Turkcell (NYSE – TKC) recently managed to outbid global giant Vodafone (NYSE – VOD) for the fastest 3G licence in an auction that looks as though it will realise a total of $1Bn for the Turkish government. Although a far cry from the 3G auctions that occurred in Western countries in the mid 90’s, this will be a welcome fillip for the Turkish economy.
The government had made regulatory changes to induce Turkcell’s competitors to bid, including the introduction this month of portability reform – allowing customers to switch mobile operators while keeping the same phone number. Turkcell agreed to pay €358m for the first 3G licence, which is for spectrum at the 40 megahertz band. Vodafone offered the minimum price of €250m for 35MHz. Avea, owned by Turk Telekom, offered €214m, also the minimum price, for €30MHz.
During the 3rd Quarter of 2008, Turkcell reported a year on year growth of 19.3%, comfortably breaking many analysts estimates. With the acquisition of the 3G licence bringing increased coverage levels, it is expected that Turcell will acheive some strong customer acquisitions in its homeland, where it has a track record of eliciting above average ARPU from its users base. Currently sitting at $13.91, the ADR has attracted a number of buy ratings, with a 6 month target of $16.22.
Meanwhile, Turkcell is looking abroad for even further expansion, its relative financial muscle in the region could see it picking up Macedonian operator Cosmofon within the next three months, although there is competition from Telekom Austria & also Slovenjie Telecom, both of whom are also looking to secure further business in the Balkans & Black Sea Basin. It already has holdings in Azercel (Azerbaijan), Geocell (Georgia). K’cell (Khazakhstan) & Moldcell (Moldovia) through its international joint venture Fintur. In Ukraine, Turkcell operates the third largest mobile operator Life :), through its Astelit operation. Life:) has been making some serious inroads into the Ukrainian market, more than doubling its subscribers in 2007.
Standard & Poors upgraded Turkcell’s foreign currency rating from BB to BB+ in early November, which can only bring encouragement for investors.