Transcript Slide 0

CONFIDENTIAL
Competition Congress
Growth and Competitiveness Trends
Cahit Paksoy
Avea CEO and Board Member
November 8, 2005
Many criteria which are related with being an information
society are included in the country competitiveness
evaluations.
Based on the Lisbon Review, Finland was the most competitive
country in the EU in 2004, followed by Denmark and Sweden.
Countries’
competitiveness
is directly linked
with the level of
development in
the knowledge
economy
The dimensions of the Lisbon diamond are information society,
innovation and R&D, liberalization, networked industries, financial
services, enterprise environment, social inclusion and sustainable
development.
According to World Economic Forum, Finland was the most competitive economy in
the world in 2004. Finland was ranked first in growth competitiveness and second in
business competitiveness after USA.
In 2005 International management Development Institute ranks USA, Hong Kong
and Singapore as the
most competitive three countries in overall competitiveness.
Based on the comparison of the European Commission, Finland was
among the leading countries in investing into knowledge-based
economy and performance of the economy.
Sources: WEF, The Global Competitiveness Report 2004-2005 and The Lisbon Review 2004; IMD, The World
Competitiveness Yearbook 2005; EU, Key Figures 2005 on Science, Technology and Innovation and
The European Innovation Scoreboard 2004; United Nations University
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1
Comparing USA and EU
The Lisbon scores
US score
An information society for all
5.9
4.6
Innovation, research and development
6.1
4.4
Liberalization
5.1
4.7
5.7
4.5
5.1
4.2
5.8
5.8
5.6
6.1
6.0
5.6
Efficient and integrated financial services
5.8
5.5
Enterprise environment
5.7
4.7
5.8
5.6
4.5
5.0
5.0
4.8
5.6
5.3
4.2
5.1
5.0
4.4
Sustainable development
5.0
5.2
Overall Lisbon score
5.6
5.0
Completing the single market
State aid and competition policy
Network industries
Telecommunications
Utilities and transportation
Business start-up environment
Regulatory environment
Social inclusion
Returning people to the workforce
Upgrading skills
Modernizing social protection
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EU average
Source: WEF, The Lisbon Review 2004
2
Turkey’s growth competition position
Turkey
Czech Republic
Hungary
Spain
Slovakia
Portugal
Romania
Poland
2001
2003
2005
48
56
48
36
37
38
40
45
55
57
Turkey’s Improvement Areas
- Education and HR Qualification
- Investments in technology and internet infrastructure
- R&D investments
Sources: International Management Development, The World Competitiveness Yearbook
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Some factors affecting Turkey’s Competitiveness
% of advanced technology exports
Turkey
2,06
Poland
3,07
Czech Rep. Hungary
13,23
25,63
% of illiterate population (age 15+)
13,50
1
1
1
Student/Teacher ration in primary education
27,5
12,5
18,9
10,8
Telecommunication investments (%GDP)
0,10
0,16
1,66
0,59
Number of internet users (among 1000 people)
105,5
270,3
344,7
293,6
Cost of electricity in production ($/kwh)
0,082
0,037
0,043
0,05
Number of PC per person (among 1000)
53
122
179
176
Life expectancy at birth
70
75
75
73
R&D investments (US$/ person)
17,6
29,1
112,4
77,4
CONFIDENTIAL
Sources: International Management Development Institute, The World Competitiveness Yearbook
4
Ranking of EU countries
The Lisbon review
Total
rank
Finland
Denmark
Sweden
UK
Netherlands
Germany
Luxembourg
France
Austria
Belgium
Ireland
Spain
Italy
Portugal
Greece
CONFIDENTIAL
