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Ladies and gentlemen, thank you for standing by. I'm Poppy, your Chorus Call operator. Welcome, and thank you for joining Turkcell's conference call and live webcast to present and discuss the Turkcell First Quarter 2022 Financial Results Conference Call.
[Operator Instructions] And the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Ali Serdar Yagci, Investor Relations and Corporate Finance Director. Mr. Yagci, you may now proceed.
Thank you, Poppy. Hello, everyone. Welcome to Turkcell's first quarter 2022 results call. We have a brief presentation to be delivered by our CEO, Mr. Murat Erkan; and our CFO, Mr. Osman Yilmaz. After that, we will be taking your questions. Before we kick off, I would like to kindly remind you to review the last page of the presentation for our safe harbor statement.
Now I hand over to Mr. Erkan.
Thank you, Serdar. Good morning and good afternoon, everyone. Thanks for joining us today. Year 2022 started off with many uncertainties, including macroeconomic challenges, geopolitical developments and continued impact of the pandemic. Most importantly among all, we are deeply saddened by the humanitarian disaster Ukraine has been suffering and hope that peace will be restored in the country.
Turkcell took a firm step into the year with better result despite unfavorable conditions. We generated 37% revenue growth, which was enabled mainly by continued growth in subscriber base and price increases in Turkey. The top line was also supported by a strong international and techfin performance. Our EBITDA reached TRY 4.3 billion on a 30% growth, with just over 40% EBITDA margin, reflecting inflationary price cost pressures as well.
Net income came at TRY 803 million, impacted by the depreciating local currency. On the operation, our strong performance continued, and we made a total net add of TRY 577,000. Turkcell goes on to be the preferred operator for new line establishment, and our broad subscriber base will be a key for monetization in the coming quarters. In line with our plan to increase the overall fiber footprint, we have reached 186,000 new homes, further others see the demand for high speed and seamless fixed connectivity.
Next slide. Let's take a look at our operational performance in mobile. In the mobile market, we observed continued price increases through the quarter from all operators, inevitably reflecting the inflationary pressures. The price adjustment reached 25% to 30% in just 1 quarter. This has sustained further market rationalization along with continued contraction in the mobile number portability market.
In accordance with our strategy to focus on more value-creating postpaid subscriber, we gained net 423,000 increasing the postpaid share to 67%. As expected, prepaid subscriber net addition was slightly impacted by the churn resulting from the boost traffic tourist visit last summer, yet still achieved a plus 59,000.
In the rising trends, mobile blended ARPU climbed 20% year-on-year, 2 percentage points higher than the previous quarter besides the price increases. As evidenced in higher ARPU growth of 26%, our dedicated upsell focus and extended postpaid subscriber base supported ARPU growth. The growth was slightly impacted negatively by the ICTA decision to decrease MTR as of January 1, 2022.
Given the ongoing inflationary environment, we expect to review our pricing more frequently than ever and may implement further increases within the year. The rationalization in the market, along with our customer-driven approach and analytical competency has resulted in a decline in our monthly mobile churn rate to 1.6%, which marked the record of past 4 years.
Furthermore, a well-invested digital infrastructure, superior customer experience and our value-to-money strategy ensure extension of the wide gap in Net Promoter Score with the second-best operator. The monthly data usage of 4.5G users has reached 14.7 gigabytes, driving data usage, smartphone penetration has reached 86%, up 2 points year-on-year.
Moving to next slide. In the fixed broadband market, the year started with the price increases both in fiber and DSL services is a familiar trend. Demand for the fiber services prevails yet sees some seasonality and competition impact. Our private subscriber continued to grow with 53,000 net additions. With 44,000 net IPTV additions, we are pleased to see continued interest in our TV+ services. Overall, IPTV penetration in our fiber base has exceeded 65%, rising 5 points year-on-year.
