Q3 2012 Turk Telekomunikasyon AS Earnings Conference Call
Oct 17, 2012 AM EEST
TTKOM.IS - Turk Telekomunikasyon AS
Q3 2012 Turk Telekomunikasyon AS Earnings Conference Call
Oct 17, 2012 / 02:45PM GMT
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Corporate Participants
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* Onur Oz
Turk Telekom - Director - IR
* Hakam Kanafani
Turk Telekom Group - CEO
* Tahsin Yilmaz
Turk Telekom - CEO
* Erkan Akdemir
Avea - CEO
* Kaan Aktan
Turk Telekom - Director - Group Finance
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Conference Call Participants
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* Cesar Tiron
Morgan Stanley - Analyst
* San Dhillon
Barclays Capital - Analyst
* Haim Israel
Bank of America/Merrill Lynch - Analyst
* Vera Sutedja
Erste Group - Analyst
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Presentation
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Operator [1]
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Good afternoon, ladies and gentlemen, and welcome to the Turk Telekom 2012 Q3 Investor Conference Call. At this time, all participants are in a listen-only mode until we conduct the question-and-answer session, and instructions will be given at that time. (Operator Instructions).
I'd now like to hand over to the Chairperson, Mr. Onur Oz. Please go ahead, sir, and I will be standing by.
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Onur Oz, Turk Telekom - Director - IR [2]
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Hi, everybody. This is Onur Oz, the Investor Relations Head of Turk Telekom Group. I'd like to welcome you to our results call for the third quarter of 2012. As always, I want to remind you that there's a notice in our first stage of the presentation, so please go ahead and read that notice.
I will now hand over the call to our Group's CEO, Mr. Hakam Kanafani.
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Hakam Kanafani, Turk Telekom Group - CEO [3]
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Okay. Onur handed the call, but did not hand the microphone. So now we have the microphone in front.
Thank you, everybody, for joining us. It's a pleasure to be here today. If you remember, I had always talked about how Avea had made strides during the first 2.5 years and we bragged about how the management team is fresh, new, and there were radical changes on the ideas and on the way forward. And we have created a lot of value based on that.
And I think we today we're also proud and we wanted to say why not do the same thing for Turk Telecom? So before we get to the slides, I would like to let you know that we are all here together, members of Turk Telekom Group management team, and I would like to just very briefly introduce the new appointed members.
The first one is my friend and colleague from TTNET, the ex CEO of TTNET, who I think has done a wonderful job taking TTNET to the top 10 in the world in terms of subscribers, taking the penetration of Turkey more than anyone we have expected in the limited time. And not only that, but I think more effectively the last two years, showing a very, very steady business model and difference against a very aggressive 3G, and if you benchmark how TTNET has responded to 3G, kept their pace, and even grew a little, I think this is attributed to Tahsin.
He is now the CEO of Turk Telekom and he has worked in many different areas of the industry as an engineer and a senior executive, and he brings us very well rounded experience and leadership from a very important related sector.
Also, we have our friends and new members in top management. We have Mehmet Ali Akarca. He joined us as Chief Marketing Officer. Mehmet Ali joined us from Koc Group. We also have Ali Yilmaz. Unfortunately, Ali is not new. He's the Chief Sales Officer of Avea and he is now with us in TT to show us some of the wonder work that they have done in the Avea distribution network, so we welcome him.
We have Gokhan Kayalibay, and he is now the Chief Strategic and Business Development Officer for TT. He has a vast experience on top firms around the region. Last, but not least, Murat Kirkgoz. He is one of my colleagues and favorite finance people because he gives a lot of solutions and not only critiques. He used to be the finance director of Oger Telecom Group. So I welcome him wholeheartedly, he will bring vast experience and practical knowledge to the team of TT Group. And he is the TT CFO, that is his position.
So let me welcome them all, congratulate them. You will hear from them soon. And, always -- and we are confident that this management team -- our new management team will execute our strategy successfully. We believe in the leadership of Tahsin. We think Tahsin is going to take us to a much needed next level because we have vast challenges as an industry and as a Group, and we will focus on the dynamic needs of our customers. I think this is key.
