Earnings Call Transcript - TKC Q4 2024

Operator, Operator

Ladies and gentlemen, thank you for standing by. I'm Geli, your Chorus Call operator. Welcome, and thank you for joining Turkcell's Conference Call and Live Webcast to present and discuss Turkcell's Fourth Quarter and Full Year 2024 Financial Results. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. At this time, I would like to turn the conference over to Ms. Ozlem Yardim, Investor Relations and Corporate Finance Director. Ms. Yardim, you may now proceed.

Ozlem Yardim, Investor Relations and Corporate Finance Director

Thank you, Geli. Hello, everyone. Welcome to Turkcell's 2024 full year earnings call. Today, our CEO, Ali Taha Koc; and CFO Kamil Kalyon will be delivering a brief presentation covering operational and financial results which will be followed by a Q&A session. Before we begin, I would like to kindly remind you to review our Safe Harbor statements available at the end of our presentation. Now, I'm handing the meeting over to Mr. Ali Taha.

Ali Taha Koc, CEO

Thank you, Ozlem. Good afternoon, everyone and thank you for being with us today. This year, in which we celebrated our 30th anniversary, has been a testament to our dedication and achievements. We delivered on our promises, honored our commitments, and strengthened our foundation for the future. For the full year, our top line reached TRY 16.7 billion reflecting a 7.8% year-on-year rise, surpassing our guidance. With a strong focus on profitability, we achieved TRY 69.8 billion in EBITDA, maintaining a solid margin just below 42%. Throughout the year, we prioritized upselling and driving customers to postpaid plans, leading to a record-breaking 1.9 million net postpaid additions, the highest of the past 15 years. In addition, we delivered double-digit ARPU growth supported by disciplined pricing strategy and an expanding postpaid base. In total, we added a net of 0.6 million subscribers in 2024. A key milestone of the year was the completion of our Ukraine asset sale in the third quarter. Along with this, we delivered a 30% increase in net income, exceeding TRY 23.5 billion. Next slide, please. Let's take a look at our operational performance. On the mobile front, the aggressive pricing dynamics that began in May persisted into the second half of the year. There were no price adjustments across the market beyond July, and with intensified competitor campaigns, the market remained highly competitive. While we strategically responded to these issues, we closed Q4 with 479,000 postpaid net adds. Over the past year, our postpaid base has grown by 1.9 million, raising the postpaid share to 76%, marking a 5-point increase year-on-year. We had a 0.9 million quarterly net loss in the prepaid segment. This is mainly due to broader adoption of alternative data solutions, the quarterly disconnection of inactive subscribers in line with our churn policy and postpaid migrations. We achieved double-digit ARPU growth, driven by our rational pricing strategy, successful upselling to higher packages, and expanding postpaid base and a slowdown in CPI. However, due to accelerated market aggressiveness and lifecycle closures, the churn rate rose to 2.8%. We are retaining our focus on profitability and leveraging our digital services to support ARPU growth. As a result, our standalone paid user base is at 4.8 million in Q4. Next please. In Q4, the fixed broadband market remained relatively rational other than the late price adjustments among small ISPs. We maintain our focus on fiber subscribers, with strong demand for our high-speed end-to-end fiber service resulting in 32,000 net additions in this quarter, bringing the full year net total to 168,000. Momentum in the demand for high-speed packages continued in this quarter. The share of packages of 100 megabits per second and above in our residential fiber portfolio rose by 12 percentage points year-on-year. Residential feedback fiber ARPU grew by 18.8% year-on-year, mainly due to the rising 12-month contract share to 85%, higher usage of 100 megabit per second plus packages and price adjustments. The slight rise in churn is mainly due to price increases and the transition to 12-month contracts. Meanwhile, our take-up rate rose by 1.7 points year-on-year as we focus on adding fiber subscribers over expanding home pass coverage. Next please. Digital business services generated TRY 4.4 billion in revenue this quarter, with recurring service revenues rising 19% year-on-year. Hardware revenues also provided support, showing a partial recovery this quarter. Notably, our system integration project backlog has reached TRY 4.8 billion. In our high potential data center and cloud segment, revenues rose 39%, driven by high demand and strong pricing. Guided by our principle of keeping Turkey data in Turkey, we remain committed to expanding our data center investments, reinforcing our long-standing market leadership. We are Turkey's first company to receive three certifications from the Uptime