Turkey debate: Learn more about the participants
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EXECUTIVE SUMMARY
• Turkish companies are growing, with growth in the home markets much better than in the regional markets, where macro difficulties are hindering performance
• Turkish companies have good access to finance, especially from local banking groups, which can provide long-term finance in size
• International banks are more selective in which companies they are banking and have reduced their overall exposure to Turkish risk
• Macro factors such as the current account deficit and the fall in the value of the Turkish lira are having an affect on corporate results
• Tax requests from the government are the biggest concern for Turkish companies |
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Nick Lord, Euromoney What is your outlook for growth in your respective sectors?
MU, TAV In the past 11 years since we began operations as an airport operator, we have seen many ups and downs. First there was the devastating earthquake in Turkey, and then the 2001 crisis in Turkey, which was a small-scale version of what happened globally in 2008, then 9/11, then Sars disease, avian flu, Gulf wars, ash cloud, revolutions in North Africa... But when we look at our sector, we see double-digit growth in the number of passengers each year. Our compound average annual growth rate has been around 11% to 12% in the past 11 years. We are expecting the same growth rate for the next three to five years at least.
ME, Turkcell Our sector is growing and will continue to grow, thanks to several factors. In the Turkish market, from which we get close to 90% of our revenues, penetration is still low, around 85%. Mobile internet revenues are growing through 3G and smartphone devices and application downloads. Mobile internet revenues of Turkcell Turkey grew by 74% in 2010. More than 23% of our revenues are coming from mobile internet and service usage, whereas a few years ago it was around the 10% level. Another factor is the usage of smartphones. There are close to 3 million smartphones in Turkcell’s network, and lots of growth is still expected from there. Then there is the fixed-broadband business. We are selectively building the latest technology fibre-optic network throughout Turkey.
BB, Erdemir All related industries such as construction, automotive and general manufacturing are projecting healthy growth – between 9% and 14% for 2012. We will see industry growth of around 10% for next year and overall steel consumption will reach about 35 million tonnes in Turkey by 2015. Turkey is a deficit market for flat-steel products and we were the sole flat-steel producer in Turkey until three years ago. With the additional local production facilities that have started production since 2009 this deficit is narrowing. And supply and demand will be in equilibrium by 2014 or 2015. Because of the increase in competition for certain qualities of flat steel with new local producers, our objective is to increase our export level. Exporting flat-steel products will not only be our company’s objective but also the whole industry’s.
Euromoney Does that picture sound familiar? You’re a regional company and the majority of your revenues are from Turkey but you’re growing very quickly outside Turkey as well. Does it look that way for TAV?
MU, TAV The Turkish market will still continue to grow, especially Istanbul, because it’s the hub of Turkey in a superb location between Europe, Asia and Africa. In the world, there are about 4.5 billion passengers travelling by air a year, carried by 20,000 commercial aircraft. In 10 to 15 years, depending on aircraft manufacturers and sector estimates, these numbers are going to double. At the moment, people constantly complain about the delays at airports and how crowded they are, so there’ll be huge investment needed in the airports: trillions of dollars around the world. Plus, in countries like Turkey, as people’s wealth increases, they’ll spend more leisure time in remote locations, and hence use airports even more, together with business travel.
ME, Turkcell We’re not just looking at Turkish markets. In terms of international expansion, we have operations in the CIS countries, Ukraine, Belarus and Germany. We would have made the investments before 2007 when there was significant liquidity. However, the crisis hit and all the asset prices went down and all the liquidity dried up. Right now, I believe the liquidity window is here. The global economy is still under some stress, but when you look at the growth opportunities in the region, there are much more reasonable opportunities in the emerging markets.
Euromoney Tolga, perhaps I can bring you in here and we can move on to the financing aspect. What is Garanti’s appetite for helping to finance the growth of Turkish companies, both domestically and internationally?
TE, Garanti At least in the past six or seven years, we have had a very strong, liquid, well-capitalized, aggressive banking sector. Until five or six years ago, if these three corporations had a big investment, they would have needed to be able to attract the investment from the foreign banks. In the past five or six years, however, most such investments by these corporations have been funded by local banks, even projects as long term as 12 years. That, combined with domestic demand, is why these three corporations, as well as all the other leading corporations in Turkey, are much stronger than their competitors in some other markets. But having said that, knowing their investors and the expectations of their shareholders, for them, I’m sure it’s not sufficient to benefit from the local market. Now they are all trying to generate more revenues from non-Turkish customers. Turkish banks will be happy to support them on this as well, obviously. So as long as we’re well capitalized, liquid and happy to lend, it’s a big plus for the corporations.
Euromoney Can I ask the corporate representatives here if they agree with that? Are the banks open to funding your expansion?