Now, let's start and going to the presentation. Let's look at page four. I'm happy to report that we have sustained our consolidated revenue growth. The revenues in the third quarter of 2012 stood at TRY3.2 billion, which is an increase of 6% over the same period of last year. In addition to this revenue, we delivered consolidated EBITDA margin of 40%, which shows our sustained profitability throughout this year.
On the net income side, the good news here is that we have increased 77% year-on-year, supported by, of course, favorable foreign exchange conditions. And to give you more color on our consolidated revenue growth, just let me briefly mention some of the highlights of primary growth drivers.
First, on our mobile business, growth has particularly been strong in the third quarter. We achieved double-digit mobile revenue and EBITDA growth with improved profitability. We have a very good trend in the mobile revenue mix where share of pure data revenue is increasing phenomenally each quarter. And I think Avea is doing a wonderful job at utilizing that trend.
Second, on our fixed broadband business, revenues in the third quarter maintained robust growth and rose to TRY775 million. This is a 6% revenue growth when we compare it to the third quarter of last year. Again, we have a very good trend in the fixed broadband. We see more and more the customers are preferring the higher packages in terms of speed and monthly capacity, and I think Onur has put a couple of numbers to reflect that in your presentation. We expect these trends to continue in the coming periods.
Now for slide number five, just a quick financial summary about consolidated results. We have the consolidated revenue growth of 6%, driven by solid revenue growth in mobile business and fixed broadband business, similar to last quarter. We recorded higher construction revenues as we continued with our new investments, primarily in the fiber network. Overall, this is a historically quarterly revenue record for Turk Telekom Group.
Second, we have EBITDA graphs in the middle, as you see in the graphs. We managed to keep EBITDA flat year-on-year with a strong margin at 40%. Third, we are talking about the net income details here. We recorded an impressive increase in net income in this quarter, 77% annual growth, supported by favorable FX conditions compared to last year. Overall net income for the first nine months reached over TRY2 billion.
Page six, please, some information about the revenue mix and trends over the last couple of years. As you can see on the graph, we have a shifting trend in our Group revenue portfolio. Revenues from fixed broadband and mobile businesses now constitute 52% of the total Group revenue, which I think we are at landmark -- historic landmark.
And we are proving ourselves in the Group, maintaining growth from the high potential and future revenues and now they have reached -- they constitute a little bit over 51%, almost 52% of total Group revenue. What's good about this trend is that it's combined the largest source of revenues grew 9% year-on-year, so this source of revenue combined has grown 9% year-on-year.
As our revenues grow, fixed voice holds less share in the mix. And that's the [fancies] as you continue to grow and your PSTN holds less share in the mix, fixed voice business used to bring in 42% of our revenues three years ago, but now it is less than one-third of our revenue. Overall, our revenue structure is further optimized with increasing proportion of high growth areas.
Just to close, I would like to hand over to Tahsin Bey for an update on the fixed line. And before I hand it to him, I would like to congratulate him, welcome him, and tell him how we are all very proud that he has joined us in this position. Thank you, Tahsin. The floor is yours.
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Tahsin Yilmaz, Turk Telekom - CEO [4]
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Thank you, Hakam. First of all, thank you very much for your kind words also from the team. Good afternoon, everybody. I'll give you a brief update on our fixed line business [Telekom, it is transparent].
Let me take you to slide eight, so we can go with the financial summary of fixed line business. I am glad that we continued our growth of the strong [revenue take] in the fixed line business. Our revenue increased 4% year-on-year and reached over TRY2.4 billion in the quarter. This revenue growth was mainly driven by upsells and price adjustments in our fixed voice and fixed broadband business. We also had a very strong revenue growth in the quarter with data services on the fixed line.
First, I would like to emphasize our upsell efforts, especially in the fixed broadband business. There is a clear demand towards a higher capacity and key packages in the market. As Turk Telekom Group, we are in the best position to address this increasing demand for high speed broadband. With our upsell efforts, we provide more value to our customers and generate higher ARPU. I'll provide you with more examples then will give you details of fixed broadband business.
As you remember, we added more value to our unlimited fixed broadband offering and made price adjustments in all unlimited upsell packages at the beginning of the second quarter. This continued to show its positive effects on year-over-year basis in the third quarter.
