Turkcell Iletisim Hizmetleri A.S. (TCELL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gelly, your Chorus Call operator. Welcome, and thank you for joining the Turkcell's conference call to present and discuss the Turkcell's initial take on COVID-19. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Korhan Bilek, Treasury and Capital Markets Director. Mr. Bilek, you may now proceed.

Thank you, Gelly. Hello, everyone. Thank you for joining our call today. In this call, we aim to provide you with a brief overview of how the COVID-19 crisis has impacted our business operations as well as the immediate actions we have taken and how we see the long-term opportunities in the post-crisis era. We will also hold a Q&A session at the end of the call. Before we continue, I would like to kindly remind you to review the last page of this presentation for our safe harbor statement. I will now leave the floor to our CFO, Mr. Osman Yil. Please sir.

Thank you, Korhan. Good morning, and good afternoon, everyone. It's very strange how drastically our life has changed in only a month. The COVID-19 pandemic has been disruptive for the whole world in various aspects at different levels. Each and every of us has been working to adapt our life to the new conditions. At Turkcell, we prioritize from inside out, taking a set of actions swiftly that concerns all of our stakeholders. Employee health, uninterrupted service and liquidity management has been on top of our list. Working in squads under each function, we closely monitor the situation and analyze its impacts on our KPIs and our annual plan. Obviously, telecommunications services have become more vital than ever, a necessity to continue with our work life, our kid's education as well as for entertainment at home. As such, the sector has so far been defensive, along with food and healthcare sectors. We also observed fast forward digitalization, both on consumer and corporate fronts. We trust that this behavioral change is likely to be permanent given the duration and, hence, the availability of our unique portfolio of digital services and solutions, which will position us favorably in the post-crisis area. And yet, we are aware of the potential risks arising from limited mobility and possibility of a prolonged scenario. Given the ambiguity and uncertainty, it is, as yet, early to discuss how our company performance would unfold under different scenarios. However, rest issued Turkcell management is fully aware of how we should respond under each from conservative to worst case. Moving to next slide. Now let me start by summarizing the actions taken by the Turkish government and several regulatory bodies. The list on this slide is not exhaustive, and frankly, new measures are announced almost every day. The first case was reported in Turkey a month ago on March 10. Within a week, all schools were closed by announcing an earlier-than-planned supreme break and continuation of true online education thereafter. Places that motivate social gatherings, including restaurants, were closed as of March 21, and a curfew announced for the most-at-risk group, for example, the elderly and those with chronic disease. The curfew has recently been extended to cover youngsters. These measures are strictly practiced particularly in [ large piece ]. With all flights being suspended, in-country travel is also restricted. Besides these measures to ensure social distancing, several monetary and fiscal measures have also been announced. As such, an Economic Stability Shield package worth TRY 100 billion was announced that includes the rescheduling of tax duties, loan repayments, social security payments and also incentive for businesses, among others. Turkey Central Bank cut the weekly policy rate by 100 basis points to 9.75% with fee liquidity measures for banks. State banks are encouraged to provide loans at below the policy rate to those in need. A cap on dividend payments was also put in place by the Ministry of Trade and confirmed by the Ministry of Treasury and Finance, limiting the payout with 25%. We currently read the decision as overriding our dividend policy. In any case, we, along with many other listed companies, are on hold regarding their call for the general assembly given the circumstances. Moving to next slide. Let me continue with a summary of what Turkcell's immediate actions have been so far. Actually, our immediate response concerned our human capital. Our employees, including over 10,000 call center agents, have been working remotely since March 13. Our ICT systems have successfully entered the stress test of such a load. On the consumer front, we have eased the lives of those using the remote education portal and channels, our esteemed healthcare workers and those subscribers still abroad. We immediately responded to the call for the closure of stores at the shopping malls. The bulk of our exclusive channels remain open for limited hours on 6 days of the week as well as nonexclusive sales