Institute for design, facility, and operations. Our data centers are built to the highest standards, ensuring redundancy, reliability, and minimal downtime. This makes us the number one choice for our top enterprises, securing our long-term growth potential. To meet growing demand, we expanded our data center capacity by 27% to 41.4 megawatts in 2024. In 2025, we plan to build two more new modules, increasing our capacity by 8.4 megawatts by year-end. Next please. Our Techfin segment, Paycell and Financell, comprise 5% of our group revenues, strengthening our top-line growth. Paycell, our mobile payment platform, achieved 33% growth in Q4. While all verticals contributed, the biggest drivers were higher commissions and transaction volumes from Paylater and post solutions. Notably, Paylater transaction volumes surged by 87%, fueled by broader adoption in app stores and expanded QR payment eligibility. Meanwhile, Paycell EBITDA grew by 51.8% with a four percentage point increase in EBITDA margin, reinforcing our commitment to profitable growth. Financell revenue rose by 13.6%, supported by higher average interest rates and an expanded loan portfolio. Thanks to the personalized pricing strategy we adopted in 2024, we are now able to address a wider customer segment. This strategy has contributed to our portfolio growth; rising interest in our loan book is offsetting higher funding costs, driving the net interest margin up to 4.6%. Despite the challenging macroeconomic environment, Financell remains the market leader in loan volume within the financing sector, a proof of our strength and resilience. Next, please. This year, I'm proud to say that we stayed true to our commitment to sustainability, reaching key milestones along the way. We successfully issued a $1 billion euro bond, with half of it marking our inaugural sustainable bond issue, a clear reflection of our ESG efforts. Our CFO will share the details shortly. On the renewable energy front, we added 8.2 megawatts of active solar capacity in 2024, on track to reach 54 megawatts by mid-2025. Additionally, we integrated solar panels into 1,000 base stations, further strengthening our commitment to renewable energy in our telco operations. Our social and digital inclusion projects have impacted 377,000 lives. We also conducted a sustainability assessment for our key suppliers to reinforce our ESG commitment in the supply chain. In governance, transparency and accountability remain our guiding principles. As part of our bond issuance, we published our first sustainable finance framework and secured an independent third-party opinion to help investors assess our ESG commitments. These milestones underscore our dedication to sustainability, and we remain committed to building a more responsible and inclusive future. I want to take a moment to layout our strategy, our roadmap for driving Turkcell into the future. At the heart of our plan lies a commitment to robust infrastructure and cutting-edge technology. We are making comprehensive investments to pave the way forward. Our leadership in mobile services will continue as we advance in 5G coupled with an expanding fiber network, not only to power mobile infrastructure but also to enhance residential access. When it comes to 5G, we are committed to leading the way in connectivity. Just last week, we successfully tested 5G in a packed football stadium with around 50,000 supporters, delivering impressive download speeds of one gigabit per second and above. As data and cloud services surge, we are building next-generation data centers, and to meet growing energy demand, we remain committed to renewable energy investments. Our strategy is about more than infrastructure alone. It is about transforming lives. We are dedicated to delivering superior technologies. We are embedding AI into our operations, ensuring operational excellence. With continued investments in data centers, we are driving growth in the cloud business through strategic partnerships. As a pioneering innovator, we are actively exploring disruptive technologies, such as 6G, satellite systems, and quantum technologies in collaboration with global industrial leaders. Our mission is clear: to keep our service simple, functional, and unique, ensuring we remain the first choice of our customers. No matter the sector, no matter the challenge, our people-centric approach remains our guiding principle. Finally, sustainability and business continue to form the backbone of our strategic vision. With this strategy, we are unlocking the full potential of our world-class infrastructure and technology expertise, delivering lasting value to our stakeholders and shaping the future of connectivity. To conclude my presentation, I share our guidance for 2025. For 2025, we expect 7% to 9% top line revenue growth. 32% to 34% data center and cloud revenue growth. We have an EBITDA margin guidance of 41% to 42%, and we expect a CapEx intensity of around 24%. I will now leave the floor to our CFO, Mr. Kamil Kalyon.