One last point I would like to mention on revenue growth is construction revenues. We had a jump in construction revenues in the second quarter as we had an increase in eligible CapEx. In the third quarter, we continued our efforts to upgrade our network to fiber to building high quality and speed for our customers. As we continued our investment in fiber network, we also continued to record construction revenue in fixed line business. All these factors, we expect our fixed line revenues to support our consolidated financial growth targets.
On the EBITDA side, as you can see from the graph, we achieved a robust EBITDA margin of 49% -- margin of 49% in fixed line, however, fixed line EBITDA stayed relatively flat year-over-year. As we recorded higher construction revenues in the third quarter, it had a slightly negative effect on the EBITDA margin. [Kaan] will more line and team] will provide more details on this, while he goes through financials.
First we're going to talk about EBITDA one off items in the third quarter, overall, the fixed line EBITDA figures would have been approximately [TRY36 million] higher, excluding one-off items.
On personnel costs, which is one of the major cost items in the fixed line business, we reduced personnel expenses to 18% of total fixed line revenues in this quarter. Access lines per employee stood at 600 as of third quarter.
Moving on page nine, I would like to mention our revenues stabilization efforts in the fixed voice. And we have next chart, you can see the trend for minute bundle packages and the recurring fee in the fixed voice business. The good trend here is that share of Home Advantage bundle packages including in our customer base.
Now (inaudible - background noise) PSTN base within these minute total packages, this turns out to give us 74% recurring revenue share in our total revenues for fixed voice. During the quarter, we continued brand partnerships with leading brands of Turkey, giving special discounts to our customers in many well known retailers. We will continue new partnership and loyalty programs to all the micro segmentation of the market. All in all, these efforts helped us reduce churn.
On the bottom left chart, you can see numbers for total access lines and PSTN ARPU figures. They have a total of 14.5 million access lines, including over 600,000 naked ADSL lines. Although PSTN lines continue to decline, we had lines with naked ADSL customers and offset a good part of this decline. If you look at the ARPU levels, you will see that PSTN ARPU is 3% up at TRY22.6 in the third quarter. We made PSTN prices adjustments in June, and this supported ARPU growth.
As a continuation of our value best based company, most recently, we introduced new bundle minutes campaigns targeted to new residential customers. With these new minute [median max advantage] campaign packages, new customers receive discounts and bonus all that extra minutes. Overall, we aspire to offer great value to our customers in fixed voice to make sure that they are satisfied with our services.
Moving to page nine, we have more details on our fixed broadband growth and strategy. In the third quarter of 2012, fixed broadband revenues grew by 6% year-over-year to TRY775 million. This robust growth is supported by upsells, price increases, and subscriber growth.
On the subscriber side, we added net 161,000 fixed broadband subscribers since the third quarter of last year. We also continued with our fiber network investments and reached 1.5 million fiber-to-home and fiber-to-building home pass. With these investments, we aim to fulfill higher speeds, higher quality needs, and to transform our network for IT-based services.
Overall, we have 7 million fixed broadband subscribers as of the third quarter. Comparing penetration levels in Turkey and Europe, we believe that that continues to be a growth potential here, especially with projects like [Hearty elements] e-education initiative, as well as our device campaign where we aim to push Internet-enabled device penetration up to support growth and broadband penetration including the [futures].
To give you an example, TTNET latest device campaigns as part of our device initiatives included laptop and tablet PC offerings with data plan contracts of two or three years. One last point I would like to mention on this slide is broadband ARPU. On the bottom left chart, you can see that we (inaudible) ARPU towardsTRY37 with our latest price increase and our successful upselling initiatives.
Now on page 11, we look at the evolution of fixed broadband usage and upselling details. On the top left chart, you can see capacity breakdown of ADSL packages. Share of unlimited quarter subscribers reached 71% of total customer base from 58% year-on-year. This is a relevant trend for our business and we will capitalize on it further.
In terms of speed, TTNET up to eight megabytes per second and highest speed packages are now 92% of subscribers, which means the lower end users who are in one megabyte per second packages are increasing the demand in high speed. As we make higher speed available to fibers, we believe our customers will appreciate it even more and move into higher speed packages.
