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Erkan Akdemir, CEO – Avea – Speaks to Teletimes

Cem Kivircik
Special Correspondent in Istanbul

Teletimes – You are CEO of AVEA for almost two years since June 2009. What kinds of changes did you do in the past two years in Avea?
ERKAN AKDEMIR – Actually it can be seen best from the perspective of our customers…  But when we look at from our perspective, we have made changes in organization and marketing strategies. These two years have passed very quickly indeed, but our structural transformation activities continue. We have a number of studies that directly affect the customer and on the other hand, we continue some transformation projects that cannot be seen by the customer, but lead to enrichment in customer experience. Meanwhile, I can say that we have shaped our road map for ourselves. The motion brought by this sector is not very pleasant for ones who make no progress. Our position is constantly changing in these conditions of competition, which is increasing in each passing day, and will also change. In commercial sense, market was changing very rapidly in 2009 and sector experienced growing and downsizing within this rapidly changing market. There was a similar development in 2010. There were different applications in the regulations. Therefore, the years of 2009-2010 are one of the turning points of the sector. We expect that ground will become a little more apparent and competition will be formed even more in 2011.

TT – Although Avea’s investment is less than other GSM operators according to the 4th quarter of 2010 report of ICTA, its EBITDA income is very high. What is the secret of it?
EA –
License fee and the amount of investments in 2010 are much higher than in 2009. When we look at the numbers, our investments in 2010 appear higher than in 2009. When it comes to EBITDA, this concept is not associated with an investment in fact; it is an indicator that shows the difference between income and expenditure. Our main aim in 2010 was to be the operator the profitability of which increases at fastest pace. We achieved this aim. In this sense, we are ahead of other operators. We are the operator that has the highest value in terms of ARPU. When we look at the last quarter, figures are very promising. Avea increased its market share in the fourth quarter. The number of its subscribers increases around 200 thousand. There is also a serious increase in ARPU. It has reached to 19,1. We closed the year 2010 with successful figures and we can say that 2010 was a successful year for us. We see a satisfactory increase at average level in terms of income. Now, we have focused on our 2011 goals.

TT – The number of subscribers of three operators is approximately certain. Only transitions from one operator to the other take place because of campaigns. What kinds of plans do you have in order to increase revenues?
EA –
Considering the external dynamics of the market, your analysis is accurate. In terms of penetration, i.e. the number of mobile line or SIM card per 100 people we have reached a saturation as it seems. But I think this is a temporary plateau… This ratio may be increase especially in the last period of this year. After all, when we look at European countries or similar countries, a similar growth trend is continuing. These countries experienced the same period before. Asymmetry between “onnet-offnet” tariffs has been removed after the number portability. They went through this period earlier. We expect the same growth trend experienced in those markets. But since this rate decreased for two years, it is apparent that we need a correction factor elsewhere. One of the biggest reasons is the thick armor shrinking, narrowing and restricting the market. I mean the tax. When it is disappeared or decreased, market will enter into a rapid growth trend.

TT – Vodafone is an international company; Turkcell also began operation in Germany. Do you have a plan such as overseas expansion of Avea in the future?
EA –
Our current priority is Türkiye. This trend adopted by our competitors is in fact better for us in this respect. Türkiye is our priority, but we can consider cooperation with different operators in different geographies.

TT – When we look at your advertising campaigns, you give very ironic messages to your opponents. Finally, “Consumer Rights” is high on the agenda among operators. What kinds of rights do you offer as Avea?
EA –
We also tell our ad that “Actions speak louder than words.” We can prepare a 500-page book and tell the customer what kinds of rights and services we provide. I want to leave the legal process between the other two operators on this issue to consumers. I think consumers are not interested in this debate. But when we look at the picture closely, it shows that Avea is much better than others and at a very different place in terms of providing a benefit to the customers and taking sides with them. We do not want to enter into such a meaningless fight. If we make an econometric analysis, in a market with an oligopoly of two operators in the absence of Avea, the price level offered by these two operators as well as the benefit and services provided by them have totally changed after Avea’s entrance to the market. Avea disrupted the oligopoly of them and actually changed and shaped the market with its price level and leading role. This situation is more important than Constitution or declaration. Moreover, I think it is not very accurate to put forward the issues demanded by the regulatory authority as if your own initiative.

TT – You as Avea think you make an important contribution to the creation of conditions of competition in the market and the formation of prices for the benefit of consumers…
EA –
Absolutely, this topic is very clear… When Avea entered to the market, there was almost an agreement on the interconnection fee between these two operators and there was no regulation. When you compare the average prices per minute at that time and the prices of today, you can see the effect of Avea more clearly. Not just the price level, but also in terms of innovative services… Intra-group advantages, group tariffs or different approaches towards certain segments were all brought by Avea to the market. Moreover, we are the operator that takes initiative in terms of calling other operator under the concept of “liberty”.

TT – Last year, at a meeting about interconnection fees, you said that interconnection fees could be even lower. But other operators expressed their dissatisfaction often and said that their profits are affected. What is your opinion on this subject?
EA –
We can be at a marginal level, close to zero at interconnection fees. In fact, the structure in developed countries goes in this direction. Many countries such as Britain and Germany announced it and shared how they decrease the interconnection fees in the next period. When we look at these countries, it becomes clear that Türkiye took the right decision, but I think we should not stop at this level and continue in the same direction. Because it is apparent that all these factors will have a negative effect on the operators in the first place… We do not want them to suffer, even they are our competitor. But this practice has positive effect on the consumer and also reduces the costs of operators. It is extremely wrong to position it in a different way … When this practice was announced, there were lots of disaster scenarios, such as the profitability of operators will decrease or the tax revenues of finance will decrease. But none of them happened and all operators will see the benefit of this practice in the medium term. It shows that this is a great barrier. We need to look at the long-term benefits of calling to other operators.  We have explored this issue thoroughly.  It has positive effect on the operators and the total market as well as on consumers. Since the last year, average prices paid by consumers have dropped very quickly. In addition, tax revenues derived by the public were influenced positively. It can be said that it resulted positively in terms of the resulting social benefits. I think that if this practice is taken a step forward, the resulting social benefits will increase.