Kamil Kalyon, CFO

Thank you very much, Ali Taha. Despite inflationary headwinds, we delivered solid financial results in 2024. Our group top line grew by 8% year-over-year, exceeding TRY 166 billion. Turkcell Türkiye accounted for 92% of this growth, contributing an additional TRY 11 billion. This performance was driven by a delicate balance between an expanding subscriber base, double-digit ARPU growth, and upsell efforts. The Techfin segment more than offset the decline in the other segment, contributing TRY 2 billion to top line growth. This was primarily driven by Paycell at 25% and finance sales at 33% growth levels. On a quarterly basis, an incremental revenue of TRY 5.3 billion was generated, reflecting strong 14% growth. In the quarter, a limited recovery in hardware sales positively impacted other segment revenue. Next slide, please. In 2024, EBITDA surged by 10.2% to TRY 70 billion, driven by a strong top line performance. Accordingly, the EBITDA margin expanded by 0.9 percentage points year-on-year. Higher personnel expenses due to semiannual wage increases and rising funding costs reduced EBITDA margin by 3.4 points. These impacts were offset by lower cost of goods sold, energy expenses, and interconnection expenses. Lower growth in the cost of goods sold due to the decrease in demand for consumer electronics and corporate projects and a decline in MTR have positively contributed to the margin. Additionally, energy expenses were lower than expected throughout the year, also supporting the margin. Next slide, please. The operational CapEx to sales ratio for 2024 was 22.8%. Given the seasonality of telecommunication investments and the completion of data centers and renewable energy investments at the year-end, we see higher CapEx intensity in the fourth quarter. 63% of our investments were allocated to mobile and fixed infrastructure with an equal focus on both. Around 5% of CapEx intensity came from investments in strategic initiatives, namely the data centers and renewable energy projects. As our CEO has underlined, we remain committed to four key investment areas to reinforce our strategy: advancing our state-of-the-art infrastructure, enhancing 4.5G capabilities, and strengthening our position for 5G to enable a full-fledged 5G experience. We aim to increase base station fiberization to 48% and grow data center capacity by adding 8.4 megawatts of active capacity with the construction of two new modules in Europe and Ankara data centers; and finally, we will continue to expect solar renewable energy investments. As a result, we anticipate around 24% CapEx intensity in 2025. Next slide, please. Now let's turn our attention to the balance sheet. In 2024, our cash position stood at TRY 70 billion. In the fourth quarter, we distributed TRY 6.3 billion in dividends from 2023. Additionally, to make efficient use of our cash, we invested in financial assets. Our gross debt was TRY 104 billion, and we ended the quarter with a net debt position of TRY 10 billion. Thanks to strong cash generation and proceeds from the sale of our Ukrainian assets, our net leverage declined to 0.14 times. We have adequate cash to meet our debt service for the coming three years. A significant portion of our cash is held in hard currencies. Excluding FX swaps, 51% of our cash is in US dollars and 22% in Euro. Next slide, please. This January, we reached a major milestone for both our company and our country by issuing a $1 billion euro bond, the largest international bond in Turkcell's history. This transaction marked only the second time in the last decade that a Turkish corporate has priced a dual trench offering. The strong outcome once again confirmed global investor confidence in Turkcell. The issuance attracted higher oversubscription levels than any other Turkish corporate issuer in the second half of 2024. Moreover, in the past year, Turkcell had the lowest spread over the Turkish treasury Eurobond compared to other Turkish corporate issuers. This issuance also reinforced our commitment to ESG, as one tranche is in inaugural sustainable bonds. It further helped us broaden our investor base by attracting funds focused on ESG investments. With these issuances we aim to refinance our existing Eurobond maturing in October 2025 and support future growth initiatives, including 5G and data center investments, as well as securing green and social projects. Next slide, please. Lastly, let's look into the management of foreign currency risk for 2024. At the end of 2024, our balance sheet had around US$2.4 billion equivalent in FX financial liabilities. In addition to US$2 billion equivalent of FX-denominated financial assets, we have a US$0.3 billion effective hedging portfolio. Overall, we ended up with a short FX position of US$124 million, which is within our neutral FX position definition of plus and minus US$200 million. This concludes our presentation, and we can now open the line for questions.

