International Mobile Roaming Market in Turkey

INTERNATIONAL COMPETITION DAY

INTERNATIONAL WORKING GROUP FOR RESEARCH OF COMPETITION ISSUES IN THE MARKET OF INTERNATIONAL TELECOMMUNICATIONS

3RD MEETING 08-10 SEPTEMBER, 2014 ST. PETERSBURG

ALİ DEMİRÖZ SENIOR COORDINATOR, TCA

2Works of International Working Group- What we have done so far? First Meeting in Kazan in September 2012

Initial presentations and debates

Second Meeting in İstanbul in April 2014 With participation of delegates from Russia, Kazakhstan and Turkey

Presentations by TCA and FAS

Decided to provide detailed information about

Market position of the mobile operators

General price level in inter-operator settlements

Level of subscriber roaming rates

Volume of roaming communication

3Presentation Plan

Summary of the issues presented in the previous meetings General information and data about Turkish mobile market

Regulations: Responsibilities of different authorities

Summary of a case handled by TCA on roaming agreements

IMR market in Turkey: Regulations

Data on IMR practices, prices and volumes

The way forward?

Turkish Telecommunications Markets

5Turkish Telecommunications Markets-1

Telecoms

Mobile

Turkcell Vodafone

Fixed

Türk Telekom

Avea Turkcell Superonlin

e

TTNET

6Turkish Telecommunications Markets-2

Controlled by three telecom conglomerates Türk Telekom Group: Türk Telekom, Avea, TTNET etc.

Turkcell Group: Turkcell, Turkcell Superonline etc.

Vodafone Group: Vodafone, VodafoneNet etc.

Groups operate in a various telecom related businesses included fixed and mobile telephony, broadband services, backhaul services and etc.

The mobile market is more competitive than the fixed market.

7Turkish Telecommunications Markets-3

Mobile telecommunications are growing fast while fixed telecommunications are becoming «obsolete»;

Fixed vs. Mobile Volume (million minutes)

8Turkish Telecommunications Markets-4 Mobile market is led by Turkcell with strong presence of

Vodafone and Avea: Turkcell, leading operator

regional power

Vodafone, part of an

int’l conglomerate

Avea, subsidiary of fixed

incumbent Türk Telekom

9Turkish Telecommunications Markets-5• Regulation• Policy Setting: Ministry of Transport,

Maritime Affairs and Communication

• Sector Specific Regulation: ICTA

• Competition Law: TCA

10Turkish Telecommunications Markets-6• Main Regulations in mobile markets

• Wholesale Market• Domestic call termination: All operators have Significant Market Power

(SMP) on their own networks

• Call origination and access to mobile network: Turkcell is the SMP operator but Vodafone and Avea are not

• Retail market• All operators are subject to price cap

• Turkcell is also subject to retail price control

• (not to reduce prices under 0,0428 TL-0,0158€/min)

11Turkish Telecommunications Markets-7

• TCA– Enforcer of Competition Law: No regulatory power!

– Competition Act covers antitrust and merger control provisions

– Ex post case handling in the sector

– Handled many cases in mobile markets-mostly related to abuse of dominance cases

• So far, a preliminary investigation concluded in 2013 about international roaming

– No sector inquiry conducted in this market

TURKCELL-VODAFONE INTERNATIONAL ROAMING CASE (December 2013)

13

Allegations - 1 14

Turkcell and Vodafone TR violate Turkish Competition Act by signing international roaming agreements with foreign GSM operators.

Wholesale level international roaming agreements: GSMA’s STIRA (standard terms for international roaming agreements)

and a discount agreement as an Annex to STIRA

Discount agreements include reciprocal terms; i.e. both for inbound and outbound traffic.

require parties to choose each other’s network as the first choice and they include commitments regarding the total amount of traffic sent.

15Allegations - 2

Under a reciprocal discount scheme, operator having more outbound traffic (parallel to power in national GSM market) use this advantage to be the first choice operator and take most of the inbound traffic.

Turkcell is dominant in Turkish GSM market. Vodafone has global market power in GSM services.

They violate the Turkish Competition Act: Provisions on being first choice operator creates de facto

exclusivity. Provisions on reciprocity creates foreclosure of inbound

traffic market. Alternative operator(s) cannot receive inbound traffic despite

having cheaper tariffs.

16Analysis of the Allegations- 1

Reciprocal agreements are common in the market.

Discount agreements have become common especially after the introduction of steering technology.

In these reciprocal discount agreements, the parties make commitments about their own traffic directed to other operator’s network.

Based on the amount of commitments given, these agreements allow for decreases from standard/reference tariff of per minute international call/SMS/data traffic.

