Turkey’s largest telecom operator Turk Telekom made a net profit of TRY2.22bn ($428.9mn) in Q4 versus a net loss of TRY113mn in the same period a year ago thanks to the bounceback of the Turkish lira, the company said on January 30 in a bourse filing.

Consequently, the company’s net loss amounted to TRY1.39bn in 2018 versus a net profit of TRY1.14bn in 2017.

The USD/TRY rate tested below 5.20 on January 31 as the Fed’s newly dovish tone added to the recent positive sentiment towards emerging markets. The rate rose to 5.29 at end-2018 from 3.79 at end-2017 after weakening as far as the 7.20s, hitting an all-time worst rate, in August last year.

Turk Telekom’s revenues rose by 13% y/y to TRY5.4bn in 2018 while consolidated Ebitda rose 31% y/y to TRY8.4bn. The company’s Ebitda target for 2018 was TRY8-8.2bn.

Turk Telekom is targeting 15-16% y/y of revenue growth in 2019 and an Ebitda of TRY10-10.2bn.

Fitch Ratings rate Turk Telekom at BB+/Negative while Standard & Poor’s has the company at BB-/Stable.

The company’s gross FX debts declined to $3.8bn in Q4 from $4.1bn in Q3 and $4.4bn in the last quarter of 2017, while its hedging ratio rose to 67% from 57% in Q3 and 35% in the last quarter of 2017.

Turk Telekom’s gross FX debts stood at $4.3bn in the first quarter of 2017, with a hedging ratio of just 13%.

The Turk Telekom share prices was up 1.01% d/d to TRY4.98 as of 13:00 local time on January 31 while the benchmark BIST-100 on the Istanbul stock exchange was up further, by 1.33% to 105,578. The annual loss on Turk Telekom shares stood at 21% versus the 16% y/y gain on the BIST-100.

The BIST-100 was in the 87,000s on January 3 when the Turk Telekom share price was in the TRY3.50s.

Largest M&A deal was telco’s restructuring
The largest M&A deal in Turkey was the debt restructuring of Turk Telekom last year. The default of Ojer Telekom (Otas), the former major shareholder in Turk Telekom, is historically Turkey’s largest ever default.

Otas borrowed $4.75bn in 2013 to refinance its acquisition of a 55% stake in Turk Telekom. Akbank has $1.7bn worth of exposure to Otas’ loan while Garanti Bank contributed with $1bn and Is Bankasi with $500mn.

“The 55% stake in TurkTelekom was taken over by a special purpose vehicle, Levent Yapilandirma Yonetimi (LYY), which is in turn controlled by major Turkish banks (the largest holders are Akbank and Garanti). We doubt the change in ownership will result in a significant strategy shift for TurkTelekom. The key question is who is going to be the ultimate strategic owner of the company, as the banks are captive temporary investors,” Ivan Kim of VTB Capital said on January 16 in a research note on Turk Telekom.

Turkey’s Ministry of Treasury and Finance controls a 25% stake in Turk Telekom while the country’s sovereign wealth fund has a 6.68% stake, according to the Public Disclosure Platform (KAP).

The Turkish competition board said on October 12 in a written statement that it had launched an investigation into Turk Telekom regarding a claimed violation of competition legislation related to connection times and fees for wholesale leased line services.

Arcelik’s net edges up
Also on January 30, Turkey’s leading appliance maker Arcelik, owned by the country’s biggest conglomerate Koc Holding, said in a bourse filing that its net income rose by 1% y/y to TRY856mn versus revenue growth of 29% y/y to TRY27bn.

Arcelik is targeting revenue growth of 25% y/y in 2019.

The Arcelik share price was up 0.98% d/d to TRY18.48 as of 13:00 local time on January 31. The annual gain on the company’s shares stood at 0.43%. Arcelik shares were being traded in the TRY14s on January 3.

“Arcelik’s operating performance was better than our expectations in 4Q18. Having revisited our valuation also giving a thought to the company guidance, which has been similar to our early expectations for 2019E, we have revised our 12M TP for the company shares up to TRY 20.60/sh from TRY 19.40/sh previously,” Fulin Onder of Seker Invest said on January 31 in a research note.

Banks’ 2018 profits up 10%
On January 30, banking watchdog BDDK announced that the Turkish banking industry’s net profit rose by 10% y/y to TRY54bn in 2018.

Turkish lenders’ non-performing loan (NPL) and capital ratios do not, however, reflect the actual situation due to amendments to regulations.

“We model a 9% YoY decline in earnings for FY19E. This is more bearish than Bloomberg consensus estimates due to our more conservative expectations on asset quality and volume growth,” Sevgi Onur of Seker Invest said on January 30 in a research note entitled “Sector earnings decline 0.9% QoQ in 4Q18”.

The Borsa Istanbul’s banking index was up 1.54% d/d to 141,080 as of 14:00 local time. The index was in the 110,000s on January 3.