TT – You have made a statement about the allocation of frequency. You wanted a fair distribution. At the same time, you argued that a positive discrimination should be applied for Avea and all operators cannot be in the same regulation pool. Could you explain it a little more?
EA –
Regulation is actually made for the operators that are active and dominating force in the market. These kinds of regulations are not made for operators that do not distort the market and do not have activities to obstruct the entrance of other competitors to the market. This is contrary to the approach of regulation… We say that operator that distorts the market and has the dominant power in the market should be subjected to the regulation. I think it is wrong to narrow the playground of other operators and apply restrictions in this direction.
Frequencies are consistently re-organized in Europe and equitable distribution of frequencies is maintained. However, frequencies have not been re-organized since the date of first distribution in Türkiye. Aside from the sale of 900 lines three years ago, it did not happen very seriously. In the coming period, this issue is a hot topic and an arrangement should also be done.

TT – You perform your LTE trials very quickly. Have you set any date for the application? When do you think the conditions will be appropriate for LTE?
EA –
We think it is too early for LTE. Because it seems that the evolution of technology side of LTE as well as the formation of its commercial side especially with the terminal devices will take a few years. There are still many uncertainties in the subject of LTE. Conditions will be appropriate after these uncertainties will be clarified.

TT – Avea has a great sensitivity in R & D. In recent months, we have seen that certain medical tests can be performed by attaching a lens apparatus to mobile phones at a meeting. When will we see this or similar applications?
EA –
I think such applications will be put into practice towards the end of 2012.  The application you mentioned is a new application not only in Türkiye, but in the world. We have shown that it can work in the first place. We also performed a good cooperation. The second stage is the production and it is process outside of our control. Once this device is developed, it is very possible to provide it as a mobile service… As these studies are completed, we as Avea consider this. There are already supports of the government in this respect. But, we also benefit from a significant amount of funds in Europe. We carry out these studies in cooperation with our domestic and overseas business partners as well as the universities and research centers. But our focus is the mobile technologies. Studies on how mobile technologies facilitate the lives of people will focus on this point. Products are always being developed in terms of commercial service. In addition, we think we are unrivalled in the development of innovative products. In terms of allocating resource to these studies, Avea is different from the other operators.

TT – Femtocell is a new concept for us. What can you say about this?
EA –
Femtocell will be an interesting product. We are working on this subject for two years with our group companies; both on service development and product development. We focus on this issue for a long time. When it is regulated, I believe that we can offer this product in a very short period of time.

TT – What is the operation system of this product?
EA –
It is same as the wireless ADSL box, except that it provides 3G coverage. Thus a two-sided benefit is provided. First, it provides a significant convergence and creates a different product and a different positioning. At the same time, it provides the opportunity to deploy 3G traffic over the internet network. You know, mobile data is growing very fast. It also requires operators to invest continuously in this way. This is an investment in technology to alleviate this burden in a sense.

TT – In recent years, call centers were established especially in the eastern region. This will make a tremendous contribution particularly to the development of employment and the creation of a source of income. What do you think on this subject? Do you as Avea intend to invest more in this field?
EA –
We have in-house call center, but also serve through the other call centers. AssisTT, among our group companies, is one the largest call centers in Türkiye. Apart from that, we are working with different small call centers. This study was initiated by former Minister of Transportation Binali Yildirim. I think it offers an insight to the companies in terms of technology as well as it provides a significant benefit in terms of employment. I know Bingöl call center were met with great enthusiasm by the people. Call center established in Erzincan is one of the largest call centers that serve a considerable number of companies in Türkiye. It is really pleasing. This will be useful for the development of those regions. From our perspective, it provides advantages both in terms of the quality of service and cost. In order to make these investments more attractive, some encouraging policies should be applied. I think, in that case it will progress much faster and move from west to east.

TT – We know that you as Avea are very sensitive to the social responsibility projects. You implement a major project of social responsibility for our disabled citizens and we know that you employ more than 2000 of them. Do your applications, such as employing disabled citizens in your call center or providing an opportunity to work at their homes, continue?
EA –
They continue. It is an initiative launched by the Ministry of Transport… In fact, we employ disabled persons working at their house or a comfortable office and their number is constantly increasing. In addition, we conduct a study in cooperation with Physical Disabilities Foundation. We are pioneering in this respect by employing around 2700 persons. This study has been completed in Istanbul. We will continue to work with the foundation for expansion of this study all over Türkiye. We see this project as bringing the important values of Türkiye to life. We will continue to work to employ disabled people in Avea and reintegrate them into the society.

TT – Finally, what kinds of innovations are waiting for us in 2011? What are the plans of Avea?
EA –
As I said in the beginning, we expect that market will be formed a little more in 2011 in comparison with 2010. Other operators’ strategies gradually become clear in this field. The year 2011 will not fall behind 2010 in terms of competition and even it appears that the competition will be more challenging. We finished the first quarter. Next month, all operators will announce their first-quarter figures. We entered the year 2011 artily and our claim will continue. In addition, our structural projects, conversion projects will continue. We plan to invest more in 2011 in comparison with 2010. At the same time, we implement a conversion project in our sales channels. We accelerate this project. In the same way, we try to be one of the leading players of the market vigorously in the competition environment.

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