points. And yet, we encourage our customers to use our digital channels, namely our website and our digital operator application. We bear the fruits of having made good level of investment on our infrastructure. Our network operations have been running smoothly as we make use of artificial intelligence for optimization. The teams are on alert with backup capacity in standby mode and with critical equipment orders are -- have already been submitted. On the balance sheet front, liquidity management has been the most critical topic on which we have increased our focus. To that end, we hold financial risk management meeting on a daily basis and the team's contact dynamic revenue forecasting. Also, where possible, we have implemented cost control measures. Regardless, collection risk in some segments remains a concern, the trends of which we monitor very closely. Moving to next slide. Let me now elaborate on how this crisis has reflected to our business from the perspective of our 3 strategic focus areas. First, with our digital services, we have been offering alternative entertainment sources as well as platforms for communications to everyone for the past 5 years. As such, our communication platform BiP has seen tenfold increase in group video calls and our TV platform, TV+ has recorded a doubling of data usage. Furthermore, people have been reading 75% more magazines and newspapers on our digital publishing platform, Dergilik. We are pleased to capture the rising demand for these products with our own digital services. Secondly, regarding our digital business solutions for corporates, our teams have been extremely busy in ensuring 24/7 business continuity for all our clients. We see a considerable increase in demand from the enterprise segment to enhance their remote working and education capabilities. This is a promising trend for the future. Further, given the importance of ongoing city hospital projects, they are accelerated with the call from the governmental body. This month, we will be opening the largest city hospital this month. Certain sectors and companies that are impacted severely by the pandemic create a potential for the risk for this business line in terms of business contingent collection. Thirdly, in our Fintech services, Paycell has been busy capturing the business potential stemming from increasing demand for cashless payment methods. We observed a solid rise in usage of Paycell services, including online payment and direct carrier billing. The risk we attached to these strategic focus is the merchant acquisition through physical channels to slow down under these circumstances. Next slide. Now let's look at some figures from the last week of March. This is the period when the majority of social precautions were taken, including remote education and work. We have chosen this period with the week a month ago to compare before and after the current situation. Overall, total network traffic has increased by almost 35%, even up to 50% in peak hours. One would expect the bulk of this increase to have come from the fixed network, registering over 110% increase during summer hours. The mobile network carried record high traffic at over 500 terabytes per day. TV+ and BiP increased their popularity with tenfold increase in group video calls and 15% higher login for TV. Regarding subscriptions, postpaid acquisition numbers were down 35%, whereas subscription to fixed broadband rose by 52%. Both businesses have seen an improvement in churn levels given the limited mobility. On the retail network front, visitors to our website and application ramped up by 30% and 76%, respectively. We also recorded 20% higher bill payments through Paycell app. Next slide. Now let me update you on the status of our international business. For Ukraine, quarantine rules still apply there. Telecom stores are allowed to remain open, but we encourage our customers to use our digital channels. While the market is prepaid dominant and remains vulnerable to the limitation of mobility, we have recorded some increase in both mobile and voice usage. Meanwhile, the Ukrainian Competition Board has recommended a halt to price increases. The progress in IMF agreement talks have stabilized the financial markets and strengthened the currency in recent weeks. In Belarus, there is no official quarantine, but the public is gradually refraining from being mobile. This has led to a decline in store traffic, impacting subscriber acquisitions and handset sales negatively. In the Turkish Republic of Northern Cyprus, the overall economy and the telecom sector are more vulnerable given the dependency on tourism and international students. Demand for student tariffs as well as handset sales have significantly declined. Next slide. As we have been discussing during our quarter calls, pursuing a prudent FX risk management has been among the success factors of our business model. This has helped us to enter this fragile period with a long FX position of USD 150 