On the bottom left graphic, you can see the trend in ADSL market data usage. Average usage stands at 25 gigabytes as of September, which again is a favorable trend for our fixed broadband products. Overall, we foresee consumers continue to increase data usage with multiple devices and a higher speeds. At Turk Telekom Group, we have the right constituents of technology platforms to address our customer's dynamic needs.
So, this was a brief review of the fixed line business performance. Now I would like to hand the call over to Erkan Akdemir, Avea CEO. Thank you very much.
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Erkan Akdemir, Avea - CEO [5]
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Good afternoon to you all. Before I started, I want to mention that our smart growth strategy is really working and I am pleased to announce once again our very strong performance.
Avea increased its revenue in the quarter TRY910 million, achieving an increase of 11% on year-on-year and 6% on quarter-over-quarter [revenues]. As it is achieved in the recent quarters data and the economic revenues growth have an essential contribution at the top-line growth of the revenues. Together with strong growth in revenue and from saving measure which have been initiated at the early Q2, we managed to deliver EBITDA of TRY128 million, with 14% margin. Significant growth by 64% compared to the Q2 and 12% compared to the same period of the previous year.
As you will see on the next slide, our subscriber base grew by 6% compared to the same period of last year, reaching 12.2 million. In Q3, the mobile [period] of subscriber has slowed down with more rationalize market condition, [not] gross adds had declined compared to the Q2 (inaudible) churn rate.
At the same time, Avea launched competitive, innovative and effective offers, as always, to the subscriber, like [fetch] in consumer and BIZ in building segment, stimulating our gross adds in this quarter. Avea is still the market leader at positive subscriber ratio, which was [44%] of our total subscriber base.
And we had still an upward trend with 12% increase, on year-over-year basis and Avea sustained its leadership for the last -- past five years with a new record of the 350 minutes in the third quarter.
Moving on to the next slide, at the end of the third quarter our blended ARPU reached TRY22.6, which grew by 6% compared to the previous quarter. Focusing on the data incoming traffic and improved subscriber mix are the main drivers of the blended ARPU. Moreover, prepaid ARPU reached to the highest level ever of TRY13 and increased by [70%] compared to the same period of the last year.
Now I'd like to move on to the next slide and mention the ongoing transformation journey. Our investment on network infrastructure still continues to provide the best coverage quality to our customers. For the nine-month period, our total CapEx reached [TRY415 million] and thus today we cover 98% of the population in terms of the 2G and a 15% increase in the base station year-over-year, we provide now 3G services to 77% of the population.
As a part of our optimization plan, number of non-exclusive dealers decreased by 8%, but our exclusive shops reached the 906 points [settling] all around Turkey for enhanced customer satisfaction. Within the scope of the Group, company synergy, Area products now having sold in more than 1,300 TT and TTNET shops, delivering a variety of the bundled offers, fixed and mobile and fixed products for the customer needs.
Finally, a few words on mobile data revenues, on page 17. I want to share the mobile data revenue. And our revenue in data grew consistently and constitutes 12% of our total service revenue in Q3 with 64% increase year-over-year. The launch of the smartphone campaigns with competitive offers contributed to the boost in both data revenue and customer loyalty.
In the consumer segment, innovative smartphone campaigns like fetch offerings a variety of the products which let customers to freely choose their needs and these offering -- different segments offering almost anything a company will need are considered to the important subscriber acquisition and data revenue drivers. Share of the small screen data users also grew by 28% year-over-year in Q3.
Now that is the end of my part. I switch to Kaan Aktan for the financials.
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Kaan Aktan, Turk Telekom - Director - Group Finance [6]
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Okay, thank you very much. This is Kaan Aktan. I will take you through the finance section of the presentation. We are now page on 19, the TT consolidated P&L statement. Well 6% revenue growth in year-over-year for this quarter, and this also brought us to 5% growth in year-to-date, meaning more closer to our guidance.
In EBITDA, we've seen 2% growth versus second quarter, and this is mostly supported by mobile profits. Operating profit, 6% up quarter-over-quarter, and this comes from both mobile and fixed line performance. FX, although not strong for this quarter, but worth more than TRY200 million net gain in year-to-date. So we've been able to recover an important portion of the last year's unrealized losses [EBITDA].
And finally, we see 77% increase year-over-year in net income. And again, I would like to mention that this is a normal quarter with minimal impact from FX.