Turkey is a net traffic (and hence income) receiver country: Turkish citizens going abroad create less traffic than the traffic created by tourists coming to Turkey.

17Analysis of the Allegations- 2 Analysis of the effect of these agreements to understand

whether they restrict competition or not. International roaming revenues constitute very low portion of total

revenues.

In last 3 years, Turkcell’s market share in terms of net total sales has decreased slightly; while Vodafone’s and applicant’s shares increased slightly.

Turkcell’s roaming revenues have been falling since 2012 while applicant’s revenues have been increasing. Turkcell could receive lower rate of traffic than the traffic it sent. For the applicant, there is a progress towards higher rate of inbound traffic.

Inbound calls to Turkcell’s and Vodafone’s networks have fallen while inbound calls to network of the applicant increased substantially.

Contrary to allegations, it is seen that the applicant performs better in international roaming market in terms of receiving inbound traffic from foreign operators.

18Analysis of the Allegations- 3 No exclusivity clause in agreements except for 2 of them.

One of them is with a Russian GSM operator. It should steer all its traffic coming to Turkey to Turkcell.

The share of this operator’s traffic in Turkcell’s total inbound international roaming traffic is below 4%. In terms of revenues the share is below 2%.

No clause in Turkcell’s agreements on being «first choice operator». In discount agreements, commitments are given based on reciprocal traffic amounts

and in turn, discounts are made from standard tariffs. If an operator cannot reach to traffic amount committed, it still pays the price of the committed traffic to other party.

The traffic committed is in terms of «minutes», not in terms of «share in total incoming traffic». It is stated that the latter cannot be known by home operator.

19Analysis of the Allegations- 4

Effect of discount agreements including reciprocal traffic commitments: T-Mobile signed agreements with all 3 Turkish GSM operators.

Traffic received by Turkcell and Vodafone from T-Mobile compared to their commited traffic is much less than the traffic received by the applicant compared to its commitment.

Telefonica 02 has discount agreements with Turkcell and applicant. Turkcell commits much higher traffic to Telefonica than the applicant but

receives lesser traffic.

Vodafone Group also has discount agreements with Turkcell and applicant. Applicant receives much more traffic than it commits to send Vodafone’s

network.

Contrary to discrimination allegations

All allegations rejected.

International Roaming Market in Turkey

21Regulations

No regulation on wholesale or retail price levels

Only consumer protection regulations Transparency

Bill shock alert

Wholesale rates are freely negotiated between operators.

Retail prices are freely set by MNOs.

22IMR Practices in Turkey

Wholesale Level STIRA

Base prices are determined

Discount Agreements

Varies among countries and/or operators

In Turkey, Vodofone’s rates are negotiated globally by VRS; Turkcell and Avea individually.

Retail Base prices vs. package offers

Prices differ according to countries and/or country groups

Not advertised except for Vodafone

Consumers refrain from mobile phone usage because of high prices

IMR Data on Volumes and Prices

24Methodologies and Difficulties

According to the Competition Act, a formal investigation is needed to collect data

TCA cooperated with ICTA for data collection and they collected the data

Prices vary among operators, thus average prices are employed

Also data and information include business secrets that we have to protect, Not possible to share all data and information

Not possible to collect data for all the IWG countries, data about Russia were collected as a good indicator

The data provided by ICTA is only on voice, The data on SMSs and data services are collected informally from

operators

25Retail Prices (Turkcell)

As the largest operator prices for Turkcell are presented Base Prices (2013)

To Europe, Russia, US and Canada 3,90 TL/min (1,39 €/min)

10 TL(3,57 €)/MB for first 10 MB, next 10 MB 4 TL(1,43 €)/MB, then 2 TL (0,72 €)/MB

«Smart Packages» (2014) 25 TL (8,93 €) for 30 minutes or SMSs

(0,83 TL (0,30€)/min-SMS)

25 TL (8,93 €) for 30 MBs (0,83 TL (0,30€)/MB)

Price Caps (As of July 1, 2014) Home 0,4625 TL (0,1652 € )/min, 0,3325 TL (0,1188 € )/SMS

26Quarterly International Roaming Traffic (EU+US+RF)

2012 Q12012 Q2

2012 Q32012 Q4

2013 Q12013 Q2

2013 Q32013 Q4

2014 Q12014 Q2

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Comparison of Inbound and Outbound Traffic

Total Outbound Traffic Total Inbound Traffic

27International Roaming Traffic

Turkey is a «Net Receiver» country On average, inbound roaming volume is more than four times higher

than outbound roaming volume,

Inbound traffic volume shows high seasonality, In summer, inbound roaming volume peaks,

On the contrary, outbound volume is stable In 2014’s Q2, Russian Federation accounts for the

third highest inbound and outbound mobile traffic in Turkey.

