Türk Telekom’s New Growth Strategy

Türk Telekom CEO Paul Doany has declared that 2008 will be ‘customer’ and ‘product’ year. He says that they will launch a major offensive and introduce a different product every week of the year. He notes that growth will be based on innovative, new products and acquisitions. He explains this target as follows: “We shall increase the share of new products in our turnover from less than one percent at present to 10 percent by 2010.”

Türk Telekom is getting ready for the public offering in the new year of 15-25 percent of the Treasury’s 45 percent stake. It has set itself some ambitious targets in order to strengthen its position ahead of the sale. Since it was sold to Oger Telecom in July 2005, Türk Telekom has undergone a radical change and the investments in infrastructure and organization now look complete. It has shaken off the mentality of a state-owned company and is preparing for a fierce battle with the mobile operators which it regards as its rivals. In this context, together with its participations TTNet and Avea, it will launch 52 products in 52 weeks in 2008. Türk Telekom will renew its distribution and sales network. It is one of the largest companies in Turkey, with 37,000 employees and an organizational network in 81 provinces. It has prepared growth strategies for both the domestic and foreign market.

We spoke with Türk Telekom Chairman Paul Doany about the post privatization era, its growth and investment strategies and its new innovative products.

You said that you planned to invest US$3.4 billion in the six years after privatisation. How much have you invested so far and in which areas?
After privatization we invested a total of $728 million in 2005 and 2006. Our biggest investment was in infrastructure. We focused on investments in modernizing the network and broadband technology. We are contracted to invest another US$1.7 billion in 2007. Although the 45 day strike slowed us down a little we shall still achieve our target figure this year. We shall realise some major investments in 2008. We shall achieve the planned volume of investment by the end of 2010.

In which areas are you continuing to invest?
We have significant investments in IT. The Customer Care and Billing Project is the largest IT project in Turkey. Our broadband ADSL and VDSL investments are our most important investments this year.

We also have another project called the ‘Rural Areas Transformation Project’. This investment will enable people to benefit from the same services even in the most far-flung corner of the country. All of our voice services will be broadband services. At the moment we have converted two million of our four million customers. In this way we shall remove the discrepancies between geographical regions of the country. We are investing around US$ 200 million in this project.

What added value do you think you have brought to TT since privatization?
In fact, even though it used to be a state-owned company, Türk Telekom always pursued a commercial strategy. But certain state restrictions meant that it was not able to operate like a private company. For example, before privatisation in 2005, it was possible to access ADSL services not just in the major cities of Istanbul and Ankara but everywhere in Turkey. The company successfully achieved this even though it did not have the infrastructure of Avea or Turkcell. This shows that the company was stronger than it appeared. The restrictions were removed after privatization. The second important point is our control of Avea. In the past Türk Telekom controlled Avea through Telecom Italia and Türk Telekom. But now Avea will be a very powerful company as a participation of Türk Telekom. This is important because it will also add value to Türk Telekom. Avea will add value to Türk Telekom in two ways. Avea used to have 4.5 million customers, but now it has nearly 9.5 million. In 2005 investment in Area was zero. No investments were made because no decisions could be taken. In 2006 we took the decision to start all the investments. In 2007 we allocated more resources.

The growth in ADSL also gives us added value. We are expecting an increase of 1.5 million users. This is very good growth for us.

At the moment Türk Telekom has more ADSL customers than British Telecom. We are the fastest growing ADSL market in Europe. The adjustments in voice service tariffs were a very important step in terms of preparing our company for competition. The public offering in 2008 will increase our value.

Could you give us some figures for the company’s growth and profits for the last three years?
In 2005 Türk Telekom had net sales of YTL 7.48 billion. Which rose to YTL 7.53 billion in 2006. In 2005 we had profits of YTL 1.71 billion and in 2006 YTL 2.10 billion. The public offering means that we cannot give estimates of future targets. 85 percent of our revenue is in voice services and we expect to grow by the rate of inflation in this area. The data business currently accounts for around 15 percent of our revenues and we would like to increase this to 25 percent.

What kind of plans do you have for growth?
We shall maintain our position in voice services and we see significant growth potential in data. We shall secure 25 percent or even more of our revenue from new products. Our strategy has three parts. We want to maintain our income in fixed lines, expand our network in mobiles and ADSL and increase competition through added value services. In terms of mobile operations, Avea has recorded significant growth. Avea will be the second operator in the market. Türk Telekom will compete with Turkcell, Avea with Vodafone. In this way, as Avea and Türk Telekom we shall be able to take a large share of the market.

We are interested in foreign acquisitions. Today, acquisition is the best expansion model. But we could enter niche areas for technology. Argela and Innova will enter new countries. We have been discussing some good agreements which would make us an international company.

