEO for the second part.
[Foreign Language]
[Interpreted] First of all, I would like to enter into questions from price to network oriented approach.
[Foreign Language]
[Interpreted] To start with, I mean, we are doing our best to take price actions as long as the competitive conditions in the market allow.
[Foreign Language]
[Interpreted] As you know, price increases on the postpaid side, including the contracted customers due to the competitive environment in 2020, we weren't able to apply them in desired levels.
[Foreign Language]
[Interpreted] 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 available subscriber base in 2021.
[Foreign Language]
[Interpreted] [Audio Gap] Competition based on pricing.
[Foreign Language]
[Interpreted] So we have a very oriented strategy.
[Foreign Language]
[Interpreted] Now, just your answer to your question last year, I mean, in parallel with all the investments we will make, our target to reach the market share we want in the medium-term continues, of course, by focusing on the service quality and the value we want to generate for our customers.
If I may, shortly follow-up, please, on the CapEx comments. So is it fair to say that because of the pickup in B2B and B2G that -- where you're structuring these projects, it is quite common in the industry that there is quite some upfront CapEx with a longer payback for your customers are tied into long-term contracts? And if that is the case, and there is this marketplace shift, first of all, fiber demand and then the ICT solution demand, is it safe to say that your CapEx intensity is likely to remain a bit higher for not just next year, but maybe a couple more years?
It will be a bit difficult to guide you with the CapEx number for 2022 or beyond because there is obviously the 5G -- potential 5G project that we should really see the -- see and understand the expected coverage obligations coming from any such project, although we don't have any details right now.
I think that will also shape our overall spending or CapEx appetite for those years. It's a bit early to say. But once we finish 2021, I think there will be a lot of progress in terms of the -- our initial expectation from that transformation project, if that's your question. But beyond that, there will be other drivers that will define our CapEx requirement.
So the current business projects, excluding any 5G, the ramp-up of data centers, et cetera, that should be kind of done by the end of 2021 is the message?
For the -- I mean, the data center, we will initiate the project in this year. I mean it will become functional at year-end at a certain capacity. If we see the demand is there, I think we may continue investing in data center. But again, it's a question for 2022. It's early to give you a highlight on the CapEx requirement.
We clearly see a great return from -- for the investments that we had in the prior years. It's all about to see the return -- to see whether the return is there. If you see that it will add to our growth momentum in the midterm, we can implement the investments. But so far, I mean, a similar percentage of revenue compared to 2021 to '20 and for the outer years, let's wait and see how we close the year.
The next question comes from the line of Kim Ivan with Xtellus Capital.
2 questions from my side, please. You did lot of hedging activity, which I think is very beneficial for the company. And I was just wondering, what is that you [indiscernible] 00:50:47 from most of your [Audio Gap] maybe a range you can give us?
And then the second question on your mobile network metrics, which you show pretty strong metrics versus your rivals. So I was just wondering how does your mobile network compared to Turkcell and Vodafone in terms of both sites and fiberization rate roughly?
Can I just ask you to repeat the question. I get that it's about the hedging portfolio, but what's the specific part that you're asking?
On the hedging -- sure. Yes. On the hedging, I was just wondering what is the you [indiscernible] 00:51:31 rates for your [Technical Difficulty] After which the hedging [Technical Difficulty]
Obviously, there were several transactions. And the overall strategy was to target the forward rate at the time of the restructuring. Considering that the transaction took around the time when the FX was moving between 7 to 8 and considering the interest rates, we don't see upward levels less than 11, 12. So those are the numbers. This is, again, the forward rate of that time. So there are plenty of headroom, especially considering where we are currently as of today in terms of the level of FX rate. I think we have great confidence that there will be plenty of room if there is any unexpected change in the FX rate.
Hello. This is Yusuf, the CTO of Türk Telekom. As you know, we are already mainly investing through fiber at greenfield, also the transformations have coupled the fiber. Thanks to the both investments, we are ready for 5G fiber cast actually. What I mean, at the end of 2020, we have already reached 83% of the streets. Now at the end of this year, we -- our target, we reached 90% of the fiber in city. So today, already 50% of the IT emission points already connected to fiber. If you need more, we will reconnect with capacity actually. So Türk Telekom, whenever needs the fiber to connect to the other IT emission points, it's easy to connect the low-cost 5G method.