The focus on higher-speed packages and price increases has supported ARPU growth of 21%. Our superior fiber service quality was the key driver of the monthly fiber churn, decreased to just 1%. This also supported the overall fixed churn to improve. Considering the low penetration of pure fiber in Turkey and high demand, which still prevails in the past pandemic period, we accelerated our fiber investment over the past couple of years.
This quarter, we reached 186,000 new home passes in line with our plan. Given the accelerated expansion of fiber footprint, our take-up rate was at 43%, which is still well ahead of the competition.
Next slide. And now next 2 slides, I will be providing an update on our strategic focus areas. Let's start with our digital services and solutions. We increased our price in all of our digital OTT services early in the year, in line with our inflationary pricing strategy. Despite that, strong demand for digital services continued and stand-alone paid subscriber base rose to 4.2 million, up 33% year-on-year.
Specific digital OTT services revenue, which includes core OTT services, rose 46% year-on-year. Among the digital OTT services, OTT TV subscriber reached 87,000, up 24% year-on-year, mainly driven by TV+ subscriber; lifebox, our cloud service platform reached 1.4 million subscribers on a solid rise of 50%. The number of 3-month active users of BiP was at 26 million with 1/5 being international.
Our Digital Business Services supporting the digital transformation of the enterprises registered a solid growth of 75% year-on-year. The growth drivers were system integration projects, data center and cloud business. System integration business was boosted by a few mega projects realized within the quarter. Yet even excluding those, annual growth still remains solid at 4%.
We achieved the highest number of project acquisitions in a quarter, with 1,000 new projects. The backlog from system integration project increased to TRY 1.9 billion, which is set to contribute to the top line in the upcoming quarters.
Next slide. Turning now to our techfin focus. Paycell, our innovative payment service platform registered a remarkable quarter, delivering 67% year-on-year growth. The ongoing shift to digital payments was evident in tripling total transaction volume and a 2% rise in 3-months active user, keeping almost $7 million. EBITDA rose 7% in the quarter with a 44% margin. The margin dilution, which we expect to normalize over the upcoming quarters reflects the diversified product mix as well as some one-off expenses realized earlier in the year.
Among the revenue lines, the leading product, Pay Later, continued its strong revenue trends as the mobile payment volume doubled year-on-year. Revenue contribution from POS solution is also improving. As we ramp up our Android POS device in the market, another strong platform works, it was Paycell Card, where the transaction volume grows eightfold.
Financing customers technologies -- technological needs, finance sales revenue rose 5% on a larger loan portfolio, higher average interest rate and the contribution of the insurance business revenues. The total loan portfolio rose to TRY 2.3 billion in Q1 '22, up 24%, driven by our greater focus on the corporate segment and recovered model.
Next slide. Now let's take a look -- take a closer look to our performance in international market. Turkcell International segment grew 101% year-on-year and the Ukraine business remained a key driver of the performance as the impact of war is limited to 1 month. Excluding the currency impact, the organic growth of the segment was at 21%. Lifecell's top line grew by 21.5% year-on-year in local terms and slightly decreased quarterly due to the 1-month impact of the war. As you may recall from our comprehensive call in March, thanks to our proactive operational risk management, we managed to continue providing communication services across the country.
We have already established data center backups within and beyond Ukraine to ensure business continuity. We have reported no damage or outage in our core network and the radio network saw partial and temporary downtime due to electricity outage. On the Belarus side, in light of the prevailing geopolitical tension, the EU, U.S. and U.K. imposed sanction on Belarus, which may further impact our access to important hardware and software.
Moving to next slide. As of today, our expectations are in line with our latest guidance announced in February. Although the developments have inevitably had a negative impact on the International segment, the strong growth of Turkcell Turkey has so far been compensating for it.
Even though the better-than-expected performance of Turkcell Turkey encouraged us to make an upward revision in the guidance, the ongoing uncertainty in Ukraine pushes us to be conservative. Thus, we keep our full year guidance as-is. We will continue to monitor the developments in Ukraine for a potential revision in the guidance.