You have acquired a new company in education? How will you expand it?
Yes. We bought the IES educational company from Meteksan. This will enable us to contribute to the education of 12-16 year-old students and provide reliable internet services. Ten million students will have email and be able to write to each other. They will be able to access interactive educational content and live lessons given by 6,000 teachers. In order to achieve all of this we needed a good educational company and we bought the best.

Last year you bought two companies. Are you thinking of buying any new companies?
In addition to telecoms services we want to grow in software and IT services. The company should be able to provide customers with all of their solutions. For example, small companies may need software, ADSL and mobile telephone services and their sub-services and we have to be able to provide them. IT is part of this business. If we can make it part of this market and play a leading role then we can grow in the technology world and we shall be able to meet the needs of customers with appropriate products. Whether as Türk Telekom, or through synergy with our affiliates and business partners, we will be able to meet every need. Türk Telekom needs to grow abroad. We are interested in the forthcoming privatizations of Azerbaijan Telecom and Kazak Telecom. We are active in Albania. We are also looking for other opportunities in this region.

What proportion of your revenue comes from corporate business? What share comes from ADSL and other new products?
Our corporate sales account for 15 percent of the total. Our target is to increase this to 40 percent within one or two years. Our revenue from voice services is YTL 5.8 billion, which represents 85 percent of our total revenue. We expect our growth in voice services to be the same as the rate of inflation. We have recorded significant growth in ADSL and we think that it will continue this year. We are planning to increase our ADSL revenue from 15 percent at present to 25 percent in 2010. We also expect growth in products such as IPTV, which we called extra innovative products. At the moment the share of these products in our turnover is not even 1 percent… Their share will increase to 10 percent of our turnover.

 “There Will Be A New Product Every Week In 2008”

52 New Products In A Single Year
2008 will be a year of technology and new products for Türk Telekom. We shall launch a new product every week. At the moment, Türk Telekom has 38 products. A significant proportion of these products are directed at corporate customers. Our target is to launch 52 products in 52 weeks in 2008. If we launch a new product every week then we shall be launching 52 products. We divide our products into three categories.

Video Phones
One of the important products which will change our lives is the videophone. We presented 24 new products at the CEBIT Fair and the one that attracted the most interest was the videophone. Market research shows that this product has a target market of 300-400,000 here. The telephone will cost YTL 200-300 and the price for using it will be around 20-25 percent higher than the voice price.

Türk Telekom CEO Paul Doany has declared that 2008 will be ‘customer’ and ‘product’ year. He says that they will launch a major offensive and introduce a different product every week of the year. He notes that growth will be based on innovative, new products and acquisitions. He explains this target as follows: “We shall increase the share of new products in our turnover from less than one percent at present to 10 percent by 2010.”

Türk Telekom’s New Growth Strategy

Türk Telekom is getting ready for the public offering in the new year of 15-25 percent of the Treasury’s 45 percent stake. It has set itself some ambitious targets in order to strengthen its position ahead of the sale. Since it was sold to Oger Telecom in July 2005, Türk Telekom has undergone a radical change and the investments in infrastructure and organization now look complete. It has shaken off the mentality of a state-owned company and is preparing for a fierce battle with the mobile operators which it regards as its rivals. In this context, together with its participations TTNet and Avea, it will launch 52 products in 52 weeks in 2008. Türk Telekom will renew its distribution and sales network. It is one of the largest companies in Turkey, with 37,000 employees and an organizational network in 81 provinces. It has prepared growth strategies for both the domestic and foreign market.

We spoke with Türk Telekom Chairman Paul Doany about the post privatization era, its growth and investment strategies and its new innovative products.

You said that you planned to invest US$3.4 billion in the six years after privatisation. How much have you invested so far and in which areas?
After privatization we invested a total of $728 million in 2005 and 2006. Our biggest investment was in infrastructure. We focused on investments in modernizing the network and broadband technology. We are contracted to invest another US$1.7 billion in 2007. Although the 45 day strike slowed us down a little we shall still achieve our target figure this year. We shall realise some major investments in 2008. We shall achieve the planned volume of investment by the end of 2010.

In which areas are you continuing to invest?
We have significant investments in IT. The Customer Care and Billing Project is the largest IT project in Turkey. Our broadband ADSL and VDSL investments are our most important investments this year.

We also have another project called the ‘Rural Areas Transformation Project’. This investment will enable people to benefit from the same services even in the most far-flung corner of the country. All of our voice services will be broadband services. At the moment we have converted two million of our four million customers. In this way we shall remove the discrepancies between geographical regions of the country. We are investing around US$ 200 million in this project.