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1
3
2
6
4
7
5
9
8
11
10
14
12
13
15
1
4
2
6
7
3
13
5
9
8
10
11
12
14
15
1
2
6
3
5
8
4
7
10
9
12
11
13
14
15
4
1
2
8
7
3
5
6
9
10
15
12
13
11
14
1
3
4
2
7
8
5
6
10
11
9
12
13
14
15
Source: WEF, The Lisbon Review 2004
3
2
5
1
7
10
6
9
12
8
4
11
15
13
14
2
1
2
8
4
12
5
9
7
6
10
11
13
14
15
1
4
3
7
6
2
8
9
5
10
13
12
11
14
15
5
Competitiveness 2002-2005
Total ranking
Finland
USA
Sweden
Taiwan
Denmark
Norway
Singapore
Switzerland
Japan
Iceland
Great Britain
Netherlands
Germany
Australia
WEF
Growth
competitiveness
2004 2003 2002
1
1
2
2
2
1
3
3
5
4
5
3
5
4
10
6
9
9
7
6
4
8
7
6
9
11
13
10
8
12
11
15
11
12
12
15
13
13
14
14
10
7
WEF
Business
competitiveness
2004
2
1
4
17
7
20
10
5
8
19
6
9
3
13
IMD
Total competitiveness
2005
6
1
14
11
7
15
3
8
21
4
22
13
23
9
Sources: IMD, The World Competitiveness Yearbook 2005 and
WEF, The Global Competitiveness Report 2004-2005
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Growth competitiveness by country
Ranking by WEF
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Source: WEF, The Global Competitiveness Report 2004-2005.
7
Competitiveness in technology and science
2002-2005
WEF
Technology
USA
Taiwan
Finland
Sweden
Japan
Denmark
Switzerland
Israel
Norway
Germany
Canada
Estonia
Australia
Great Britain
2004
1
2
3
4
5
6
7
8
10
12
13
15
17
18
2003
1
3
2
4
5
8
7
9
13
14
11
10
19
16
2002
1
2
3
4
5
11
6
7
10
12
8
14
9
15
IMD
Technology Science
2005
1
5
15
13
9
11
14
10
12
16
6
31
20
18
2005
1
10
7
4
2
13
5
14
24
3
17
42
26
12
Sources: WEF The Global Competitiveness Report 2004-2005 and
IMD The World Competitiveness Yearbook 2005
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EIS 2004 - Summary Innovation Index
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Source: European Innovation Scoreboard 2004
9
Total R&D funding in 2003
Percentage of GDP
Sweden 1)
Finland
Japan 2)
USA
Denmark
Germany
Belgium
Austria
France
EU 15 3)
EU 25 3)
Netherlands 1)
Great Britain 2)
Slovenia
Czechia
Italy 2)
Ireland
Spain
Hungary
Portugal
Estonia
Lithuania
Greece
Poland
Slovakia
Latvia
1) 2001
0.0
2) 2002 0.0
3) Est.
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0.5
0.5
1.0
1.0
1.5
1.5
2.0
2.0
2.5
3.0
3.0
Source: Eurostat
3.5
3.5
4.0
4.5
4.5 %
10
Public grants and alleviation of taxes for corporate R&D in
OECD countries
Share of corporate R&D spending in 2001
Taxation practices according to funding of large-company R&D, public grants
cover all companies. Estimation by Tekes based on OECD statistics.
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Size and growth of the ICT sector
Share of ICT value added in business sector value added in 2000
%
* 1999
** 2001
CONFIDENTIAL
ICT manufacturing
ICT services
Source: OECD, Technology and Industry Scoreboard 2003
12
Overall maturity scores of eGovernment
Source: Accenture 2004, eGovernment Leadership:
High Performance, Maximum Value
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The eEurope 2005 index
The eEurope 2005 index is calculated from indicators on Internet usage, public on-line services,
eCommerce activities, information security and broadband usage.
CONFIDENTIAL
Source: Insead/SAP 2004, eEurope 2005
14
Competition in the Turkish Telecommunications Sector
Low
Price
High
Competition
Bundled
Services
Service
Laws and Regulations
Integrated
market
Competitive
market
First phases of
competition
Service
Monopolistic
Low
CONFIDENTIAL
Regulation
Service Quality
High
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Over the last decade the industry has witnessed many
important achievements.
