Turkcell Looking Up this Thanksgiving, Should you Invest? - Analyst Blog

With Thanksgiving just around the corner, the demand for turkey dishes is on the rise. Americans consume about 20% of the annual turkey meat produced in the country on this particular day alone. As retailers and restaurants coming up with attractive discounts, the average price of a 16-pound turkey has fallen by 11 cents.

Apart from this delicacy, there is another attraction from the land of Turkey, which may also help investors gain considerably in the stock market. Turkcell Iletisim Hizmetleri AS (TKC), the largest wireless carrier in Turkey is likely to maintain its strong momentum in the stock market. At present, Turkcell is the only stock from Turkey that trades in the U.S.   

Turkcell is a major business organization in Turkey. As of Sep 30, 2014, the company had 34.7 million subscribers in Turkey. Currently, 99.62% of the company's total footprint is covered with 2G network whereas 88.09% fall under 3G network coverage. Turkcell also operates in nine countries in Asia and Europe through various wholly owned or partially owned subsidiaries.

In fiscal 2014, Turkcell put up a decent performance. In the first nine months of 2014, total revenue increased 4.9% year over year. Gross margin was 39.5% compared with 38.9% in the year-ago period. Group EBITDA (earnings before interest, tax, depreciation and amortization) grew 5.6% year over year. This solid performance is mainly attributed to a robust mobile business despite facing tough competition. 

Recently, Standard & Poor's Ratings Services (S&P) upgraded Turkcell's overall outlook from “Stable” to “Positive”. Although, S&P reaffirmed the BB+ long-term corporate credit rating on the company, it stated that the rating might be raised in near future if Turkcell manages to improve its corporate governance.   

Catalysts for 2015

Turkcell is expected to launch 4G LTE (Long-Term Evolution) service in Turkey in 2015. LTE offers several advantages over legacy 3G network technologies. The benefits include improved spectral efficiency, lower costs, and solid integration with other open wireless standards.

Around five years ago, the company had launched 3G services in Turkey. Since then, mobile data traffic on Turkcell's network increased by 200 times. We believe that the installation of 4G LTE will increase mobile data traffic many folds and result in a significant growth in average revenue per user for TurkCell.

Meanwhile, Turkcell is investing in fixed-line broadband network. The high-speed Internet (broadband) market of Turkey is relatively untapped. The company has deployed a powerful optical fiber based broadband network. This market also provides enough growth opportunities for Turkcell to capitalize on.

The company also recently launched next-generation Turkcell TV+ which provides seamless TVEverywhere service on any compatible mobile device along with cloud-based program recording facility.

To add to the positives, the current Zacks Consensus Estimate for fiscal 2015 revenues stands at $5,818 million, up 6.1% year over year. Similarly, the current Zacks Consensus Estimate for fiscal 2015 earnings per share is pegged at $1.38, highlighting an increase of 19% year over year.

Other Stocks to Consider

Turkcell currently carries a Zacks Rank #3 (Hold). Other better-ranked non-U.S. telecom operators include SK Telecom Co. Ltd. (SKM), TIM Participacoes S.A. (TSU) and China Telecom Corp. Ltd. (CHA). All three stocks currently sport a Zacks Rank #1 (Strong Buy).