Now we are moving to next page, page 20, TT Group consolidated balance sheet. Just I would mention we see an increase in the intangible assets, the first line in the page, so this comes mostly as a result of higher construction work we performed in this year. And this is capitalized under IFRIC 12, so you see a lot of impacts from the construction, both in the revenue section and the balance sheet with that.
So now we are moving to next page, which is 21, summary cash flow statement. So we see a much better performance this quarter, mostly comes from the working capital CapEx. We see it slightly lower, especially compared to prior quarters. And now, just to mention, we are still not changing our CapEx guidance in full year, although we see some little bit lower numbers here in this quarter.
So next page is 22, summary breakdown for the revenues at the consolidated level. Fixed line revenues up by 1% compared to the prior quarter and there is 2% increase before the construction revenues. You see a drop in the construction revenue part from second quarter to third quarter, adjusting impact fixed line revenue increase is 2%.
Mobile, 6% versus second quarter. While we all know that there are some seasonal impacts here, but looking at the year-over-year comparison it's a very solid strong double-digit growth of 11% for the quarter and 12% for the first nine months.
Next page will the summary of OpEx breakdown. While I will skip this one and give you more -- some highlights at the individual pages for fixed line and mobile.
Next page is 24, fixed line business summary P&L statement. So we all know -- we already believe this year one-off expenses, both in the second quarter and the third quarter. And those are mainly related to provisions on litigation, court cases, and overdue receivables. We [doubt though] EBITDA would be flat versus last year. But since we have this 4% growth in our revenues, our margin is slightly diluted to 49% for the fixed line. Last quarter -- or second quarter was kind of heavier in profit. Now we are more in line with our guidance figures, and the CapEx to revenue ratio came down to 18%.
The next page, page 25, OpEx breakdown for the fixed line business. So a few adjustments to better explain the story here. We had 2% growth year-over-year without construction costs, but really also relieve that we had 3 percentage point impact from the provisions, one-off item. So all excluded, actually we are looking at 1% drop in our controllable cost base compared to the prior year.
What will be the drivers behind this since it's mostly a fixed and not variable cost base due to the nature of the business? People-related costs are flat year-over-year. Although we had the inflation adjustment throughout the year on wages, we see the outcome of the actions taken last year on headcount. Commercial costs, 11% lower year-over-year, a slight change in the commission structures and some optimization efforts. We hope that those will be sustainable in the long term. The one-off item, the impact from -- around TRY34 million for the fixed line, you see the impact in the doubtful receivable line in this page.
We move to the next page, page 26, with mobile business P&L statement. We keep the EBITDA margins stable at 14%, but with the revenue increase -- the strong increase in the revenue, up [7] EBITDA, growing by 12%, similar to the revenue growth. And 4 percentage point increase both in EBITDA and operating profit from second quarter to third quarter.
Next page will be 27, mobile business OpEx breakdown. So we all know that the variable portion of OpEx is much higher in mobile, having said that, the revenue growth is similar to OpEx growth this quarter. But there are some again highlights around the controllable cost base. You'll see in the maintenance there is a 3% drop year-over-year, although we are still going through the rollout in our network.
Commercial costs, only 2% higher than prior year's, although we see significant improvement in the revenue performance. These are all the efforts around better use of resources in our [both] business line.
The next page, moving to debt profile. Our debt is now at TRY6.4 billion with an average maturity of 2.5 years. And net debt -- you don't see it on that page, but net debt is at TRY5.4 billion. Now with that, I complete the finance section of this presentation and I hand it over to Onur.
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Onur Oz, Turk Telekom - Director - IR [7]
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Thank you. [Anton], you can open it up for questions now. Thank you.
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Questions and Answers
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Operator [1]
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Thank you. (Operator Instructions). We have a question from Cesar Tiron. Please go ahead.
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Cesar Tiron, Morgan Stanley - Analyst [2]
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Hello? Hi. Actually, I have two questions, please. My first question is the DSL segment. Despite a lot of initiatives over the past couple of months, we're still not seeing any pick-up in the growth of DSL. That's first. And actually, most of the DSL revenue growth is driven by ARPU increase. What are you going to do in the future, because this is probably not sustainable? That's the first question.