million. Our average debt maturity is around 5 years, and we fund working capital requirement through bank loans, matching the maturity of our obligations. Our liquidity position offers us sufficient buffer to sustain our operations with $1.7 billion cash in hard currency and only USD 1 billion debt service in 3 years, excluding short-term local currency loans. We have available credit lines from diversified funding sources, both from local banks and international banks. The potential for a further slowdown in consumer finance business will also mean additional working capital release. Next slide. This slide features the major challenges and risks we anticipate at this stage. Again, this list shall not be considered exhaustive, but simply a list of risk factors we identify for the time being. Obviously, the decline in consumer traffic at physical stores has impacted our consumer acquisitions. On the other hand, the mobile number portable to market also lost momentum, contributing positively to our churn levels. Customer traffic decline has also negatively impacted top-up levels in the prepaid segment, particularly those in the habit of visiting our stores and transacting in cash. The prepaid segment is a smaller part of our subscriber base with less than 70% revenue share in Turkcell Turkey mobile revenues. In Corporate segment, certain industries and SMEs have been vulnerable given the direct severe impact of the pandemic. Payment deferrals and temporary discounts will be under discussion with these customers. SMEs have some 10% in Turkcell Turkey revenues. One revenue line, namely roaming, is clearly at risk. Roaming revenues in total are around 3% of our consolidated revenues. On the other hand, roaming costs will also significantly come down, limiting the impact on margins. Our consumer finance business is subject to further slowdown given the decline in device sales under limited mobility. Also, BRSA's resolution on deferral of loan payments will potentially increase the cost of risk in this business. On the macro front, ever-rising unemployment, coupled with decreasing purchasing power, is also likely to negatively impact our overall business. Next slide. As with every crisis, this one, we believe, also offers field opportunities, some of which we expect to monetize only when the dust settles. While some companies may have been called flat-footed given their belated digitalization, thanks to our digital transformation over the past few years, our service SaaS solutions as well as availability of digital channels have positioned us favorably, both now and also for the future. The disaster has been instrumental accelerating the digitalization of both consumers and corporate. We expect to see a greater demand for our services supporting remote work, online education and e-commerce in addition to entertainment services. Our fixed wireless access product, Superbox has increased its popularity as it is still the sole alternative to fiber-like speed. We have observed 125% increase in Superbox acquisitions. Superbox was already popular with more than 400,000 subscribers. And now consumers increasingly prefer Superbox due to difficulties in connecting to VC and school systems with copper-based solutions. One particular area of upload speeds is also very limited due to technical capabilities of ADSL. In the techfin area, the cashless payment methods have become more popular than ever. Demand for mobile payments has surged. We trust that the change in consumer habits will be there to stay, paving the way for long-term contribution to our Paycell operations. Next slide. Before we end our call and switch to Q&A session, I would like to recap our key messages of today. Telecom services have always been critical in the daily lives of most of us, and this pandemic has made them even more critical for almost anyone, continuity of work, education and life itself has become dependent on telecom services. As such, we trust that Turkcell is well positioned to meet the rising demand with its quality, best portfolio of solutions and extensive sales force. The accelerated digitalization of both consumer and corporate enhances the opportunities for business entertainment, which only emphasizes the higher demand we expect for our digital service SaaS solutions. Optimization of our channel cost with a faster than planned shift to digital channels will also contribute to our profitability positively. Potential risk do lie in certain areas and for certain segments, including roaming income, prepaid top-ups and for SMEs. Risk of disruption to the global supply chain may also emerge depending on the duration of this crisis. All in all, balance sheet quality and cash strength are why Turkcell have sustainable operations during this period. Our balance sheet remains robust with some $1.7 billion cash in hand and our long FX position. This brings us to the end of our presentation. I now would like to open the floor for the Q&A session. Thank you very much.