Okay. Great. This is very helpful. I was just wondering to follow-up on the second question. Do you have any estimate of how many sites do you have versus your competition?
Now we have more than 23,000 emission points. The LTE has reached I think more than 16 -- more than 16,000 emission points, so the half of them is already connected with the fiber. As you know, whenever we need the capacity more, we connect the fiber. Actually, today, if I need the fiber, easily we connect it with others.
The next question comes from the line of Degtyarev Vyacheslav with Goldman Sachs.
A couple of questions. Firstly, it looks like the competition in mobile was pretty intense in Q4. What trends do you see in the first quarter of this year? And secondly, on dividends, what would be your thinking about the optimal payout in the medium-term given the reduced debt ratios as well as the improved net FX exposure? Can you share any thoughts here?
[Foreign Language]
[Interpreted] The operators started to disclose their results, and I can easily say that the operators who had a price competition didn't get any market share. And even these operators started to lose subscribers.
[Foreign Language]
[Interpreted] And for 2021, this tells us that the operators the natural result of price competition, I mean, in 2021. And this is also an indication -- indicator of a more rational market structure.
[Foreign Language]
[Interpreted] I mean our base scenario is that when the negative effects of the pandemic is relieved, the pressure on the mobile will also be relieved.
[Foreign Language]
[Interpreted] As I have mentioned before, as an integrated operator, we focus on a value oriented, I mean, operator structure. And we believe that the prices will come upwards in the market.
[Foreign Language]
[Interpreted] I mean if the aggressive competition continues in 2021, we are going to preserve our stable position, and we will highlight again the importance of the value-oriented market.
Let me take the dividend question. Well, I think the recent announcement that we had, which was the decision of our Board of Directors to release the remaining 25% of the 2019 dividend is a clear sign that the shareholders want to have a transparent, sustainable dividend performance. Obviously, it's a question for the 2020 -- dividend on 2020 in it, it's still a question for the shareholders again. But as the management, I think, looking at our balance sheet, the ability to generate cash flow. I mean, we will comfortably absorb the additional cash out that may come from a dividend payment based on 2020 net income. That was our main target to show that the company is ready and can afford any level of dividend payment. Let's wait and see the general assembly. And before that, I'm sure there will be a clear instruction from the Board of Directors for the new dividend payment.
The next question comes from the line of Kumbaraci Asli with Yapi Kredi.
I have a question about today. Turkey Watsons, CEO, stated that ownership structure of TTKOM needs to be changed. And the banks cannot take part like for the long term. What's your opinion about this subject?
[Foreign Language]
[Interpreted] Thank you very much for the question. I mean, we have followed the statement there from the press as well. But today, we are here to share with you our remarkable fourth quarter and 2020 results.
[Foreign Language]
[Interpreted] So instead of answering your question with a direct comment, I would like to tell you that Türk Telekom, with its current shareholder structure, as you can very well see, have been performing impressively for the last couple of years. I mean Türk Telekom has taken fiber to the streets of -- 83% of our streets of Turkey. And our investment budget increased 36% from 2019 to 2020. We have a guidance of TRY 7.7 billion of CapEx, which mainly covers SPV access. So I mean, what I can tell you that, I cannot see a direct correlation between the shareholder structure and the fiberization or the 5G path of our country.
The next question comes from the line of Vengranovich Alexander with Renaissance Capital.
A couple of questions from my side. First one, very simple, on FX forecast, which do you assume for your 2021 guidance? Second question is on what kind of expectations for recovery of international travel do you assume in your guidance for this year? So I'm just trying to understand what share of international roaming or what share of the inflow of additional customers do you expect coming from the international travel? And the third question what sort of expectations do you have on the timing of the release of your new OTT video product, which you, I think, promised to present to the market at some point of time in the future last quarter.