Operator, Operator

Ladies and gentlemen, at this time, we will begin the question-and-answer session. The first question is from the line of Mandaci Ece with Unlu Securities. Please go ahead.

Mandaci Ece, Analyst

Hello. Thank you for the presentation. I have a few questions about the potential transactions in Türkiye. You mentioned some comments in your earlier interview regarding the tender. What is your perspective on the timeline for the standard and potential license lines, especially concerning the spectrum announcement? What do you think about the possible investment size or license fees related to these standards? Additionally, regarding the standards, could there be any changes in the pricing mechanism for mobile contracts? You mentioned a dynamic pricing model during your interview, and I would like to know if there could be an opportunity for higher pricing with the rollout of 5G in Turkey. Would this potentially impact your overall average ARPU performance moving forward? Furthermore, you set a target of 24% operational CapEx over sales, and I understand this doesn’t include any license fees; however, there will still be costs related to the fiberization of base stations. Given that these efforts are tied to the 5G deployment, should we expect the CapEx over sales to remain around 24% in 2025 and 2026? Lastly, regarding infrastructure sharing models, is this a possibility, or is it just a concept? I’ve heard comments from the ministry about a potential tender for fiber infrastructure, and I would like to hear your overall thoughts on the points I raised. Thank you.

Ali Taha Koc, CEO

Thanks. Let me tell you that there is no official timeline for 5G announced by the regulatory yet. But we know that 2025 there is going to be a tender and in 2026, there is going to be a live 5G network. But the official time has not been well announced yet. However, recent statements indicate that the tender will definitely begin a bit this year. So as Turkcell, we are determined to establish our 5G infrastructure with local and national technologies as much as possible. We will continue our ongoing efforts to support the development of these technologies. We are committed to lengthen just as I explained in my talk. Last week, we managed to show the speed of 5G to all the sports and football fans in both the ultra stadium and the travel stadium. So with a full packed 50,000 people, people experienced the 5G. This is a good starting point for Turkey, so that everybody is going to get a better experience at 5G. Before that, there is only one place that you could experience 5G, which is the airport. This stadium approach is going to help us out. We are going to show the people how good the 5G is and how Turkcell's 5G is going to be. Simultaneously, we are continuing to pay our mobile and fixed support network for 5G. We are committing to building the best, most advanced version of the 5G network to support next-generation applications and the digitization process of both government and industry. We will continue to invest in fixed wireless access solutions, especially FWA, a key feature of 5G to increase broadband connectivity in Turkey where we can provide fiber-like speeds where there is no fiberization. So fixed wireless is a good possible alternative to fiber. Alongside our network provision, we continue to intensify our efforts with our business partners from an R&D perspective. Especially, 5G is going to be focused on the internet of things. We are looking for additional revenues from these kinds of deals, especially from non-terrestrial networks and satellite networks. Regarding the tender for fiber infrastructure in 2026, we are glad to welcome the Minister's statements. Actually, there is significant demand for fiber infrastructure, both from the corporate side and individual side in Turkey. There is still a considerable need for further investment to expand fiber infrastructure across the country. We are ready to take on this national responsibility as Turkcell, delivering the same world-class services in fiber broadband that we provide to date mobile communication. We are ready for it. As I have always emphasized, at the end of this process, Turkey will be the winner, benefiting from enhanced quality and cost efficiency. At Turkcell, we continue our investments, strengthening our fiber infrastructure and bringing innovative technologies to our nation.