[Operator Instructions] The first question is from the line of Tiron Cesar with Bank of America.

I have 2 actually. The first one would be on the -- on your network and how this 35% kind of unexpected increase in usage, how is the network coping with it? And then second, on the potential impact from the corporate segment, do you already see any risks from bad debt? It seems like that SME is asking you for discounts or you haven't faced it as of yet.

On your network questions, actually, Turkcell is the most prepared network operator for this sudden capacity increase. So far, we have witnessed a 35% increase on our network. When it -- if we split it in 2 parts, mobile and fixed, we see about 40% on the fixed part and about 20% on the mobile network. And the mobile network capacity increase is mainly coming from our Superbox product, our fixed wireless access product. Due to limited mobility, excluding the Superbox, the capacity increase, the traffic increase is not significant. Actually, we have been investing a lot on our network since 2016, especially on our mobile network. Because in 2016, we switched to LTE. And since then, we have been increasing -- investing more than $1 billion each year to increase our coverage and also increase our network quality. We are -- Turkcell is the second fastest mobile operator in Europe in terms of capacity. So we are not much affected by this network increases. Actually, our network team also make use of artificial intelligence to optimize traffic load on network and actively manage the capacity, and we have been optimizing the new investments. Normally, in spring and summer periods, we invest more in southern parts of Turkey, where the traffic becomes more intense due to tourism season and seasonality. But now we switched these investments to the main cities like Istanbul, Ankara, where population density is higher and where mobility is now much limited due to curfew decision. Moreover, we also test the capacity on our network occasionally, and we already have done stress tests for these type of increases. We sometimes increase -- we doubled the quota of our existing clients to stress test of an additional capacity increase traffic increase on our network. So we can comfortably say that Turkcell's network is ready for such an increase even for a prolonged scenario. And on the second question, corporate, actually, this is the most risky part along with the roaming revenues, as I tried to highlight during the presentation. Actually, our corporate revenue share on our total top line revenue is like 15% to 18%, and it mainly comes from larger segments, strategic accounts and public accounts, where we expect less risk in terms of collections and revenue declines. So far, SMEs have been asking for discounts, but the total number we have received so far is less than 1,000, which is insignificant, given the total number of total subscribers. But if this scenario prolongs, we can expect further demand for payment deferrals and extended discounts. But currently, we are not expecting a sudden surge in demand for discounts. And also, government announced support for this segment. There are some -- there are specific supports for the segment in terms of loan payment deferrals. And also to support employment, the government has announced subsidies for each employee for this segment. So we are not expecting a particular problem from this sector. But if this prolongs beyond June, July, it will be a bigger concern for our company as well. But initially, we can say that the risk is relatively lower.

Great. Just one last question, apologies. Just wanted to check, it wasn't part of your presentation, but I just wanted to check if you could comment on this legislation, which looks at capping the maximum of dividends companies are allowed to pay in Turkey this year. Is there anything you can share with us?

Actually, this also came as a surprise to us last week, first, Minister of Trade and then confirmed by Ministry of Treasury and Finance. We heard that a 25% dividend cap would be applied to all companies in Turkey. But I can say that this is still a draft legislation, and this legislation has -- is yet to be approved from -- in the parliament. And certainly, this overrides our dividend policy, which is to distribute at least 50% of the distributable net income. And also, it contradicts with our former payout performance, which is more than 80% in the last 5 years. But this was an unexpected event. And the caused impact is that any prudent company and also government officials will wait and see the normalization of the crisis before removing this cap. Therefore, this 25% cap does not change the practical situation. And hopefully, if the situation normalizes maybe in the summer months, the cap might be removed, and we might talk about the normal trend of digital dividend payout.

The next question is from the line of Degtyarev Vyacheslav with Goldman Sachs.

Two questions. Just can you comment on the pricing outlook. Do you think you will continue inflationary price adjustments in the current market environment? And secondly, are there any limitations on the buybacks? And can you potentially substitute the dividends with the buybacks?

Actually, we can say that we are not in an inflationary. We are in a deflationary environment, given the sharp decline in oil prices. And given the lower demand, significantly lower demand, we also see a deflationary environment in Turkey. Actually, Turkey was already in a disinflation path, and this will be accelerated by the recent plunge in commodity prices and plunge in the consumer demand. Despite depreciation of Turkish lira, we are not expecting rising inflation and the FX pass through will be significantly lower compared to previous periods on significantly lower demand. So what I can say for now, we will not change our pricing in near future until the dust settles. Our aim is to upsell our customers to more favorable offers based on their usage needs because in certain segments, we see substantial increase in usage. So we are -- our marketing team proactively offers this segment more favorable tariffs at higher prices. This will be our tactical strategy during this pandemic period. And after the dust settles, we will continue to adjust our prices in line with the macroeconomic conditions and given the ongoing practices and our competition. And also for the competitors, all players in the market have shift their focus to ensure their services without interruption. We don't see any signs of price competition. And given the fact that part of the retail channels have already been shut down, we see lower churn rates, which also works in favor of us. So I think until mid-summer, we will not see increase in competition and price changes in the market. And for the second question, in the limitations on buyback. Actually, government has not announced any limitations on buyback so far. Today, I have seen a retail -- listed retail company to increase their buyback budget. And last month, we also increase our mandate -- we received a mandate to increase our buyback budget by an additional TRY 150 million, and we can use it when necessary. But the market so far has -- since we got this mandate, market share has been stable, and we didn't need to use this.