And second question would be on the mobile business and the fact that pricing seemed -- the decline of pricing seems to improve compared to the previous quarter. And also, we're hearing that most of your operators have increased their [M&P] prices for most of the offers. And also, some price adjustments for existing offers. Can you please say what you've seen in the mobile market over the past couple of weeks? Thank you very much.
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Hakam Kanafani, Turk Telekom Group - CEO [3]
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Okay, let's start with the first question first, about DSL. We've seen in the mid-term, long-term, you know that we can push the penetration higher. We are facing tremendous competition from 3G. You have to note that 3G is in -- it's maybe growth stage, introductory passing to growth stage, and we are between growth and maybe maturity stage. So we are working on that.
I think the success is that you note that, too, we have maintained a level that we will not hit and see that other markets you will get actually a hit. Now, we've done a lot of initiatives on ADSL and there are more initiatives to come. And I am confident that if will respond.
On the mobile, when we -- we're getting mixed signals from the market, so that's why we are cautious. We did our -- some price increases that we have done, and part of the other competition has done, but there's also some aggressiveness that we have seen the last week or so, even today. So we're getting mixed signals, and that's why we are very cautious.
Now, the effect of our own price increase is still -- we need to take a look at it. The growth that you've seen does not include that. And we need to analyze it. So the answer is mixed signals and we are cautious about how to respond to what's happening to the market.
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Cesar Tiron, Morgan Stanley - Analyst [4]
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Just if I can quickly follow-up on that, if there is -- if all the operators are including the prices for M&P offers, are we not going to see some decline in churn in the next quarters?
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Hakam Kanafani, Turk Telekom Group - CEO [5]
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That would be good news. We are always looking for lower churn. But you are talking to the M&P leaders, so I think if you -- we are hurting them more. And yes, this is the logic. Is it happening? We still -- as I said, we're getting mixed signals and we're cautious. So I cannot take a position on that and Erkan Bey is going to hit me in the face if I continue to talk about this.
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Cesar Tiron, Morgan Stanley - Analyst [6]
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Thank you very much for your help.
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Hakam Kanafani, Turk Telekom Group - CEO [7]
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You're very welcome. Thank you for the question.
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Operator [8]
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Thank you. (Operator Instructions). We have a question from San Dhillon. Please go ahead, sir.
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San Dhillon, Barclays Capital - Analyst [9]
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Hey, guys, just a couple of questions. The first one, in order to hit the bottom end of your 2012 revenue guidance you'll have to achieve 4Q growth of around 8.5%. That looks like that's ahead of anything you've achieved here today. How confident are you of doing this?
And secondly, looking forward to 2013, the consensus you sent around last week implies that analysts are expecting Group EBITDA growth of 4% in 2013? Again, given you're looking like you're going to achieve 2% EBITDA growth in 2012, are you happy where consensus is positioned at the moment? Thanks.
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Hakam Kanafani, Turk Telekom Group - CEO [10]
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Okay. On the first item, we are speaking to our guidance. Our guidance are clear, we are sticking to it. We believe that we are committed of this guidance to the investor guidance. We faced a difficult two quarters, but that's our guidance, we're sticking to it.
On the second question, I have no future statements to talk about, any consensus in the future about either EBITDA growth or revenue growth. We're focusing on this year, man, so we have no comment about next year and we don't want to cause any mix-up for you guys or confusion.
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San Dhillon, Barclays Capital - Analyst [11]
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Okay, thanks.
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Hakam Kanafani, Turk Telekom Group - CEO [12]
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Is that okay for you, San? No problem?
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San Dhillon, Barclays Capital - Analyst [13]
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No, no, I'm cool. Of course, as far as -- maybe a quick follow-up on the first one. So the sequential tick-up implied by confirming your guidance, I guess where do you expect that sequential growth to come from? Is it more the fixed side or the mobile side? And maybe a bit more color on that would be great.
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Hakam Kanafani, Turk Telekom Group - CEO [14]
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Fixed and mobile.
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San Dhillon, Barclays Capital - Analyst [15]
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Both?