Kamil Kalyon, CFO

Thank you very much for the question. I will try to respond to the second one. As you mentioned, we do not include our license fee in the operational CapEx to sales ratio. Therefore, our guidance would not include the license fee. For 2025, we will be focusing on our core business, mobile and fixed side more for the preparation for the 5G side. Besides that, we will continue to make the investments for the data centers and solar energy side. Our expectation is that we do expect to start with a 24% CapEx intensity ratio in 2025, and most probably in 2026, we will not exceed such kind of CapEx intensity rates.

Mandaci Ece, Analyst

Thank you very much. From your comments, I understand that there could be a possibility of premium pricing with 5G deployment due to increased usage of the additional services we have mentioned. Do you have any insights on the potential size of the license fee? Since 2016, things have changed, and perhaps the 5G deployment will not be required across all of Turkey, but rather regionally. Could this mean that the overall license fees might be lower than the €4 billion figure for the sector from 2016, including VAT? Is a reduction in license fees for the sector a possibility?

Ali Taha Koc, CEO

From a pricing standpoint, we are currently uncertain about the exact licensing fees, which influences our ability to establish a pricing strategy. In Turkey, we have been implementing inflation-based pricing. We are still in the process of determining our pricing strategy due to the varying infrastructure costs that depend on tender requirements and licensing fees, all of which are subject to change. For now, our approach at Turkcell is to align our pricing with inflation across all the technology we offer to our customers.

Kamil Kalyon, CFO

And regarding the license fee, unfortunately, we do not have any information provided by the government bodies regarding the 5G tender yet. But I think it would not be the same as in the 4.5G tender because there was significant technological transformation while making a trust from 3G to 4.5G. It is quite different. Our expectation is not high as in the 4.5G tender. But still, we do not have any idea regarding how the government bodies will design this standard. For example, we do not have any idea whether they will request a fixed fee or a revenue share model; there might be some possibilities. It's not clear yet. We will wait and see.

Ali Taha Koc, CEO

Everything is on the table. And associated with your question, €4 billion is for all three operators. Turkcell paid €1.6 billion for the 4.5G tender. So, to correct that, the total amount that the government collects from the three operators is around €4 billion in 2015 and 2016.

Mandaci Ece, Analyst

Thank you very much.

Cemal Demirtas, Analyst

Thank you for the presentation. My first question is related to your growth prospects. As far as I remember, you were more just passionate about the growth side. Again, this year after 8% another 9%. Do you think we will see momentum in the growth prospects in the following years because I remember that you are very estimated about doubling this company going forward? What should we expect for the following years? Could you further elaborate on your assumptions behind your similar growth profit in 2025 compared to 2024? That's my first question. The other one is the financial side, at the bottom line. Do you see that your net debt level is coming down going forward? Are we going to see improvement at the bottom line in the second quarter? Or does it depend on the interest rates? Thank you.

Ali Taha Koc, CEO

Thank you very much, Cemal. As you know, our growth rate is around 8%. This is a real growth after adjusting for inflation. Therefore, this is a significant growth rate from our perspective because we are the market leader and we are continuing to achieve growth. As you know, the January inflation rate was declared above expectations. Therefore, such measures significantly affect our growth estimates. The 7% to 9% growth rate is a solid target from our point of view. We will look at the developments in the competition in 2025, and the inflation development will impact our growth rate. But I can easily say that a 7% to 9% real growth is still very good from our standpoint. I think the second question pertains to net debt to EBITDA.