What added value do you think you have brought to TT since privatization?
In fact, even though it used to be a state-owned company, Türk Telekom always pursued a commercial strategy. But certain state restrictions meant that it was not able to operate like a private company. For example, before privatisation in 2005, it was possible to access ADSL services not just in the major cities of Istanbul and Ankara but everywhere in Turkey. The company successfully achieved this even though it did not have the infrastructure of Avea or Turkcell. This shows that the company was stronger than it appeared. The restrictions were removed after privatization. The second important point is our control of Avea. In the past Türk Telekom controlled Avea through Telecom Italia and Türk Telekom. But now Avea will be a very powerful company as a participation of Türk Telekom. This is important because it will also add value to Türk Telekom. Avea will add value to Türk Telekom in two ways. Avea used to have 4.5 million customers, but now it has nearly 9.5 million. In 2005 investment in Area was zero. No investments were made because no decisions could be taken. In 2006 we took the decision to start all the investments. In 2007 we allocated more resources.

The growth in ADSL also gives us added value. We are expecting an increase of 1.5 million users. This is very good growth for us.

At the moment Türk Telekom has more ADSL customers than British Telecom. We are the fastest growing ADSL market in Europe. The adjustments in voice service tariffs were a very important step in terms of preparing our company for competition. The public offering in 2008 will increase our value.

Could you give us some figures for the company’s growth and profits for the last three years?
In 2005 Türk Telekom had net sales of YTL 7.48 billion. Which rose to YTL 7.53 billion in 2006. In 2005 we had profits of YTL 1.71 billion and in 2006 YTL 2.10 billion. The public offering means that we cannot give estimates of future targets. 85 percent of our revenue is in voice services and we expect to grow by the rate of inflation in this area. The data business currently accounts for around 15 percent of our revenues and we would like to increase this to 25 percent.

What kind of plans do you have for growth?
We shall maintain our position in voice services and we see significant growth potential in data. We shall secure 25 percent or even more of our revenue from new products. Our strategy has three parts. We want to maintain our income in fixed lines, expand our network in mobiles and ADSL and increase competition through added value services. In terms of mobile operations, Avea has recorded significant growth. Avea will be the second operator in the market. Türk Telekom will compete with Turkcell, Avea with Vodafone. In this way, as Avea and Türk Telekom we shall be able to take a large share of the market.

We are interested in foreign acquisitions. Today, acquisition is the best expansion model. But we could enter niche areas for technology. Argela and Innova will enter new countries. We have been discussing some good agreements which would make us an international company.

You have acquired a new company in education? How will you expand it?
Yes. We bought the IES educational company from Meteksan. This will enable us to contribute to the education of 12-16 year-old students and provide reliable internet services. Ten million students will have email and be able to write to each other. They will be able to access interactive educational content and live lessons given by 6,000 teachers. In order to achieve all of this we needed a good educational company and we bought the best.

Last year you bought two companies. Are you thinking of buying any new companies?
In addition to telecoms services we want to grow in software and IT services. The company should be able to provide customers with all of their solutions. For example, small companies may need software, ADSL and mobile telephone services and their sub-services and we have to be able to provide them. IT is part of this business. If we can make it part of this market and play a leading role then we can grow in the technology world and we shall be able to meet the needs of customers with appropriate products. Whether as Türk Telekom, or through synergy with our affiliates and business partners, we will be able to meet every need. Türk Telekom needs to grow abroad. We are interested in the forthcoming privatizations of Azerbaijan Telecom and Kazak Telecom. We are active in Albania. We are also looking for other opportunities in this region.

What proportion of your revenue comes from corporate business? What share comes from ADSL and other new products?
Our corporate sales account for 15 percent of the total. Our target is to increase this to 40 percent within one or two years. Our revenue from voice services is YTL 5.8 billion, which represents 85 percent of our total revenue. We expect our growth in voice services to be the same as the rate of inflation. We have recorded significant growth in ADSL and we think that it will continue this year. We are planning to increase our ADSL revenue from 15 percent at present to 25 percent in 2010. We also expect growth in products such as IPTV, which we called extra innovative products. At the moment the share of these products in our turnover is not even 1 percent… Their share will increase to 10 percent of our turnover.

 “There Will Be A New Product Every Week In 2008”

52 New Products In A Single Year
2008 will be a year of technology and new products for Türk Telekom. We shall launch a new product every week. At the moment, Türk Telekom has 38 products. A significant proportion of these products are directed at corporate customers. Our target is to launch 52 products in 52 weeks in 2008. If we launch a new product every week then we shall be launching 52 products. We divide our products into three categories.

Video Phones
One of the important products which will change our lives is the videophone. We presented 24 new products at the CEBIT Fair and the one that attracted the most interest was the videophone. Market research shows that this product has a target market of 300-400,000 here. The telephone will cost YTL 200-300 and the price for using it will be around 20-25 percent higher than the voice price.

Ip Television
IPTV completely redefines broadcasting technology. It monitors your viewing habits and makes it easy for you to access your favourite programmes. It provides a very easy electronic guide. It will be launched in the third quarter of the year. We have spoken with 1,500 potential IPTV customers. We estimate that this product could reach a million households in Turkey within one year. It will be a TTnet service.

Elçin Cirik
[email protected]