Well, thank you very much. I mean, we had a simple formula for the macro parameters. We assume roughly around 10% for both devaluation, also for inflation. Yes, for the roaming part? Yes. So roaming is -- actually, it's a very -- roaming which is the basic revenue stream that we generate from the visitors coming to the country is -- I mean, size of the mobile business considering the overall -- within the overall total revenue and the roaming revenue within the mobile business, it's a very limited revenue stream. So obviously, the timing of the start of the revenues or the size of the revenues will have almost no impact on the -- at least for the guidance that we provided. It's less than 1% of the total revenues.
[Foreign Language]
[Interpreted] Allow me to answer for your question related to OTT.
[Foreign Language]
[Interpreted] Now we have a strategy to increase our revenue by using the subscriber side of [indiscernible] in TV business effectively, both by increasing penetration and taking actions to increase ARPU.
[Foreign Language]
[Interpreted] We aim at ARPU maximization and subscriber growth with attractive content and user experience that emphasize technological features, and we want to do it as a stand-alone and bundle.
[Foreign Language]
[Interpreted] The recent interest shown by global content providers to Turkey, revealed the attractiveness of the market. We focus for the future -- our focus for the future is to create Turkey's leading digital TV OTT platform. In this direction, while we are expanding our horizons about content, our main focus is renewing our technical infrastructure for the time being.
[Foreign Language]
[Interpreted] We have mentioned to you before that we need to improve our technical infrastructure in order to improve our competency, add new subscribers and also improve customer experience.
[Foreign Language]
[Interpreted] I mean in line with our responsibilities to our customers and shareholders, we may consider some new efforts in terms of content. But of course, we are going to do it in a way to follow the opportunity window.
[Foreign Language]
[Interpreted] I mean mainly, it would be more correct to consider 2021 as a transition year for our TV business.
The next question comes from the line of Demirak Kayahan with AK Investment.
I have 1 -- follow-up 2 questions. I mean since the second quarter, your net headwind of fixed broadband is quite strong. The [indiscernible] raising an IPO. Very quick. So my question is, given the extended lockdowns in first part of this year. Do you expect similar momentum in the subscriber additions. And on that front, I also have a question on your guidance, while we have a very successful year in the fixed broadband, which will support at least first half numbers this year, and you see some normalization in the ARPU growth in the mobile from loan base. So why do you think you revenue growth will be 14%, is there some particular revenue item that you're, I mean, pessimistic about.
[Foreign Language]
[Interpreted] I would like to answer your first question, but I have difficulty understanding your second question. After answering the first question, I will try to get again, the second question from you.
[Foreign Language]
[Interpreted] We have high subscribers in terms of OTT throughout the year. And we made a strong start to 2021. We added more than 2 million subscribers in the year.
[Foreign Language]
[Interpreted] And although there's not such a strong increase in subscribers next year compared to the European average, we see that the fixed Internet penetration in our country still has a room to grow.
[Foreign Language]
[Interpreted] Considering the current needs and the demographic structure of our country, it would be a reasonable prediction for the penetration level to increase to 75% in the next couple of years.
[Foreign Language]
[Interpreted] We made 24 months of contracts with our SPV customers and also, we make some penetration efforts for our customers. Moreover, the increased need for speed also offers room for more upsell opportunity for us.
[Foreign Language]
[Interpreted] So we can say that for the next couple of years, we will be able to grow from penetration and upsell efforts.
[Foreign Language]
[Interpreted] Can I have your second question again, please?
Okay. I think that your growth guidance looks a bit conservative, which is what I mean by that, even if you maintain the present level ARPU number of subscribers in the fixed broadband. And in the first half, you can grow your fixed broadband revenues by more than 20%. And now you're looking some normalization in the fixed broadband ARPU growth coming from a low base for this year. So these factors combined, don't you think the 14% revenue growth guidance for next year is a bit conservative?