Cemal Demirtas, Analyst

Related to your financial expenses side?

Ali Taha Koc, CEO

Regarding financial expenses, we had a very successful balance sheet management in 2024. Our liquidity position is very good. When we look at our credit portfolio, we have a basket approach, and we are diversifying the financial instruments very well. Therefore, we are keeping this finance income and expense well managed. The other important issues regarding FX losses; you know that there is stability in the FX side in 2024. Therefore, we kept our short position for a long time in 2024, and it has positively affected our income statement below the EBITDA level. Therefore, we will continue in 2025. We will monitor macroeconomic and geopolitical developments in Turkey, and if we need to change our hedging strategy, we will adjust according to market conditions. Most probably, we do not expect any problems on this issue because when you look at our balance sheet situation, we are very rich in terms of cash, therefore we do not face any liquidity issue. I think this will help us manage our financial income and expense better.

Cemal Demirtas, Analyst

Thank you. And maybe in the business lines, you mentioned the growth in the cloud and data center side. What about the other side? Do you expect a similar trend in the other side, lower growth prospects? And in Turkey, do you see the pricing environment as supportive? Or are you still seeing an increase in competition compared to last quarter?

Ali Taha Koc, CEO

Normally, we are making our estimations for the growth side. Yes, Turkcell Türkiye will be the most important strategic point for the growth side. When you look at our financials in the fintech side, for example, our growth rates are around 20% or 30%. Therefore, I think this aspect will also be important for growth in 2025. As you mentioned, we are making investments in the data center side, and we are anticipating that the returns on these investments will start in a three-year period, most likely following the addition of new modules to our portfolio. That’s why we are prioritizing data centers and cloud issues. Therefore, we have included this in our guidance for this year. Our guidance indicates around 33% growth, which is significant when adjusted for inflation. Therefore, these amounts and rates are essential and are the main motivations for growth in 2025. Unfortunately, I would like to say that irrational and illogical competition has started from the second half of 2024, and this continues. As the market leader, we strive to stabilize or rationalize the market, but some of our competitors are implementing aggressive strategies. They are persisting with this in January and February; we are monitoring developments and taking necessary actions. But don’t worry, we will continue to be the market leader in the medium and long-term in Turkey.

Cemal Demirtas, Analyst

Thank you. And the last question is related to the monetary position side. When we look at details, we see that your financials after inflation accounting, when we look at your figures. And when we look at your pre-inflationary figures just based on the food not related to net monetary gain, I see that if inflation accounting was not applied, your profits would have been around 12 billion lower when I look at the details. Is that a fair statement? Or in a simple way, if the inflation accounting didn't apply, your profit would be lower. Is it a fair statement?

Kamil Kalyon, CFO

No, it's not fair. For pre-inflation figures, I don't know what kind of calculation you made, but you should take into consideration, especially regarding the depreciation side. Below EBITDA level, you are right; there are some positive or negative effects. But if you would like to find the non-inflationary figures, you should also eliminate the effects in the inflation side on the depreciation. Because depreciation is affected negatively from the inflationary accounting.

Cemal Demirtas, Analyst

Yes, yes, because after the meeting we can provide detailed information about that.

Kamil Kalyon, CFO

You're welcome.

Operator, Operator

The next question is from the line of Bystrova Evgeniya with Barclays. Please go ahead.

Bystrova Evgeniya, Analyst

Thank you very much. I have just two quick questions. So my first question is, could you please elaborate on what your inflation assumption for 2025 is that you are using in your guidance? And my second question is, given that basically, your net leverage ratio is very low with all the balance sheet management things that you've done in 2024? And given that you're expecting more CapEx and potentially some license fee payments, where do you see your net leverage at the end of this year? Thank you.