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Hakam Kanafani, Turk Telekom Group - CEO [16]
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Yes. And they both have grown 9% so far, so they're combined and they are bigger chunk of our revenues. All of these are great signs, and we are seeing them and they're bringing in a lot of confident for us. We are very confident in the new team. They have new ideas. They have been there, done that. They've been challenged. So we are confident in these two factors.
Kaan talked about the smart growth strategy. It is working in a very, very aggressive market. And you know that [Avea] a situation there's a lot of upside because we have a short -- the short fall in many departments, from third operator to the frequency to the price wars. So I think these are all actually upsides and we are very optimistic about Avea's -- about Group growth and Avea growth in particular.
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San Dhillon, Barclays Capital - Analyst [17]
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Okay. Fantastic, guys. Thank you.
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Operator [18]
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Our next question comes from Haim Israel. Please go ahead.
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Haim Israel, Bank of America/Merrill Lynch - Analyst [19]
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Hi. Good afternoon, guys. A quick question. Hakam introduced us with the new management team in the beginning of the call, but what can we expect in terms of strategy, vision, view from the new team? Talking about a lot of changes in the last couple of weeks, so if you can just give us some kind of clarity of what should we expect? What's going to change?
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Hakam Kanafani, Turk Telekom Group - CEO [20]
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I think there are two anchors. The first anchor is Tahsin. He's the anchor that is going to manage this change. And I tell you why, because he's been there and he's been in our highest growth industries. So he has seen it from a client to TT, which is very important. So when you see TT as a client, you have a lot of dreams and things that you would want to do.
Now, the other anchor is the relationship between Avea and TT, which is Erkan and Tahsin. And their relationship is very solid and they have the incentive and the initiative and also this is how they will be compensated, is on the Group numbers, how we can bring about the Group numbers an increase. Now, the management team has not yet -- they are super men, I agree, but they still need to a little bit of time to looking into that.
But we have agreed with the board today -- and there's a board meeting today -- is we are focusing on shareholder value. That's very important. Growth, shareholder value, add to that, our dividend, wink-wink. So you would see that this is the Company to stick to and to continue being optimistic about.
I don't think that we are going to see -- we want to go back to the fundamentals, some of the things that we need to do. We want to look at the quality of service. We want to look at new products. It's very, very, very important. So the sudden -- the big change -- it wasn't sudden, but it was a big change -- I think it will be answered by this man in the middle, who is Tahsin, who has seen from around TTNET a lot of that and he has a lot of plans for this.
Let's give them a chance. You will see them and we are going to go on a road show, then want to introduce them and we want you to hear their ideas. But the word of a new manager who speaks quickly and has a menu for success. If you don't take time, then we will doubt what they're able to do. So they will take time and think this over, and then you'll see, I think, a lot of good developments.
The good news is we see -- what's the word in English? Momentum. We see momentum in Q3. So this is good and it shows you how the decision-making process has improved tremendously with the collaboration of Tahsin and Erkan. And it's very important that I attribute a lot of this momentum to them and their team.
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Haim Israel, Bank of America/Merrill Lynch - Analyst [21]
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Okay, great. Thank you very much.
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Hakam Kanafani, Turk Telekom Group - CEO [22]
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Thank you, Haim.
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Operator [23]
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Thank you. (Operator Instructions). We have a question from Vera Sutedja. Please go ahead.
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Vera Sutedja, Erste Group - Analyst [24]
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Yes. Good afternoon. The question, please, about the fiber-to-the-home or to-the-building, could you please update us, how much of these home pass that you mentioned in the presentation has been subscriber to your fiber-to-the-home service? And could you also give us a bit of flavor, how much is this priced? I just want to know whether actually it's affordable to the people in Turkey.
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Hakam Kanafani, Turk Telekom Group - CEO [25]
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Yes. We believe that the people in Turkey, like any other people in the world, respond not only to discount, but they respond to value. And we've shown this and we've shown how Turk Telekom Group is a disciplined play maker in this wonderful market. So we need to look at value and offering and also the price, and that we've taken care of and we've looked at that intensively.
Today, we have about 175,000 fiber customers and about 180,000 ex-DSL, which is partly fiber on part of that. But I think the good news is -- and we've started early, when we started early this year, but the good news is that we have a good up-tick on our IPTV, and that's a successful story for us. It's better than our expectations and it's driven by TTNET and you see the common factor there.