1993
1994
1996
 Split of the old model of the  Licensing of Cable TV

Post, Telephone and
services based on
Telegraph monopoly
revenue sharing system
 Two 900MHz licenses were
 Privatization efforts of
awarded to Telsim and
Türk Telekom has started
Turkcell in 1993 to provide
GSM cellular services under a
revenue-sharing basis with
Türk Telekom
 Turkey's first international
Internet connection
established by METU and
TUBITAK (a 64 Kbps line to
NSFNet in the United States)
Nr of GSM
subscribers:
(-)
68K
 Türk Telekom privatization
will be concluded.
Nr of GSM
subscribers:
41.000K(*)
CONFIDENTIAL
Turkey's National Internet 
Backbone Network
(TURNET) was put into
service
Frame Relay service which
enables data transfer at
high speed was put into
service
620K
2004
2005
1997
 Alternative operators
began to provide
services.
34.708K
(*) as of September 2005
2003
 Aycell and
Aria merged.
27.888K
With other 68 countries,
Turkey committed to
liberalize its basic
telecommunications
services market till 2006
1.406K
2001
2000
1998
 GSM network was
transferred to the
firms Turkcell and
Telsim for 25 years
by giving license at
$500 million.
3.053K
1999
Türk Telekom became a 
joint-stock company,
dependent on special law
provisions.
Telecommunications
Ay-Cell started Authority became
operations soon operational.
after Aria
GSM license, at
1800MHz, awarded to
the Telecom Italia/IS
Bank Consortium
Turkcell listed on the
New York and Istanbul
stock markets
On March, Aria
has started
operations
18.593K
15.183K
The coalition
government committed
the abolishment of TT
exclusivity on fixed
lines
7.500K
16
- Mobile -
- Fixed -
- Broadband -
 Low mobile penetration compared
to Europe.
 The market has a total of 39.7
million subscribers.
 Competition became more tough
and price wars have started. This
trend will continue until the sale of
Telsim
 Mobile internet has not achieved
a success yet, because of
technological constraints, current
user preferences and more
importantly cost issues.
 Turkish Wired Communication
Market is 29th in terms of total
revenue but it is 229th worldwide
in terms of ARPU.
 Room for improvement of Türk
Telekom’s services and
efficiency.
 xDSL services are only provided by
Türk Telekom until the market’s full
liberalization.
 Satellite Digital TV has
developed and spread rapidly in
the last years, with two companies
(DigiTurk, StarDigital) jointly sharing
the market.
 Market’s full liberalization.
 Competition in the market,
alternate operators start to emerge.
 Türk Telekom starts to take
necessary actions in order to
increase its efficiency in services and
processes.
 Market size increases with
additional data and voice services.
 Broadband market size
continuously increases.
 xDSL services become more
spread by Türk Telekom and other
carriers (after full liberalization).
 Cable DTV operators start to
emerge with additional value added
interactive services.
Near
Future
Today
Turkish telecommunications market is not mature yet, there are
important opportunities.
 Mobile penetration increases.
 Prices tend to decrease,
customer satisfaction and service
differentiation become more and
more important.
 Mobile internet penetration starts
to increase and mobile Internet
services evolve fast.
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17
The market has not saturated yet, however purchasing power and
the high tax rates are important barriers for full realization of the
market potential.
 Turkey’s mobile telecommunications market is
directly correlated with domestic growth as most
revenue comes from domestic operations.
 MoU and ARPU directly depend on growth in GDP
per capita income.
 Turkey has the largest population and GDP of any
market in the Middle East and Africa (MEA) but it
has very modest GDP per capita.