Next question is from the line of Erdem Hafizoglu with BGP.

I have 2 questions. The first one is considering the current environment, would you think that you can reach your 2020 guidance. Or is there any upside or downside or a major downside to it? What would you say or comment on that? Second one is when you plan to release the Board decision on the dividend payout issuance, and what date would be for the general assembly?

Actually, it's important to tell the telecom industry compared to other sectors, you'll see a limited impact from this pandemic. But anyhow, we will see at-- we see some downside risk to our guidance and our annual operating plan for 2020. But so far, in March, we haven't seen any shift from annual operating fund. But in early April, we see initial signs of slowdown in certain segments, including roaming and corporate segment. For example, roaming revenues make 3% of our top line, and we see a sharp slowdown in roaming because all international and flights have been suspended. And also demand from corporates significantly came down. Most of the business has been closed since mid-March, and we have started to see initial impacts in April. I think in late April, when we are about to announce our Q1 financials, we will be able to give more color on 2020 guidance. But honestly, it will be relatively downside rather than an upside shift, especially in terms of revenues. But we aim to keep our profitability stable by taking necessary cost-cutting measures, because some of the revenue declines will also decline our costs. So -- and all in all, we will be able to give you a much reasonable and comfortable figure for the outlook in late April. And the date for AGM, I think the date for the AGM, that will be discussed during the Board meeting in late April. But currently, all AGMs have been postponed due to existing conditions in the country. The Board will discuss the potential date for the AGM. And as soon as these restrictions are lifted, we are planning to gather AGM to get the decision on dividends and other corporate actions.

The next question is from the line of Mandaci Ece with Unlu Securities.

I have a few questions as well. One is a formal on your dividend guidance. You mentioned about the cap provided by the Ministry of Treasury. So should this be approved in the Parliament first? Or should we assume it's a 25% payout is as the final payout ratio for this year's dividend? And is there a possibility for higher dividend for next year, for example? Will there be a deferral of dividend payment? And I understand that for the moment, you are not increasing the funds allocated for share buybacks you already made recently. And second question is about -- is again about operations. You said there could be a downside risk to our revenue guidance of around 13% to 16% for 2020. This was mostly due to normal rate in roaming revenue or some -- we will see some decline in consumer finance revenue. But on the other hand, you also highlighting higher data usage and possibly given higher share of postpaid cost card, but we will see mobile also growth trend is postpaid for the first half, particularly above CPI growth. And could you please also elaborate on the broadband ARPU generation?

On your first question, dividend guidance. And there is a draft omnibus bill, which is still under discussion, and which will probably be discussed in the Parliament early next week. I think this dividend cap will also be a part of this omnibus bill. It has to be passed from the parliament. But both trade and finance ministers have declared that the cap will be applied throughout this year. So all companies, including the non-listed ones, have shifted their dividend policy accordingly. Of course, if we postpone, if we -- we are forced to postpone this dividend payment, and if there is a cap, this will inevitably impact the payout for the next years. Turkcell has this type of irregularities over the last 5 years. There were periods when we couldn't distribute or distributed at lower payout rates. And then this was compensated in the following years. This might be a similar case if this is postponed or capped this year. It might be compensated in the following years. But it is early to make a direct judgment on this dividend issue. And if the things are -- start to normalize and if the things does not extend further to spring month winter times, we can see that the government might remove this cap and the companies can shift back to their original dividend policies. On your second question, operational downside risks. Actually, the roaming is on top of the list because it is totally depending -- dependent on increase in traffic. Both incoming and outgoing traffic is impacting our roaming revenues. In addition to that, corporate revenue is much more cyclical than our consumer segment, because 80% of the consumer revenues are contracted, and there is no other alternative for this consumer to shift to other type of services. But in consumer segment, especially device sales and their investment for infrastructure will inevitably come down in the coming months. Consumer finance is the other segment that we expect lower revenue contribution in coming months. It was one of our businesses, which already -- which was already slowing down since late 2018 on back of macroeconomic developments. And the government has introduced caps for the maximum number of installments on device -- handset sales. We expect further slowdown in this business given limited mobility so -- but the impact will be very small. And it's not a big -- it will not cause a change in our top line stand-alone basis. Mobile ARPU growth trend, we still see strong ARPU growth in Q1. We will announce the figures in April 29. And we still see about 1/3 of our customers are -- have been spending more than their quota, which gives us opportunity to upsell and to shift these customers to higher tariffs. ARPU growth in near future will not come from price increases, rather the ARPU growth can come from upsell efforts, mainly. And in addition to that, we will see lower churn rates, which will also be supporting our consumer revenues. On fixed broadband ARPU generation, actually, since last year, all fixed broadband quotas are unlimited. So it gives us a very limited scope for upsell. So we are not expecting a significant increase in ARPU levels in fixed segment. For this year, I expect lower ARPU growth in fixed segment compared to mobile segment.