Let me take this one. So you're right. I mean, first of all, we are providing the guidance based on the operating revenues, which was 17% for 2020. And we said it might get to 14% for 2021. We definitely expect a good year for fixed broadband revenue growth. It may not be as strong as this year, slightly less than that. Mobile should be stronger than 2020. A few factors here are kind of diluting the growth rate. First, we had a sizable growth during 2020 on revenues from ICT project, large corporate project. I mean, the revenues that we generate through the subsidiaries are -- code center business delivered very high growth. So you should start seeing kind of the base year impact, which will take the revenue growth a bit down throughout 2021. Another item is the device sales delivery, I mean, equipment sales, again, we started from a raw base in 2019 went to a very high number at 2020, which impacted our revenue growth. But now we expect rather flat performance in those specific revenue streams. These are the main considerations that we had when the guided with 14%. Obviously, as we always do, if you see or when we see an upside opportunity, we will definitely flag it and upgrade the guidance during 2021.
The next question comes from the line of Annenkov Evgeny with Bank of America Merrill Lynch.
Thank you for the presentation and congratulations on the strong results. I have just 1 question. Could you please discuss possibility of price hikes in fixed broadband in 2021 and what factors you would primarily take into account? Is it your market share or disposable income dynamics?
[Foreign Language]
[Interpreted] So in -- this January, we have made a price increase in parallel with the guidance that we shared with you [indiscernible]. Moreover, in 2020, April, we have closed 8 megabit per second speed and our lowest speed started with 12 megabits per second. And now in January, we again this time closed 12 megabits. And right now, the low-speed starts with 16-megabit. So we are increasing the tariff prices and also the lowest speed of our packages accordingly.
Excuse me. Mr. Annenkov, are you done with your questions?
Yes, I just wanted to confirm that for now, you do not budget price -- further price hikes for Q2, Q3 directly?
[Foreign Language]
[Interpreted] I mean we have just increased our prices in January. And I don't want to give you a date which will be binding, I mean, for us. But we are going to take actions accordingly, which will lead us to our revenue targets, as we have shared with you within our guidance.
[Foreign Language]
[Interpreted] And moreover, for the fixed broadband ARPU, we're going to take subscriber addition and pricing into account. I mean, it will be like a mixed effect.
[Foreign Language]
[Interpreted] And lastly, our ARPU growth will not be far from double digit numbers, and it will be the main engine of the consolidated revenue growth.
The next question comes from the line of Mandaci Baysal with Unlu Securities.
Congratulations on the strong year. I have a question regarding your FX and hedging gains and losses recorded in the fourth quarter. This was a number of TRY 337 million negative number. And you have already mentioned this was related to the renewal of the hedging contracts. And I believe some part was defining -- high hedging cost was related to the fair value adjustments due to TL appreciation during the quarter. So would it be fair to assume smaller hedging costs in a stable TL -- stable currency environment for the first quarter or the second quarter. And in -- again, in a stable current environment, how much hedging costs should be assumed based on similar net debt levels?
I mean if you look at the full year numbers, not only the fourth quarter, I think we had a TRY 4 billion total financing costs, out of which TRY 1.6 billion was FX losses. I mean if you look at 2021, obviously, based on our current strategy, we should completely eliminate that TRY 1.6 billion, which came as a result of FX volatility in the year. In return, this should incur some additional cost because of a larger hedging portfolio. So we also started hedging our accounts payable, which is, again, adding a few hundred million dollars of new hedges into the portfolio. And we also restructured the last part, last component of the swap -- total swap portfolio in this year, which will again impact our Q1 and 2021 financials. But overall, this should have a sizably lowest total financing cost for the full year of 2021, when we compare it to 2020. I think there was TRY 750 million, excluding the FX part, there was TRY 700 million -- TRY 750 million total financing cost in the last quarter of 2020. I mean you can start building, based on this and maybe use it as a run rate for the full year.
So TRY 750 million on a quarterly basis, financial expenses, we can assume, you're saying basically, right?
I mean I'm just saying it may be a good starting point if you make a prediction for the full year. Without, obviously, incurring or assuming any FX loss or gain coming into the picture.
[Operator Instructions] The next question comes from the line of [Bultar Ali] with [PAMCO].
