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Turk Telekom:  Successful operating strategy complemented with greater risk protection

Maintain our BUY recommendation We value Türk Telekom based on a combination of discounted cash flow (DCF) and peer comparison…

Turk Telekom:  Successful operating strategy complemented with greater risk protection

Maintain our BUY recommendation

We value Türk Telekom based on a combination of discounted cash flow (DCF) and peer comparison analysis, attaching 80% weight to DCF and 20% weight to peer analysis. Accordingly, we calculate a 12 month target Mcap of TL24bn, corresponding to TL6.8/share PT, implying 35% upside potential.

We maintain our coverage for Türk Telekom with a BUY recommendation due to (i) large 43% and 42% discount compared to its international peers on 2019E EV/EBITDA and P/E, respectively, (ii) reduction in FX exposure which will reduce the impact of FX fluctuations on its financials, and (iii) digital transformation strategy fueled by increasing data consumption.

Growing subscriber base at mobile segment

The population based penetration rate in the market is at 99% with three operators (Türk Telekom, Turkcell and Vodafone) in Turkey while it is at 132% levels in Europe. In the last two years, Türk Telekom increased its market share from 15% to 28% while Turkcell’s market share declined to 42% in 1Q19 from 59% in 1Q07. Türk Telekom’s mobile subscriber base increased to 21.5 mn with 1.9 mn net additions in 2018. Türk Telekom has been focusing on its mobile subscriber base through the additional contributions of the mobile offers which include TV packages. The company is also involved in active and passive sharing and leasing projects with mobile operators to better coverage.

 

Excerpt from Researh Report by Is Invest

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