Kamil Kalyon, CFO

Thank you very much for the question. Our year-end inflation assumption is around 31%. The average inflation rate would be around 33%. Regarding the net leverage, as you know, with the help of the proceeds from the sale of Ukraine assets, we completed the year with leverage of 0.14 times levels but our target is to keep leverage below the industry average. Most probably, it will be less than one time at the end of 2025. It depends on how this 5G and the other issues will realize, but most probably, it would be less than one times at the end of 2025.

Bystrova Evgeniya, Analyst

Thank you very much.

Kamil Kalyon, CFO

You're welcome.

Operator, Operator

The next question is from the line of Campos Gustavo with Jefferies. Please go ahead.

Campos Gustavo, Analyst

Hello. Congratulations on the results. Just a few questions from my side. Firstly, you're expecting some top-line growth, while your margins will be sort of like very similar to 2024. However, there are concerns about a decline in purchasing power for the Turkish consumer amidst this inflationary environment as well as some potential pressure from competition. How do you expect to maintain EBITDA margins in this environment? What will be your drivers for that? That is my first question. Thank you.

Kamil Kalyon, CFO

Starting from the establishment state, Turkcell is doing these two issues very well. One of them is the growth side, and the other one is we are not only focusing on growth but we are also very good at cost management. Therefore, while we are taking into consideration the growth rates, we are not conceding anything from our cost management side. Therefore, in 2024, we increased our EBITDA margin 1% compared to 2023. This is a significant success from our perspective; the inflationary environment is not new for Turkey as you might know, we faced this crisis more than 20 years ago and it was very sticky in a hyperinflationary environment. Therefore, as I said from the start, we are managing inflationary pricing very well as Turkcell but we are also very sensitive about the cost management side. The results of this year and previous years are the most important evidence of this discipline.

Ali Taha Koc, CEO

Also, we have a very diversified revenue generation model. We have our telco business as well as we have a Techfin segment, and currently, our new guidance is in the data center and cloud business. I think we can achieve these targets.

Campos Gustavo, Analyst

Understood. Yeah, that's crystal clear. Thank you very much. I was also wondering about your CapEx breakdown. You mentioned you have a 48% target on fiber infrastructure. I am assuming that the other 50% of this CapEx will be directed to the 5G tender and expanding renewable capacities, etc. Is that a correct assessment of your expectations for CapEx in 2025?

Kamil Kalyon, CFO

No, I would like to clarify our breakdown. For example, we are targeting to spend 32% for the mobile side in 2025, and 33% of our CapEx investments will go to the fixed side. When we look at the fixed side, fiberization is included in the fixed side. Therefore, in total, 65% of our CapEx investments will go to our main focus areas: mobile and fixed side.

Campos Gustavo, Analyst

Understood. And that will also include any potential 5G tender investments for this year, correct?

Kamil Kalyon, CFO

This 32% mobile investments also include 5G requirements or 5G investments that will be made in 2025, but the license fee is not included in the CapEx to sales ratio.

Ali Taha Koc, CEO

These are just the base stations, network equipment, and all this CapEx related to 5G. Well, it doesn't include the tender fee or license fee.

Campos Gustavo, Analyst

Thank you very much. That's very helpful. Lastly, from my side, I was wondering what your plans are or your expectations for the 2025 year bond maturing in October. Is your plan to refinance it or just pay it in cash? That's my last question.

Kamil Kalyon, CFO

In January, we issued a Eurobond in the amount of $1 billion, therefore Eurobond issuance is also for the preparation of the redemption of the Eurobond repayment that would be realized in October 2025. The remaining portion of this $1 billion will be used for 5G investment, data center investments, and solar renewable energy investments.

Campos Gustavo, Analyst

Perfect. Thank you very much. I appreciate the details.

Kamil Kalyon, CFO

You're welcome.

Ali Taha Koc, CEO

Thank you very much.

