This article first appeared on GuruFocus.

Revenue: Group revenue reached TRY 71.8 billion, up 2.5% year-on-year.

EBITDA: TRY 30 billion, with a margin of 41.8%.

Net Income: TRY 5.2 billion.

Mobile ARPU: TRY 448, with mobile ARPU excluding M2M growing 27% year-on-year.

Residential Fiber ARPU: TRY 570, up 37% year-on-year.

TechFin Revenue: Up 7% to TRY 4.1 billion.

Digital Business Services Revenue: Grew 33% to TRY 8.7 billion.

Data Center and Cloud Revenue: Increased 10% to TRY 1.6 billion.

Paycell Revenue: Increased 22% year-on-year to TRY 2.4 billion.

Financell Revenue: 12% lower year-on-year, reflecting disciplined portfolio management.

Net Interest Margin (Financell): Improved from 4.5% to 7.8%.

Cost of Risk (Financell): 3.4%.

Operational CapEx to Sales Ratio: 25% in Q2, 23.2% in the first half.

Cash and Cash Equivalents: TRY 89 billion at quarter end.

Net Debt: TRY 44 billion, with a leverage ratio of 0.4 times.

Release Date: August 13, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Turkcell Iletisim Hizmetleri AS (NYSE:TKC) delivered real revenue growth for the eighth consecutive quarter, with group revenue up 2.5% year-on-year despite high inflation, demonstrating strong pricing power and commercial execution.

The company achieved a significant milestone by surpassing 40 million mobile subscribers, with strong postpaid net additions of 284,000 in the quarter and improved monthly churn to 1.6%, indicating robust customer loyalty and a higher-value subscriber mix.

Digital Business Services (DBS) revenue surged 33% year-on-year, driven by a strong system integration backlog of TR16 billion and the expansion of data center capacity, positioning the company for sustained growth in high-potential areas.

The FWA (Superbox) business continues to accelerate, adding 64,000 subscribers in the quarter and maintaining a dominant 74% market share, with 5G expected to further boost demand and revenue.

The company maintains a strong balance sheet with a low leverage ratio of 0.4x and robust liquidity, fully covering all remaining 5G license obligations and debt maturities, while also benefiting from tax incentives and improved net interest margins in its TechFin segment.

Negative Points

Turkcell Iletisim Hizmetleri AS (NYSE:TKC) faces persistent macroeconomic headwinds, with inflation revised up to 28% for year-end, which could pressure consumer spending and increase operational costs.

The company’s net income was impacted by higher depreciation expenses related to 5G assets, which began this quarter and are expected to continue, putting pressure on bottom-line profitability.

FX losses remain a significant drag on financial results, driven by the depreciation of the Turkish lira and FX-denominated liabilities, including 5G license installments, with hedging costs still elevated.

ARPU growth is expected to remain subdued in the near term, with management indicating that the full impact of pricing actions will only be visible in 2027, suggesting limited immediate revenue acceleration.

The TechFin segment showed mixed performance, with Paycell’s EBITDA margin declining due to investments in POS solutions, while Financell’s revenue dropped 12% year-on-year due to tighter credit conditions and reduced demand for equipment financing.

Q & A Highlights

Q: What are the key drivers expected to reaccelerate revenue growth in the second half of 2026, and when will the impact of recent price hikes become fully visible?A: CEO Ali Koc stated that growth in the second half will be supported by a naturalizing competitive environment, dynamic pricing actions implemented in the first half, and continued contributions from Digital Business Services (DBS) and fintech. CFO Kamil Kalyon added that due to the lag effect of price changes and 12-month contracts, the impact will become much clearer starting from the end of Q4, with positive signals expected in Q3 and Q4 of 2026, but the exact results will be seen in 2027.

Q: Can you provide more details on the FWA (Superbox) offering, including device capabilities for 5G, pricing versus fiber, and the competitive response?A: CEO Ali Koc explained that Turkcell has the highest frequency band and made the biggest 5G investment, offering FWA with Wi-Fi 7 support. The company is swapping 4G Superbox devices for 5G-capable ones to utilize the new capacity. Pricing for Superbox is comparable to fiber, with slight variations depending on data limits (250GB, 500GB, or 1TB). When asked about competition, Koc pointed to Turkcell’s 74% market share in FWA as the definitive answer.

Q: What is the long-term strategic vision for Turkcell’s diversification, particularly regarding data centers and digital platforms, and can you provide a three-year plan?A: CEO Ali Koc reiterated his long-term dream of transforming Turkcell beyond a traditional mobile operator. He highlighted the journey starting with data center collocation in 2016 and the recent $3 billion agreement with Google Cloud to build hyperscale data centers in Ankara. Koc expects data center and cloud revenue to grow from the current 2.3% of group revenues to 10-15% in five to six years, driven by AI demand and the upcoming service business from the Google Cloud partnership.

Q: Why are the EBITDA margins at Paycell and Financell so volatile, and are you still comfortable with your CapEx guidance given high inflation?A: CFO Kamil Kalyon explained that Paycell’s margin erosion is due to heavy investment in physical POS solutions, which have lower profitability but drive significant growth. Financell’s margin improvement is due to Turkey’s tightening monetary policy reducing demand for equipment financing, lowering costs. On CapEx, Kalyon confirmed confidence in meeting guidance, citing disciplined spending history and no expected deviation despite FX effects.

Q: What are the expected payment schedules for the 5G tender, and what was the specific Q1 payment?A: CEO Ali Koc detailed the payment schedule: the first installment of $625 million (including VAT) was paid in January 2026, the second installment of approximately $400 million is due in December 2026, and the third and final installment of approximately $400 million is due in May 2027.

Q: Do you expect any changes to credit limits for device installments, which are important for 5G penetration and Financell, and have you started seeing 5G contribute to ARPU growth?A: CEO Ali Koc noted that 30-35% of users have 5G-capable phones, and Turkcell is lobbying to increase the current installment limit of 20,000 Turkish liras, which is becoming insufficient due to rising phone costs. He expects a change soon as phones below this price are disappearing. On 5G ARPU, Koc confirmed that data usage has increased and 5G users have higher ARPUs, which will positively impact overall ARPU as customers migrate from 4G to 5G.

Q: How much EBITDA does the data center segment generate, and can you share details on the digital services segment?A: CFO Kamil Kalyon stated that the company does not expect any erosion in overall EBITDA margins from data center operations, as the business plan projects margins that are not dilutive. He did not provide specific segment-level EBITDA figures but emphasized the strategic importance of the data center business for long-term growth.

Q: Regarding the system integration backlog of TR16 billion, should we expect gradual increases or more significant improvements in the coming quarters?A: CFO Kamil Kalyon explained that significant projects from governmental bodies have contributed to the backlog, and these projects typically generate follow-on business. He expects the strong enterprise-side momentum to continue into 2027, noting that Turkcell’s strong sales force in the enterprise segment is a key competitive advantage, which is why major companies like Google choose Turkcell as a partner.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.