And I think this is good. It proves that our strategy in the beginning is right, is that if we upgrade the capacity we will be able to add value-added services. We are also happy with some of the bundles that we have put out in terms of mobile and PSTN together.
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Vera Sutedja, Erste Group - Analyst [26]
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Just a follow-up question. In IPTV up-tick, can you quantify how much it is at the moment?
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Hakam Kanafani, Turk Telekom Group - CEO [27]
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No. I cannot quantify. They'll start throwing things at me from the IR team. But this is good and it's creating a nice niche for us. And it gives a good indication that the strategy works, so we're happy about that. I would like to congratulate the team for their success.
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Vera Sutedja, Erste Group - Analyst [28]
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And a final question, how much is --.
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Hakam Kanafani, Turk Telekom Group - CEO [29]
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Sure.
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Vera Sutedja, Erste Group - Analyst [30]
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[Give reminder] is target of the fiber-to-the-home or to-the-building home pass that you can give us?
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Hakam Kanafani, Turk Telekom Group - CEO [31]
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I'm sorry? Again, please, Vera?
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Vera Sutedja, Erste Group - Analyst [32]
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The targets? The home pass -- number of home pass target for fiber-to-the-home connection or fiber-to-the-building?
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Hakam Kanafani, Turk Telekom Group - CEO [33]
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I think we have that in the document that you -- you will see it in the documents. If it's not in the document, then we probably will not be able to announce it. The number is there, right?
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Unidentified Company Representative [34]
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No, target is not there.
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Hakam Kanafani, Turk Telekom Group - CEO [35]
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The targets? No. Okay, so the target -- I was just about to tell you, but I was stopped at the right time.
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Vera Sutedja, Erste Group - Analyst [36]
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Okay.
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Hakam Kanafani, Turk Telekom Group - CEO [37]
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Okay. There is a considerably big target for next year. Now, if that's the last, I wanted to make a couple of points first about mobile, what they're doing, but I think this is it. There are no more problems.
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Vera Sutedja, Erste Group - Analyst [38]
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No. From me? No. Thank you.
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Operator [39]
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Thank you. We have a follow-up question from San Dhillon. Please go ahead.
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San Dhillon, Barclays Capital - Analyst [40]
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Hey, guys. Yes, just one quick follow-up.
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Hakam Kanafani, Turk Telekom Group - CEO [41]
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Hello again, San, we missed you.
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San Dhillon, Barclays Capital - Analyst [42]
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I miss you guys, too. Just quickly on Avea and the nine or so percent stake that [Ish] Bank Group own. If they were to attempt to IPO that stake, do you have in your powers the ability to stop it and acquire it at a predetermined value? Are there any put options or call options that cloud anything?
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Hakam Kanafani, Turk Telekom Group - CEO [43]
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Oh, my god, I think you're mistaking us for a different group. We don't do these things at our board level. Our chairman believes in consensus, believes in building bridges, believes in unanimous decisions, and we don't do that.
And I want to tell you, it's Ish Bank decision. If Ish Bank decides to do anything with their stake, they would see that Erkan and the team is there to support them and help them. They're our respected shareholders. And you've seen an indication what happened when we recapitalized the Company. And it happened slowly but surely and without any fist fights or animosities. That's the way the Group is run and we're very, very proud of that.
And this is a shareholder decision for Ish Bank and we would support them however they want to do. They're our shareholders, too.
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San Dhillon, Barclays Capital - Analyst [44]
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Okay, great. No more questions from me, guys. Thank you.
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Hakam Kanafani, Turk Telekom Group - CEO [45]
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Okay.
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Operator [46]
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Thank you.
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Hakam Kanafani, Turk Telekom Group - CEO [47]
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All right.
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Operator [48]
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(Operator Instructions). We appear to have no further questions at this time. I'll now hand back to you, sir.
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Onur Oz, Turk Telekom - Director - IR [49]
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Thank you very much, everyone. This is the end of our call. Thanks a lot.
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Operator [50]
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Thank you. Ladies and gentlemen --.
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Hakam Kanafani, Turk Telekom Group - CEO [51]
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Thank you.
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Operator [52]
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-- thank you for participation. This concludes today's conference. You may now all disconnect your lines. And once again, thank you.
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