Come together: Sector players seek to expand their reach into different segments of the market

While incumbent operators in other European countries have become market leaders in both mobile and fixed segments, the Turkish example has been defined by large operators who started out strong in either the mobile or the fixed segment – but not both. Türk Telekom, the incumbent fixed-line operator, dominates the market with the copper infrastructure that inherited from its days as a public entity. Turkcell and Vodafone, on the other hand, have become the two largest mobile operators but have each had a relatively small fixed presence. All three firms are now branching out.

GOING MOBILE: Türk Telekom has been working hard to break with its past as a solely fixed-line operator. As a result, the company has invested to cultivate a greater presence in mobile, internet and other segments. In late 2004 on the eve of completing its privatisation, Türk Telekom doubled its stake in its mobile venture, Avea, from 40% to 80%, acquiring Telecom Italia’s share in the company. Since then, Avea has grown significantly, increasing its market share from 14% to 19.5% between 2005 and 2011, becoming Turkey’s third-largest operator. Türk Telekom has been actively investing in fixed lines as well. Indeed, as mobile data use increases, more fixed-line networks are needed to support that mobile use. In April 2006 the company created its internet retailer TTNET, which offers bundled plans that include fixed ADSL, mobile broadband using 3G, and access to Wi-Fi hotspots utilising its fixed connections throughout the country. In May 2010 the company also announced its acquisition of Invitel International, a Hungary wholesale data business, for €221m.

FIXED IN PLACE: Turkey’s mobile operators have also been devoting resources to broadening their presence. For Turkcell, a crucial move was the company’s acquisition of Superonline, a fixed communications and internet operator. The 2008 purchase, Turkcell said, would enable it to take advantages of synergies that exist between Superonline’s operations, Turkcell’s operations and those of Turkcell’s subsidiary broadband provider at the time, Tellcom. Since the acquisition, Turkcell Superonline has grown to account 4.6% of the market, according to the Information and Communication Technologies Authority (ICTA). Next, in August 2011, the company announced that it would buy Global İletişim Hizmetleri, a firm offering fixed telephony, broadband and cloud computing services to a largely corporate clientele. Superonline plans to integrate Global İletişim’s data centres and cloud computing servers with its own fibre-optic network.

LINKING UP: Vodafone Turkey has also gotten in on the action. In January 2010 it announced it would acquire Borusan Telekom, a fixed-voice and data services firm. Similar to Turkcell’s acquisition of Superonline, Vodafone indicated that it made the move with the goal of improving its internet infrastructure. Although the selling price was undisclosed, Vodafone reported Borusan’s sales were $70m in 2009.

A year and a half later, Vodafone reached another deal to boost its fixed presence. In July 2011 it announced its intent to buy Koç.net, an internet and digital services provider. As of third-quarter 2011, Koç.net had 2.02% of the internet service provider market share, the third-largest alternative operator after Superonline (4.62%) and Do ğan Telekom (3.43%), according to ICTA data. Vodafone paid TL30m ($12.8m) for the operator, which it valued for its fixed infrastructure. The company plans to create a new internet brand, Vodafone Net.

The significance of Vodafone’s and Turkcell’s shift to the fixed-line internet sector cannot be understated.

Although alternative operators were present in the market earlier, TTNET has been able to maintain the vast majority of market share for broadband internet – hovering around 82.5% in the third quarter of 2011, according to ICTA. The growth of these smaller operators has started to change that as their market shares have all been increasing and are expected to continue to do so.

As mobile operators establish their presence in the fixed segment and the fixed juggernaut carries on with its mobile infrastructure investments, one major trend – continued investment – seems likely to continue.

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Cover of The Report:Turkey 2012

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