The next question is from the line Cabejsek Ondrej with UBS.

So it's great to have something this exhaustive and transparent as many companies have done that, so thank you. 2 questions for me, please. One is on the fixed wireless access. You're mentioning that, that could be something that puts a bit of a strain on your network, and you're seeing huge growth in demand there. Now with streets presumably quite empty in a lot of places in Turkey, do you think that this could, for example, lead to higher expansion or faster expansion of your fiber network currently and then shifting some CapEx towards that direction? And second question, just a theoretical one. Do you think that there is a chance of approvability of any regulatory changes from the current situation?

For your first question on fixed wireless access, actually, initially, we planned this product to utilize our idle capacity on mobile network because until last year, our investment in mobile network was more than some of the other operators in Turkey. So we invested vastly on our mobile network, and we had a idle capacity and Superbox was the best product to utilize this capacity and with our 3x ARPU for ADSL subscriber. For ADSL product, which is low-quality and copper-based product, which has very low upload speed, we are using 2 telecom infrastructures, and we are dependent on these infrastructures. And for fiber, we use our own fiber infrastructures, and we have some constraints to make new investments in fiber rollout. We cannot get approvals from the Ministry of Communications for new fiber expansion. And we -- unfortunately, we cannot increase our home pass numbers since late 2018. So Superbox has been a very good suitable product in terms of replacing low-quality ADSL, and also utilizing our mobile network. And so far, we have not been witnessing a significant burden on our mobile network with this additional 400,000 Superbox customers. But of course, if this number grows further, we still require additional investment, but we are not complaining from additional demand. If the additional demand comes, which means additional revenues, we will invest accordingly. Our network capacity is sufficient to cover additional demand coming from this segment, and we are ready to invest further if the demand increases further. And so far since early March when the first effects of pandemic was felt in Turkey, demand for our Superbox product has increased by more than 125%, because this demand is parallel to the customers' demand for more quality home broadband solutions. We see many customers trying to switch from ADSL to Superbox because with ADSL product with very low upload speeds, you cannot connect to telecom for video conferencing systems and you have -- you will have problems with accessing to the online education portals, et cetera. So we have been seeing a surging demand for Superbox products, and we expect this trend to continue in coming months. And your second question on regulatory changes given the current situation. The omnibus bill, the draft bill includes also some change for the sector, but all of them are positive for our company. One significant among them is the change in contract types -- type of contracts with the customers. This -- the planned new regulation will allow customers to make digital contracts with the operators. If it is approved, it will bring significant change to the industry because it will remove the burden of paperwork with the new contracts. And this will allow us to make contracts through online channels. We have been investing in online channels for 2 years, including digital signatures, face recognition and video call centers to get -- to acquire customers from digital channels. So if this is approved, this will be a very positive change for the market, especially for the Turkcell. Other than that, we are not expecting any price-related pressures from the regulator or ministries, because there have been some cases in other countries. But we are not expecting a similar reaction from Turkish officials.

And one follow-up, if I may. Could -- do you think this could accelerate, for example, the regulation around fiber wholesale? So still making it my...