Operator, Operator

Your next question is from the line of Madhvendra Singh with HSBC. Please go ahead.

Madhvendra Singh, Analyst

Yes, hi. Thanks for taking my question. The first question is on your mobile segment. It seems like the churn rate has gone higher. So I'm wondering what is driving that higher churn? Is it because of the continuous price hikes, if at all? So if you could talk about the drivers there. Then the second question is about pricing outlook. Recently, the inflation expectations were raised, I think, in Turkey. So if you could remind us, can you still continue to pass on the inflation to the consumers? Is there any issues from competition or regulation or anything we need to know of? And then finally, I'm not sure whether I missed, but have you announced the dividends? And if not, when will that be done? And just remind us what we should expect? Thank you.

Ali Taha Koc, CEO

Starting with the first question, it's starting from 2024, the price adjustments that we implemented are also followed by the competition, and the motivation to change operators to the pricing is limited at the beginning of the year. However, currently, we have not seen a deterioration on the retention front due to price adjustments. However, we observed that aggressive campaigns started in the second half of the year, and these aggressive campaigns started around May and continued throughout the year, and they're still going on. So due to the aggressive market environment, we experienced a slight increase in the mobile churn rate into Q4 2024, compared to the same quarter last year, particularly on the prepaid side. We have started to observe the impact from the absence of a minimum wage increase in the second half of 2024, coupled with intense competition, such as customers switching to lower tariffs and more competitive offers. Despite this, we managed to keep our mobile churn rate at around 2%, which we define as a healthy level, thanks to our effective churn management actions supported by our analytical models. The second question was regarding the inflation.

Kamil Kalyon, CFO

Regarding the inflation expectations, yes, as you mentioned, in January, the rate is a little bit higher than expectations. But as we mentioned previously, as Turkcell, we estimated the inflation rate around 33% average for 2025, which is higher than the Central Bank's expectations. Therefore, we do not foresee any risk about this issue. We are taking necessary actions regarding we have mentioned that we have a smart pricing model, and we are closely monitoring developments in the market and competition. I believe we will navigate through this issue effectively in 2025 as well. Regarding the dividends, our dividend policy remains the same. As management of the company, we propose that 50% of the net income be distributable for the relevant year. However, as our AGM date is not clear yet, we do not have any idea when the AGM meeting will be. It will probably happen in May or something like that. Our policy is clear, and the AGM will decide how much the dividend distribution will be in 2025.

Madhvendra Singh, Analyst

Thank you. If I can ask one more question on the salary hikes, could you remind us; because of the inflation again, has gone up? What is the plan around the salary hikes? I mean, how many rounds of salary hikes should we expect this year? And what magnitude?

Kamil Kalyon, CFO

Normally, we made price increases in January in the mobile side. In the fixed side, we did not make any price adjustments because the incumbent has not made price increases right now. As I said, we are following them closely. But in January, we made price increases in the mobile side. We will be looking at the coming periods regarding the price hikes.

Ali Taha Koc, CEO

Salary increases are typically conducted once a year at Turkcell.

Madhvendra Singh, Analyst

In which month is that, sorry?

Ali Taha Koc, CEO

Last year, because of inflation, we did it twice. First in January and the other in June. But this year, in 2025, we're expecting a yearly salary adjustment with a single increase.

Madhvendra Singh, Analyst

In June, should we expect that?

Ali Taha Koc, CEO

We closely monitor inflation and currently, according to our plans, we haven't scheduled any raise in June. However, we will find the best way to maintain balance with the increases.

Madhvendra Singh, Analyst

Thank you very much.

Operator, Operator

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

Kamil Kalyon, CFO

Thank you very much. Hope to see you in the next meeting.

Ali Taha Koc, CEO

Thank you very much. Hope to see you.

Ozlem Yardim, Investor Relations and Corporate Finance Director

Hope to see you in the first quarter.

Operator, Operator

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