 The country is the largest market for
telecommunications services as well, accounting
for an estimated 34.6% of all MEA telecom retail
services revenue in 2005 (24% of fixed retail and
44% of mobile services revenue)
8.000
6,0%
7.000
4,0%
6.000
2,0%
5.000
0,0%
4.000
-2,0%
3.000
-4,0%
2.000
-6,0%
1.000
-8,0%
0
-10,0%
1994
1995
1996
1997
1998
000 # of subsriber added
Real GDP growth percentage
1999
2000
2001
2002
2003 2004 E 2005E
Source: TA and Ata Invest
Estimations
W
or
ld
Tu
rk
ey
Po
la
nd
ly
Ita
y
Hu
ng
ar
G
re
ec
e
an
y
GSM ownership per 100 inhabitants
G
er
m
110
100
90
80
70
60
50
40
30
20
10
0
Eu
ro
pe
 On the road to EU membership Turkey will be
aligning its telecommunications law to EU
regulations.
8,0%
Fr
an
ce
 The analysts expect the telecom market to display
a sustainable trend, in line with decreasing
country risk and growing economic recovery linked
to the EU accession process.
9.000
Source: ITU Statistics,
2004
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The market is unique in the way that both fixed and
mobile markets are of monopolistic nature.
• Turkish mobile market indicate a monopolistic market structure. The extraordinary on-net advantage is difficult to
compete.
• The Authority is working on important subjects which critically affect the market dynamics.
• Number Portability
• A Committee is formed with the participation of GSM operators. The draft regulation regarding Number
portability is expected to be finalized by the end of this year.
• Draft Law Amending Wireless Law
• The ground behind this draft is to prevent the theft and illicit usage of the handsets. The operators will be
responsible to establish their own CEIR system in addition to the central database to be established by TA. All
the handsets not registered to TA’s database will be blocked by the operators.
• Draft Electronic Communications Law
• Abolishes the license and usage fees
• Describes a new framework for authorization
• Draws a framework for the designation of SMP
• Brings a new financial obligation for the participation to the Universal Service Fund.
• Draft Law Amending Environmental Law
• Brings a new fee to be collected from the subscribers (1YTL per month) and will be transferred to TA as
environmental contribution fee. Describes the procedure to be followed for the activities that may have a
negative impact on the environment.
• Regulation Regarding the Protection of Public From the Electromagnetic Fields
• Caused by Non-Ionized Radiation Based on the Law regarding Organization and Duties of Ministry of
Environment and Forestry: Brings new authorizations regarding electromagnetic areas and abolished TA’s
authority in related fields.
• Study Regarding Market Analysis
• Since TA is the authorized body to conduct studies regarding the SMP and give the final decision for the
designation of SMP operators; TA is trying to describe the market structures in which SMPs will be designated.
CONFIDENTIAL
19
There has been a steady growth in the number of mobile
subscribers
 Government took a big step in the privatization of
Türk Telekom. Next step will be the sale of Telsim
- Wireless Market Development in Turkey -
 Telsim’s sale will significantly increase the
competition However changes in the rules of
competition are not expected before 2006.
 Delay in the regulation of number portability is
one of the growth barriers.
 High tax rates: another factor hindering growth.
Although mobile phone growth is impressive, MoU
and ARPU are still very low compared to the EU
because of heavy taxation. (exceeding 60% of the
invoice amount). On top of the existing rates
government will introduce a new fee (1YTL/month)
as environmental contribution fee.
Source: Merrill Lynch
 Due to high tax rates average call duration dropped
from 103min/ month in 2000 to 67min/ month in
2005.
 The market is highly dependent on prepaid cards,
which represent around 75% of the total. Postpaid
growth is flat. Prepaid subscription is also expected
to compromise 95% of net additional subscription in
the coming periods.
 Growth is expected to continue at a slower pace in
2005, carrying a total number of mobile
subscribers to around 40millions.
 As of Q3 2004 average net monthly churn rate is
0,7%.
CONFIDENTIAL
Source: Avea estimation based on Merrill Lynch growth forecasts.
20
Conclusion: Turkey needs to invest in advanced
technologies to improve its competitiveness.
Policy, strategy
and action plan to
increase competitiveness
Increase
internet usage
and improve
electronic
integration in
the economy
Increase the
share of R&D in
GDP
Integrate public and
private industries’
processes, improve
coordination among
public and private
institutions
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21