Actually, there are still ongoing discussions on fiber infrastructure sharing and easing the restrictions on Turkcell for additional fiber home pass investments, but this is not related to pandemic-related regulation change. And today, all the streets are closed. Even if you want, you cannot invest in fiber because the municipalities are not allowing for the new home pass infrastructure constructions. But I think we will have much more positive developments in terms of fiber investments of Turkcell in coming months once the pandemic effects and this curfew will be lifted.

So can you just clarify that last bit? You said you expect positive developments in terms of fiber investment. But earlier, you were saying that you're restricted from investing in fiber. So can you explain that?

We have been -- even though our -- because Turk Telekom has some privileges and some exclusivities for fiber investments. But 3 years ago, it expired, but even the Turk Telekom no longer has the exclusivity for fiber rollout, Turkcell has not been granted permits for fiber rollout and fiber infrastructure investments. But it is about to change. We are seeking permits to make additional home passes in large cities, especially in large cities, where we still have some lacking home pass even in Istanbul, but this is not related to the regulation change with the pandemic. This is another discussion, under discussion with the ministry and other regulatory bodies.

The next question is from the line of Ibragimova Dilya with Citibank.

I had a couple, please. First is on consumer finance. Could you please give a bit or explain -- you mentioned the consumer finance as a positive, the potential slowdown as a positive for the working capital, so if the -- a ramp-up in the new business slows or gets delayed then that means that you get more of that release that the repayments. But you also mentioned it as a risk that the new measures that have been introduced may affect the repayments. How does -- the question I had is, how does the new measures that have been introduced by the government and that may affect the repayments or delay in repayments? And how does it work? And my -- I think most of the consumer finance is also insured. Is there a way where you can tap for -- into insurance to get their payments on time? And the second question is, again, on your network. And as the discussion moves about the -- into the popularity of the fiber or fixed wireless, how does your mobile network is configured? Could you give a bit more color like how many sites are actually connected to fiber? So maybe you can -- or in cities, whether you can offload the mobile traffic directly to core fiber? Or yes, if you could give a bit more color on that, that'd be great.

Actually, BRSA announced some measures affecting all the banking sector, including consumer finance companies, but our loans from Turkcell Consumer Finance, our consumer finance company, are micro loans. On average, monthly payments are around TRY 200, which is like $30 per month. So we are not much affected with the change in macroeconomic environment. Of course, it will have more -- this current environment will have more negative consequences on banking sector, because the ticket size are significantly higher than our consumer finance operations. And so far, less than -- only less than 500 customers applied for the deferrals of their payments. So in terms of cash flow, we will not be much affected from this deferral applications. But on the other hand, our cost of risk will inevitably be affected from these measures. Our cost of risk as of the end of last year was around 3%, and I expect this rate to increase towards 4% to 5% in coming months. Of course, there will be some difficulties from different segment in coming months. But it will not delay or postpone the deleveraging of the company due to lower handset sales. And on the other hand, more than 90% of the loans that we give from Turkcell Consumer Finance have been insured, and this insurance covers the unemployment cases. So in case the unemployment rises in Turkey, which is very likely, we will have a substantial amount of claims from the insurance company, which will limit the increase in cost of risk. On your second question, increasing popularity of our fixed wireless product Superbox. Our fixed wireless access Superbox subscribers have already reached 400,000. And it's already -- it has been only 1 year since we started this product. In less than a year, we reached 400,000. And of course, if these numbers -- if the number of subscribers increase further, this will require additional investment on our mobile network. And one other factor affecting mobile network quality is the connectivity through fiber. Almost 1/3 of our towers are connected with fiber. Unfortunately, in Turkey, we cannot increase this further due to restrictions on fiber infrastructures. But there is intention from the government to start 5G in Turkey, if not this year, but in 3 years' time, potentially, we will see 5G launch in Turkey. But before we are able to start 5G in Turkey, we need to have at least more than 50% of our towers connected with fiber. If this is not the case, we cannot talk about a full-fledged 5G launch in Turkey. So I believe in near term, we will see more -- more of our towers will be connected through fiber.

And can I just -- one follow-up question unrelated to the first 2. On subscriber acquisition costs, is there a scope that some of the -- or subscriber acquisition cost investments will decline this year, potentially with the further positive impact on cash flow? It's -- maybe it's something that it's a below EBITDA, like on the balance -- more on cash flow or P&L?