Now I will hand over to Osman, our CFO, for the financials.
Thank you, Murat. Let's take a closer look at our financials. In the first quarter, group revenues grew 37%, corresponding to TRY 3 billion rise in nominal terms. TRY 2 billion of this increase comes from Turkcell Turkey. The increased focus on pricing and upsell efforts as well as a larger subscriber base led Turkcell Turkey to grow 33%. The contribution of our international businesses was TRY 0.7 billion. Together with the positive impact of currency movements, our Ukrainian operations were the main driver of the rising International revenues despite the 1-month impact of the war.
Our techfin segment contributed TRY 130 million to the top line with the strong performances of both Paycell and Financell, which grew to 67% and 50%, respectively. The other segment's contribution to the top line remains limited. The impact of global supply chain issues on equipment sales was compensated for by the growing energy business. Our EBITDA in nominal terms rose TRY 1 billion. Despite the strong top line performance, the slower EBITDA growth resulted mainly from the rise in wages and energy prices. Meanwhile, our net income declined by 27% year-on-year. This was mainly due to higher FX loss.
Let's look into details in the next slide. We started to see the increasing pressure of inflationary impact in the first quarter. Our EBITDA margin contracted by 2 full points year-on-year to 40.2%. The main effect -- the 2 main factors behind this were wage hikes and rising energy prices in line with global trends. We made inflationary adjustments to wages in January earlier than its usual period of April, which led to some margin pressure during the quarter. Additionally, energy prices have been rising since the fourth quarter, and this has also become more visible in our financials.
Accordingly, the radio expenses impacted in particular by energy prices led to a 2.2 points margin decline compared to the same quarter of last year. Meanwhile, the lower share of equipment sales in group revenues supported profitability at the EBITDA level. Next slide. Let's take a closer look at our CapEx management. The current situation requires us to be more disciplined and focused on our investment planning. Accordingly, we allocate more of the budget to businesses with strong demand and growth prospects. As such, the largest portion of our CapEx went to our fixed infrastructure investments where demand remains strong. This obviously leads to an increase in the CapEx and cash flow of the fixed segment. Going forward, this should normalize as we start generating revenue on newly added home pass.
I should also note that the lesser FX decline of fiber investments has a positive impact on overall investments. On mobile front, our superior infrastructure and the front-loaded investments that we did in the first half of the last year give us investment flexibility in this year. This is also reflected in the lower CapEx and cash flow of the mobile business in Turkey.
With the current situation in Ukraine, we will most probably see savings in our international CapEx over the coming periods, which we may consider channeling to our local operations in case of further depreciation of Lira. All in all, in terms of CapEx management, we are progressing in line with our plan.
Next slide. Now a few words on our balance sheet. Our gross debt increased by TRY 4 billion compared to previous quarter. This was due mainly to the impact of currency depreciation on FX-denominated debt. Our consolidated cash position was TRY 18.8 billion. While the currency had a TRY 1.4 billion positive impact on our cash holdings during the quarter, this was netted off mainly by frequency usage fee and bonus payments. We continue to keep the bulk of our cash in hard currency. Excluding the FX swaps, 76% of our cash is in U.S. dollars and 12% is in euros.
Our net leverage increased slightly to 1.2x due to currency depreciation. Excluding the techfin business, net leverage was at 1.1x. As you may recall, each 10% depreciation of lira, is a 0.1x increase in our net leverage. I should emphasize that we are still below our net long-term target of 1.5x in terms of leverage. Lastly, in terms of liquidity, I would like to stress that we are in a comfortable position, thanks to our strong cash position and available credit lines.
Next slide. Now I will go into the management of foreign currencies. At the end of Q1, we had around a $2.1 billion equivalent FX debt on our balance sheet. As a natural hedge, we had a $1.2 billion equivalent of FX-denominated cash. Additionally, we had $700 million derivative portfolio. Overall, we ended up with a short FX position of USD 200 million. This is broadly in line with our initial FX range of plus/minus USD 200 million. We aim to remain within this range going forward.
