Digitalization And Urbanization Will Expand Telecom Frontiers

Key Takeaways

• Accelerated postpaid growth, premium package uptake, and rapid fiber adoption position the company for sustained above-market revenue, ARPU, and margin expansion.
  
• Robust financial health supports aggressive investment and regional expansion, boosting diversification and strengthening long-term market leadership and profitability.
  
• Currency weakness, rising competition, declining legacy revenues, heavy investment needs, and regulatory uncertainty collectively threaten profitability and revenue stability.

Catalysts

Operates as an integrated telecommunication company in Turkey.

• While analyst consensus expects continued subscriber and ARPU growth fueled by upselling, the acceleration in postpaid additions-achieving record-high activations and premium package uptake-suggests that market share gains and ARPU expansion could outpace expectations, leading to above-consensus revenue and earnings growth.
  
• Analysts broadly agree on the positive effects of fixed broadband and mobile price revisions, but the rapid adoption of higher-speed packages (with over half of subscribers now at 50 Mbps or higher and fiber penetration at 91 percent) signals that ARPU growth and margin expansion could be structurally higher for years, materially improving both EBITDA and net margins.
  
• The launch of Türk Telekom's international fiber and broadband operations in Northern Cyprus is a catalyst not recognized in consensus, as it opens new underpenetrated markets and establishes a platform for further regional expansion, directly boosting long-term revenue and diversifying the company's earnings streams.
  
• The exponential rise in data consumption from video, IoT, and cloud services-combined with Türk Telekom's dominant fiber footprint and 5G readiness-positions the company to capture outsized share of high-margin, premium-tier customers, resulting in strong multi-year uplift in premium service revenue and overall profitability.
  
• The company's reduced net leverage, robust cash flow, and access to diverse funding options (including green and sukuk bonds) set up a virtuous cycle that enables accelerated network investment and innovation, creating a sustainable, superior growth trajectory versus competitors and enhancing long-term earnings power.

Türk Telekomünikasyon Anonim Sirketi Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Türk Telekomünikasyon Anonim Sirketi compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Türk Telekomünikasyon Anonim Sirketi's revenue will grow by 37.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.1% today to 8.1% in 3 years time.
• The bullish analysts expect earnings to reach TRY 36.9 billion (and earnings per share of TRY 19.71) by about August 2028, up from TRY 10.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.7x on those 2028 earnings, up from 18.5x today. This future PE is greater than the current PE for the TR Telecom industry at 18.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 28.69%, as per the Simply Wall St company report.

Türk Telekomünikasyon Anonim Sirketi Future Earnings Per Share Growth

Risks

• Continuous depreciation of the Turkish Lira combined with Turk Telekom's significant foreign currency–denominated debt raises the risk of increasing debt servicing costs and more expensive technology imports over time, which could negatively impact net margins and earnings.
  
• The rising intensity of competition in both fixed broadband and mobile segments, including record levels of churn and the risk of a potential new mobile operator entering the market, may lead to ongoing price pressure and limit the company's ability to sustain ARPU growth, ultimately constraining revenue growth.
  
• Rapid shifts in consumer preferences toward over-the-top (OTT) services such as WhatsApp and Netflix are reducing reliance on traditional telecom services like voice and SMS, putting downward pressure on legacy revenue streams for Türk Telekom and threatening long-term revenue stability.
  
• Substantial upcoming capital expenditures required for 5G rollouts, renewal of fixed line concessions, and fiber infrastructure upgrades in both Turkey and Northern Cyprus may depress free cash flow and constrain profitability, especially if such investments are not matched by commensurate revenue growth.
  
• Ongoing regulatory and geopolitical risks, including potential changes in data privacy policies, unpredictable regulatory interventions, and Turkey's broader macroeconomic instability, create uncertainty that may restrict profit potential, deter foreign investment, and weigh on overall earnings.

Valuation

• The assumed bullish price target for Türk Telekomünikasyon Anonim Sirketi is TRY102.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Türk Telekomünikasyon Anonim Sirketi's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of TRY102.5, and the most bearish reporting a price target of just TRY45.2.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be TRY454.9 billion, earnings will come to TRY36.9 billion, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 28.7%.
• Given the current share price of TRY56.7, the bullish analyst price target of TRY102.5 is 44.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.