I have 2 questions. First one, as you mentioned, you have restructured most of the hedges. And you have said there's a feeling of -- in terms of the FX since the 2020 hedges, it is around the forward rates when the currency was around 780-ish. But could you give some color about the average interest rate so that we can understand where your net financial expense would reach. I'm saying, for example, if you don't share average interest rate, which is around 11-ish, what would be the level that this -- because after the restructuring most probably your forward rate gets higher. But on the other hand, the interest rate that you are paying should be increasing. So the net interest expense, for example, outside FX and hedging gains and other financial income and expense in full year 2020, that number is around TRY 2 billion. So how should we think about this number in 2021? This is my first question.
The second 1 is, I mean, when we look into your depreciation over sales, 19%, the CapEx reached around 24%. And in the past while you were sharing CapEx over sales, the normalized number was around 18% to 20%. So it would be good to assume around 18% to 20% depreciation over sales. So -- and for the company, this D&A should converge the around CapEx levels in the following years. So in that sense, rather than EBITDA, EBIT is more important for the P&L. So could you give some color on this depreciation item for 2021 and in the coming years I mean is this going to converge to 24% levels in the next 2 to 3 years or just in a very short period of time. Most probably, it will take more time. But just I'm trying to understand the depreciation trend in 2021 and going forward. Thanks a lot.
Well, there are a lot of technicalities involved into the questions. So let me try to answer as much as I can. So for the first one, I think we should have around 200 basis point increase in the cost of the hard currency debt -- which took us to above 10% which includes the original interest cost-plus the incremental cost coming from the hedges. But you should also keep in mind that we are now -- we now have around 14% of the total debt portfolio coming in lira -- in short-term lira funding. I mean we started using the short-term commercial loans. Now we had last year a small tranche of lira bonds into the portfolio of TRY 150 million. And we want to build on what we already had and committed. And naturally, this will be coming with mid-teens to even maybe higher interest rates throughout the year. That should take the average cost of funding a bit higher than 10%. When you include those new potential lira funding sources. Again, we should look at it with the reference of last year's total financing costs, as I mentioned, an elimination of the FX plus some innovational charges coming from the items that I just mentioned, restructuring and lira funding.
But all in all, I think that will be yes, I understand the depreciation question, but it's a bit difficult to give you an exact number for the depreciation. So IR is already looking at me very carefully. So this is not part of our guidance, but let us check whether we can find a proper way to -- not to misguide you with the -- the impact of the potential increase in the depreciation. I think, yes, these are limits of my answer for the moment.
I mean normally, I don't ask this depreciation question, but the gap of 5 percentage point between the CapEx and the depreciation. That's why we may need more color going forward. I mean, so that's why EBIT guidance is more -- how could I say more helpful going forward?
Yes. We noted that your concern. And I think we will work on a sensible solution to find a way to guide you with.
Congrats for the results. Have a good day.
The next question comes from the line of Demirtas Cemal with Ata Invest.
My first question is about the regulatory environment and taxes, which we see -- we recently saw an increase in the special communication tax. Do you expect another tax increases or decreases going forward in the regulatory environment, how do you see it for the time being? And the second question is again about your FX position. When I look at the details, we have much less FX concern. But when I look at the details in the sensitivity analysis, I see that if dollar depreciates and if euro depreciates against Turkish lira, depreciating dollar is favorable for you, but depreciating euro is not, just the opposite. Were there any specific reason for that, the dollar and euro effects looks different. And for the following quarters, do we assume that FX position is likely to be stable, not like the ones, we had experienced back in third quarter and fourth quarter. We -- negatively impacted in both quarters despite the difference, the direction of procurement. So just -- I just want to understand, could we expect any surprise depending on swift movements in the currency and do you have any action plan if Turkish lira remains strong for the rest of the year because of higher interest rates.