Okay. Definitely, we will see a decline in customer acquisition costs because our acquisitions are down 35% compared to pre-COVID period. And given the fact that we spend around $200 million each year for customer acquisition, we can see a significant slowdown in customer acquisition cost. But on the other hand, we have to support our sales channels. We cannot let them go and fail. So we -- as we did in 2018, we will be supporting our sales channels to -- so that they can continue their operations, and we can serve -- we can have uninterrupted service in our sales channels. But this is not recorded under customer acquisition cost. This goes below EBITDA. But also, we are encouraging digital channels. Our sales from digital channels were roughly 8% of our revenues last year. But this year, it also reached 12%, and we see increasing demand for device sales, accessory sales through our online channels. And online channel sales per month reached TRY 40 million. It compares only a couple of million Turkish lira compared to last year. So we see increasing traffic in online channels. Also, one other part of our business, which will be negatively impacted from this case is prepaid top-ups. Most of our prepaid top-ups were generated through our channels, physical channels. But now we see an increasing shift to our digital operator applications, our customer care application and also our website, turkcell.com.tr. Also Paycell, our fintech application has been witnessing increasing traffic for bill payments and also prepaid top-ups. We are investing more and more to encourage digital channel usage. We are promoting these channels by giving subscribers free gigabytes if they use this channel rather than our physical channels. So even excluding this pandemic effect, our customer acquisition costs will gradually decrease in coming years, thanks to our digitalization efforts.

[Operator Instructions] The next question is from the line of Ozdemir Alper with Ak Invest.

Alper Ozdemir from AK Invest. How much negative impact should we expect on EBITDA from the free minutes and data packages granted to certain subscriber segments?

Actually, we have provided free minutes and data package only to a very limited segment, including health care employees, which is, in total, 500,000 people. They are not all Turkcell subscribers, by the way. And it does not create additional burden neither to our network nor to our profitability. And also, we have been offering data package for EBA online education portal. Normally, we were providing 3 gigabytes to each student in this portal, but after this pandemic, we have increased this quota to 6 gigabytes. And the usage so far has been relatively small, and it will not create any burden on our profitability as well. So the EBITDA impact from these free minutes and data packages so far is very minimal to our profitability. And in near future, we are not planning to distribute any free minutes, data package to others, to wider segments.

Okay. And also, what's the share of corporate revenues in your total Turkey revenues?

Like 18%.

Ladies and gentlemen, there are no other further questions at this time. I will now turn the conference over to Turkcell management and to Mr. Bilek for any closing comments. Thank you.

Okay. We have a long list of web questions. Unfortunately, we have limited time, we will take couple. And as IR team, we will be returning all -- answering all of the questions coming from the web afterwards, very shortly. This one is from [ Kunar at portfolio ]. Is there a change in -- or will there be a change in churn policy due to unpaid bills? And is there a change plan in CapEx plans?

For churn policy -- on churn policy, we are not planning any change in our churn policy. And for the second question on collection terms, actually, the unpaid bills will not be affecting our churn policy. And so far, initial signs from collection performance, because we have a limited evidence because it's been only 1 month since this funding started, the due date performance has not been affected significantly. Still about 70% of our customers pay on time. But we expect some deterioration if this case extends further, but this will not create a negative impact on our churn policy. And also for the prepaid lines, for this segment also, we are not planning any change.

Okay. Another question comes from Alex from RenCap. Can you share -- discuss the share of SME business in your total revenue?

SME segment is almost half of our corporate segment, and it makes like 7% to 8% of our corporate revenues.

Okay. And maybe last question, Osman, if you may, from Alastair Jones, New Street. Is there any restriction around the ability to increase tariffs? Any restriction on price increases?

There is no restriction on price increases. But under current circumstances, it's not reasonable to increase prices. So rather than price increases, we are encouraging our customers to switch to higher tariffs, then we collect customers who have potential to breach their quotas. So it either reduces churn and also increases our revenues.

Okay. Sure. This was our last question. Thank you very much.

Thank you very much. Stay safe, stay healthy. Have a nice weekend.

Have a nice weekend. Thank you all. Bye-bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.