News: TurkTelekom reported 4Q12 results yesterday after the market close. 
Our View: In the fixed-line business, revenue was ahead on the back of high IFRIC 12 revenue (low margin construction revenue related to fibre roll-out). 4Q12 IFRIC 12 revenue accounted for 37% of the 2012 total. Importantly, both PSTN and the fixed broadband business underperformed our estimates. PSTN revenue was lower mainly as ARPU was up only 1% YoY in 4Q12, although it was positively influenced by a price rise mid-year (3Q12 PSTN ARPU was up 3% YoY). In fixed broadband, TurkTelekom is struggling to grow the subscriber base, which is worrisome. It seems that competitive pressure and affordability are headwinds. The 6% price increase in December 2012 did not help broadband revenues much. The fixed-line EBITDA margin was record low at 44.1% in 4Q12 vs. 48.4% in 4Q11 and 48.5% in 3Q12. As we highlighted in the January initiation report, the change in the revenue mix has an impact on profitability. We are awaiting management's explanation behind the margin pressure on the conference call and also whether there were any one-offs. 
Avea showed strong ARPU dynamics (almost flat QoQ ARPU) in 4Q12, while subscriber numbers were largely in line. The strong ARPU performance helped to increase revenue 15% YoY in 4Q12, which is an acceleration from 12% growth in 9M12. We think this is evidence of further market rationalisation and a positive read-across for Turkcell which is set to report on 21 February. Avea's EBITDA margin was also strong - at 17% on an adjusted basis (21% reported excluding one-off related to change in doubtful receivables), still ahead of our 14.5% estimate. This is the highest quarterly margin since 2008. Again, this is a positive read-across for Turkcell. 
The board proposed TRY 2.4bn (TRY 0.69/share), which is largely in line with our estimate and translates into a 9.3% yield at today's closing price. 
Source: bne