Our FX position takes into account ineffective part of our hedging portfolio. The significant Turkish lira depreciation during the fourth quarter has led us to utilize short-term proxy hedging tools, increasing the share of these instruments in our portfolio.
These short-term instruments have higher hedging costs and they create more bottom-line volatility yet they provide us protection independent of security levels. We continue to evaluate market conditions closely. If we see more favorable hedging conditions in the market, we can execute longer-term transactions or restructure our existing ineffective ones.
This concludes my presentation. So we can now start the Q&A session. Thank you very much.
[Operator Instructions] The first question is from the line of Kennedy-Good, Jonathan, with JPMorgan.
Murat, I think you made a comment that you would be looking to potentially increase pricing at various stages during the year. Can you give us a sense of whether you foresee an acceleration in ARPU growth as a result? And how are customers reacting to the price increases? Are we seeing trading down in any meaningful measures yet to -- in reaction to saving cash on the consumers' side?
And then secondly, on energy, the impact on margin. I'm just wondering how we should think about potential impact on margin in the next 2 to 3 quarters. Should we expect that to continue to drive narrower margins? Or is the worst behind us now?
Thank you, Jonathan. First of all, we are in a highly inflationary environment. It is the case in Turkey, and it is the case all over the world as well. But in Turkey, we are having quite a tough situation for the inflation. In inflation environment like this, we have increased our focus on pricing to eliminate the impact of the cost pressure on our financial and operational results.
With the increased focus, we have taken required action swiftly. Accordingly, we started adjusting our price back in December when the sharp Turkish lira depreciation led to a jump in inflation. Additionally, we have made a price adjustment to our tariffs in March as well. These price adjustments were followed by the competition. However, please also bear in mind that 90% of our postpaid subscriber contracted. Therefore, price adjustments will have a gradual impact on ARPU. So we'll see this impact sooner.
Our services also necessitate rather than discourage spending for our customers. This is the response for the customer reaction. Additionally, both share of the telecom services is less than 3%. Therefore, consumers have larger items to sale. Additionally, the prices of other spending items are also rising like electricity, natural gas and so on, which makes consumers less sensitive to price adjustments.
Moreover, despite the current macro environment, digitalization needs of our customers still rising, supporting the demand for our services. Hence, during the first quarter, we have not observed a downsell or upsell performance was in line with the previous quarter.
So regarding ARPU for the remainder of the 2022, the current macro environment requires us to be more focused. As Turkcell, our aim in 2022 will be to reflect the inflation pressure to our tariffs in a timely manner. We continuously evaluate competitive environment, consumer sentiment and targeted adjust our price with great [ possible outcome ]. So as I mentioned, our contract for the postpaid is on 12 months; on the fixed line, it's 24 months. We will see gradual reflection of our ARPU growth throughout the year. Meanwhile, inflation is still following a rising PAT, trending above expectations.
At this point, there is no clarity to foresee when the trend will be resolved -- reversed. We believe that once inflation peaks and enters into declining phase, our ARPU growth can catch up with inflation in a couple of quarters.
Last but not least, inflation remains on its current path -- if inflation remains in its current path as per our increased pricing focus, we will take necessary actions swiftly as we did in the last 2 quarters. So our -- back -- I mean what we did last 2 quarters, we will continue to do what we need to do.
[Operator Instructions]
I forgot the energy question. Sorry, but let me add this energy impact on our margin. It is around 2 points in the second half of the year. With our price increases, it's going to become more reasonable. The pressure on the margin should gradually decline due to the energy.
[Operator Instructions] 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.
I would like to thank everyone joining our conference call. I hope we're going to get a better result from the Ukrainian side and the peace will come on table. And thank you very much for everyone.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.