28International Roaming Traffic with Russian Federation

2012 Q12012 Q2

2012 Q32012 Q4

2013 Q12013 Q2

2013 Q32013 Q4

2013 Q12013 Q2

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Comparison of Inbound and Outbound Traffic

Total Outbound Traffic Total Inbound Traffic

29Yearly International Roaming Traffic (RF)

2012 2013 2014 (6 months) -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

Comparison of Inbound and Outbound Traffic

Outbound Inbound

30Quarterly Traffic Comparison (RF)

2012 2013 2014

Q1

Total Outbound Traffic

725.665

751.451

827.684

Total Inbound Traffic

1.581.841

3.127.852

3.348.886

Q2

Total Outbound Traffic

811.311

897.381

899.868

Total Inbound Traffic

10.835.529

15.850.742

15.180.758

Q3

Total Outbound Traffic

914.643

1.033.617 n/a

Total Inbound Traffic

18.312.297

18.412.542 n/a

Q4

Total Outbound Traffic

747.146

934.704 n/a

Total Inbound Traffic

4.756.870

5.384.450 n/a

31International Roaming Traffic with Russian Federation

Not different from the general traffic volume Turkey is again the «Net Receiver» country

On average, Roaming traffic created by Russian Federation citizens in Turkey is more than eleven times higher than roaming traffic created by Turkish citizens in Russian Federation

Inbound traffic volume shows high seasonality In summer, inbound roaming volume peaks

On the contrary, outbound volume is stable

32Average International Roaming Prices (EU+US+RF)

2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2013 Q2

Comparison of Average Money Paid v. Received (TL/min.)

Average Money Received Average Money Paid

33Average International Roaming Prices

The money paid by Turkish operators abroad are always higher than the money paid by the operators of other countries in Turkey. On average, a Turkish operator pays almost two and

half times more than a foreign operator. Although, the chart doesn’t show a clear trend in

pricing, recent average roaming price in Turkey is clearly lower than the previous years.

34Average International Roaming Prices with Russian Federation

2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2013 Q2 Average

Comparison of Average Money Paid v. Received (TL/min)

Average Money Received Average Money Paid

35Average International Roaming Prices with Russian Federation

Except for 2012 Q1, the average money paid by Turkish operators in Russia are always higher than the money paid by the operators of Russian Federation in Turkey. On average, a Turkish operator pays more than three times

more money per minute of roaming in Russia than a Russian operator pays in Turkey.

Average money paid by a Russian Federation operator for roaming in Turkey is almost same with general average (EU+USA+RF)

36International Roaming Prices in the EU

July 1,2011- June 30,2013

July 1,2012- June 30,2013

July 1, 2013-June 30,2014

EU Outgoing calls (wholesale)

0,18 € 0,14 € 0,10 €

EU Outgoing calls (retail) 0,35 € 0,29 € 0,24 €

37International Roaming Prices in the EU

EU prices are regulated and continuously declining

As a result, international roaming rates in Russia and Turkey are more expensive than EU tariffs

But still international roaming rates for Turkish operators in Russia are almost three times higher than Turkish rates and six times higher than EU tariffs

Informal data also support our conclusions

38International Roaming Prices for data and SMS (wholesale)

Incomplete and confidential (cannot share the data and rates but results)

Varies among operators

From 1st of July, price per MB of data was reduced to 5 Euro cents from 15 Euro cents in the EU,

It seems that after that reduction the EU prices for data match the wholesale prices applied by Turkish and Russian operators Still wholesale prices of Turkish operators are cheaper than Russian operators’

prices

Price per SMS is 2 Euro cents in the EU, prices applied by Turkish and Russian operators are almost identical and partially higher than the EU rates.

39The Way Forward

The problem: High IMR prices Impossible to find a domestic solution: At least

there is a need for bilateral intervention Handled mostly by regulators and/or ministries

Is competition law an appropriate tool? Difficulties in establishing the dominance and

abuse Difficulties in imposing and supervising effective

remedies

40The Way Forward

What Should Be Done? A binding agreement must be targeted.

An initiative should be started between/among regulators ICTA’s initiatives : Regional Roaming Initiative Among Balkan Countries

Inclusion of Turkey into the scope of EU roaming regulation

Political support is needed Support of relevant ministries is essential as they are the policy-makers

Regulators and TCA has no power to make a binding agreement

Thank you for your attention…