A Ringing Success

Turkey

Economic News

22 Jul 2010
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At the CeBIT Informatics Eurasia Fair in Istanbul on August 31, Cuneyt Turktan, Avea's general manager, announced that the GSM operator reached 7.5m subscribers in June, up from 6m one year earlier.



"Compared to last year, within the first half of this year we have managed to record growth of 30-35%. The number of new clients is rising every month. Our market share is also growing. Last year, our market share was 14%; this year it's 15%. While growing 30-35% within the first six months of the year, our expenses have also increased by 16% over last year," Turktan said during a press conference.



Avea was founded in 2004 through the merger of GSM operators Aycell - owned by Turk Telekom - and Aria - a joint venture between Is Bankasi and Telecom Italia Mobile. As of its privatisation in 2005, Turk Telekom is 55%-owned by Oger Group, the Saudi-Lebanese construction and telecommunications conglomerate, which also owns telecoms assets in Saudi Arabia, Romania, Portugal, Jordan and South Africa.



Following the merger between Aycell and Aria, the ownership of Avea was initially split three ways, with Turk Telekom and Telecom Italia Mobile both holding 40.5% stakes in the company and Is Bankasi holding the remaining 19%. In mid-July 2006, however, Telecom Italia Mobile announced the sale of its 40.5% stake to Turk Telekom for $500m, giving the firm a controlling 81% share.



Under the leadership of Turktan, former head of Turkcell, Avea is launching a serious bid to challenge Turkcell's market dominance. Turktan was the general manager of Turkcell from 1994 through 2001, and is widely credited with making the GSM operator one of the country's most successful firms - during his tenure subscribers skyrocketed from 40,000 in 1994 to around 12m by 2001 and Turkcell became the first Turkish company to list on the New York Stock Exchange.



In the past, Avea's nationwide coverage was seen as less than complete, and paled in comparison to Turkcell, which as of end-2005 had 100% coverage in cities with 10,000 or more inhabitants and 99.75% coverage in cities of 5000 or more. Avea is working to bridge the coverage gap by aggressively increasing its network of base stations, expanding from 6000 stations at the beginning of 2006 to 7000 by mid-year, with plans to reach 7650 by the end of 2006. Turktan has big plans for Avea, and intends to spend $300m on infrastructure and systems development in 2006, allowing the firm to compete head-to-head with Turkcell on service quality.



"In some parts of the country, we have reached superior levels of reception to Turkcell. We will continue our investments until the end of 2006 and be ready for rivalry," said Turktan. With concerns over coverage finally being addressed, Turktan plans to scale the company up rapidly, aiming to reach 10m subscribers by the first half of 2007.



Avea has been busy making deals of late, inking an $85m deal with Swedish telecoms giant Ericsson in mid-June to boost network coverage and capacity. On August 21, Avea signed contracts with leading long distance telecoms service providers Borusan Telecom, Dogan Telecom, Global Telecom, Isnet and Kocnet to upgrade the quality of its international voice traffic.



Avea is also blanketing local media with an aggressive marketing campaign to promote its HepsiBir (one price for calls to all numbers -fixed, mobile and other operators) and biDunya ("one world" - music, entertainment and banking services via mobile) programmes.



Meanwhile, Telsim, Turkey's number two GSM operator, with 11m subscribers and a 23% market share, has a lean and hungry look about it these days. Acquired from the state by Vodafone for $4.5bn in December of 2005, Telsim also has ambitious plans to boost service quality. Telsim's recently appointed CEO, Attila Vitai, the former CEO of Vodafone Hungary, told the Turkish business daily Referans back in mid-June that improving the quality of service was Telsim's top priority.



With Vodafone's deep pockets bankrolling the effort, Telsim is set to spend $1bn over the next 18-24 months to upgrade service quality. "We are improving our network, IT and CRM [customer relations management] system. Everything will be renewed and will reach world-class quality in a very short time. We have money, the technical capacity and a managing staff with leadership qualifications," Vitai added.



Both Avea and Telsim are pursuing a two-fold growth strategy, bringing first time mobile users into the market and trying to lure away customers from Turkcell, the market leader, with a 62% share as of March 2006. But Turkcell, known as a tough competitor, looks set to put up a strong fight. Fuelled by its popular Konbara (credit bank) and Gece Kusu (night owl) promotions, the firm added 1.1m new net subscribers in the second quarter of 2006, giving it a total of 29.8m subscribers, according to the firm's recently released quarterly results.

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