Yes. Let me take both questions. Yes, you're right. There was a change in the tax rate for special communication tax. That was the first news for the year. As you know, communication tax is very similar to VAT. Ultimately, it is the tax for taxing the end users. So it's the responsibility with the taxpayer actually. It is not the company or us. We are just acting as intermediaries, the ultimate payer is the customer. So we will -- and the impact is sizable. And our current view is that we have no other option then to reflect this cost to our customers by including it into their bills, this additional 2, 2.5 percentage point increase. There is also 1 thing. I mean, we are trying to implement the changes in our IT systems, but it's taking a bit of time. So that's the only parameter that is kind of not set yet. But the intention as a whole is that it should be reflected fully to the -- at some point to the customers.
The other point, I mean, there are a few major changes in our hedging portfolio. First, we have no hedges unrestructured as of today. There was 1 last piece that was left intentionally to -- because of the market conditions -- intentionally to this year. This is why we see a long dollar position, but still a potential loss, in case there is a depreciation of lira, and that will be fully removed from the picture as we announced first quarter numbers after this latest restructuring activity. Normally, we do -- when we protect our cash flows, we have -- we are also looking at balance -- we also have a balanced approach between euro exposure and dollar exposures. But we also have a euro reporting entity in the system, which is Türk Telekom International. And there are some variations that is caused by the balance sheet, net balance sheet -- net asset coming from this entity, which is in euro. This is why you see some different numbers in the sensitivity. But our aim is to balance, if it's a financial exposure the balance sheet according to whether it's euro or dollar, it balances the euro or dollar hedging instruments. We don't want to create a parity risk, although we eliminate the currency risk, I mean, lira to dollar and lira to euro risk. So I think we shouldn't expect any surprise just to come from this sector.
And part of my question was, in case of further TL depreciation. Could we assume similar sensitivity for the future or in case of further depreciation of Turkish lira, you need to take some action or just you will say, okay, it's the hedge and we are comfortable with that.
With depreciation of lira, you asked -- I couldn't hear.
Yes, yes, yes. In case of -- because there is -- no, no, I'm not talking about the -- in case of further depreciation of Turkish lira. You hedge your position to some extent. But in terms of high volatility, you still pay some cost in 2020. And it is just in case of rapid appreciation of Turkish lira. Will you need to take an action in such a situation and just strategically or you would just say with the currency issue at current level?
Listen, I mean, considering the current status of the hedging and debt and hedging portfolio and considering all the major restructuring that we already had, I mean from this point on, it will be somehow fine-tuning of few instruments here and there, this shouldn't basically change the outcome dramatically. So we will definitely focus on getting a natural sensitivity every quarter. But by just tuning a few instruments or getting into a new contract but I don't think there will be major impact coming from that. Everything we have so far are already secured and very stable monetary position in the long term.
Your next question comes from the line of Gurbuz Ogeday with TEB Investment.
I only had 1 question. When we look at your -- the improvement in your operating cash flow, a significant portion of that comes from an improvement in -- well, a decrease in working capital. I was wondering what is the reason for this decrease? And how sustainable will it be going forward?
Yes, the working capital provided some -- I mean, enables us to improve the cash flow performance. There are few factors here, some of it is here to stay, some of it is here to -- I mean, some of it will not be there especially when we announced the 2021 numbers, starting from Q1. First of all, we did certain cannibalization of our CapEx spending, which are mainly concentrated on the second half and mainly in the last quarter of the year, but they are not turning into a real cash out because of the attach payment terms. So mostly, we do payments in the upcoming years, which will be 2021 in this year, but they are shown as a working capital benefit. So if there is an increase in the overall CapEx size for a year, it means there is an increase in the CapEx size for the last quarter, which means there will be a positive impact coming from the payable. That part may not be there. The other factor, which is the -- if you look at, especially to the last quarter performance some of the large accounts is mainly the public accounts, the government accounts that they tend to provide the payments towards the year end? This is why we had a lot of collections coming from those accounts at the end of the year. I mean that part should be -- should at least repeat itself in the next year towards the end of the third and fourth quarters.
[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.
Thank you very much, everyone, for joining the call. So I hope to see you and have you all here in our Q1 conference call as well. Have a good day. Thank you.
Thank you so much. Have a good day.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.