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One-stop ICT shop pushes to continually bring something new to the table

Interview - September 30, 2013
With ICT a key catalyst for economic and entrepreneurial growth, Hakam Kanafani, Group CEO of Turk Telekom speaks to World Report about the company’s “ability to change and react and create opportunities, and adapt to what is happening” to maintain the momentum of its innovation and expansion
Turkey is going through an exciting phase at the moment. In a period of global economic recession, Turkey has been the fastest growing economy in Europe, for two out of the last three years, and is even projected to post a respectable gross domestic product (GDP) growth figure of 4% for 2013. What impact would you say the ICT sector has had on this impressive growth?

I think it is in two ways. There has been a direct impact because information communications technology is growing much faster – by around 7.5% in Q2 2013 – than economic growth, so it is bringing economic growth with it.

The economy is growing at a rate of around 4 to 4.5%, so there is a direct contribution. While the Turkish economy is expected to continue growing with 4 to 4.5%, the ICT sector in Turkey is expected to grow by around 10%, outpacing the economic growth. In fact growth in ICT is positively affecting the economic growth of Turkey. The indirect contribution is that ICT is like oil – it is in every industry, so it is a catalyst that enables these industries to grow from within and become more efficient. So they have more projects and more efficiency, and lower costs, and they can generate more revenue.

They can hire more effective human resources. They will then be able to grow the industries indirectly. There are very few, maybe only us and oil and gas, which are in every industry. Every company and office has to think about an ICT plan.
ICT is fundamental to Prime Minister Erdogan’s 2023 vision, with ambitious goals such as reaching 30 million broadband subscribers and supplying 50% of ICT with domestic services, and the ICT sector representing 8% of Turkey’s GDP. Clearly Turk Telekom is fundamental to achieving these goals. Can you please briefly outline some of the strategies you have in place in order to achieve these goals?

I think one of the most important things is to deliver a fibre platform so we can speed up the data exchange. The more you do this, the happier people will be because they will be able to browse faster, as well as so many other things on the software side that you can do on the web.

The faster the web and the better the fibre mean more complex and sophisticated software can be written, which means that the internet can be used more to develop society in particular. 
Turk Telekom is rapidly expanding its superfast broadband infrastructure in 81 cities and has already reached extensive coverage levels in fibre. As of 1H 2013, our FTTH/B (fibre to the home/building) home pass reached 2.2 million and FTTC (fibre to the curb) home pass 5.1 million. 
As we are doing the fibre carpeting of the nation, we are moving into the next phase of offering new and innovative products and services like smart home and smart city solutions. We have invested a lot of energy, money and planning to make sure that we are able to deliver this fibre network. We have a very aggressive plan for the next five years where we want to transform our network with fibre.
There are other projects that are going on in the ICT world like the Fatih project, which is connecting every classroom to the internet. There are 430,000 classrooms to be connected to the internet. All the students will have a tablet, and all the boards will be smart boards. Imagine the potential, not just in terms of the quality of education for the students, but also in terms of what this means for homes.

They will need an internet connection at home, and all of a sudden, their mothers and fathers will need an internet connection at home. The internet has changed the learning functionality at home. Today, children are teaching their parents how to get onto e-mail and look at this and that; in the past it was always the parents who were teaching the children, but today it is the opposite.

Children will introduce parents to the internet, who are a little hesitant, maybe due to language problems or security stereotypes or complexities as to how to use IT, keypads, keyboards or laptops. This will have a big impact on the children.
The other impact is on the teachers and their families. There are 600,000 teachers, who will also require an internet connection and who will also need to do more work on the internet at home, which will reflect on their families.

This is a very strategic way of doing PPPs (public-private partnerships) for the Government to enhance the private sector, to invigorate a new industry or improve new techniques, applications and so on.
How do you work with the Government to improve the ICT sector for the country and the overall quality of life of the Turkish people?

Arm’s-length transactions. For the selection process of these projects, it is going to be fair and transparent. We believe that in any country, especially Turkey, the Government has a very big role to play to galvanise how people use the internet.

That is very important, because the more there are things that people have to do on the internet, the earlier they are introduced, and the more practical they are at it. You can renew your driver’s license or get your marriage certificate and health insurance policies – all of these things can be driven by the Government to create demand for the internet.

That really reflects on the Government, as well as the users. When you go on the internet, you start by doing something, and then you end up discovering a full range of other things to do. People will be able to learn more applications, and get more qualified for their job and professional environment. 

Considering the size and scale of the Turkish economy, there is an extraordinary amount of untapped potential in the ICT sector. When you look at the domestic landscape, where do you see opportunities?

Turkish ICT market continued to grow in Q2 2013 by 7.4% year-on-year. Operators supported their growth with acquisitions implying that operators are becoming more focused on ICT services. Operators’ appetites and the industry’s need for ICT services are good indicators for future growth in the area.

Current broadband penetration of around 42% and mobile penetration of around 90% show significant potential for penetration growth in Turkey compared to European averages of 60% and 140%, respectively.
We look at opportunities in every industry. We think there is something special to do in every industry. We can help the oil and gas industry communicate better with the fields, and we can help them supervise and maintain a network of their pipes and ships. If you look at the health industry, they can do a good job engaging doctors with certain families and having doctors give them knowledge as to where to go, who to talk to, and basic information they require for their children.

What we can do for digital education is to make education much more entertaining and engaging for children, and make it much safer and more effective for teachers. For banking, we can connect all the retail sectors through unified communications. The list goes on, from security to manufacturing. We think the potential is tremendous. 
One thing about Turkey is that the Turks like their little gizmos and handhelds and gadgets, and they believe in technology, the machine and the equipment. It is a big opportunity for us here in Turkey. Usually nations and cultures that have this affinity and belief in the equipment will develop more.

They always want the best or the most effective equipment. They look at how to buy technology in a very modern way. Attention to detail is one of the very important things we have in Istanbul and Turkey in general. We think there is tremendous potential.
How does Turk Telekom ensure that it is ahead of the game?

Turk Telekom Group positions itself as a one-stop-shop information and communication technologies (ICT) service provider. Through its subsidiaries and technical capabilities, Turk Telekom Group is capable of providing a wide range of ICT services, including managed services, data centre services and system integration services.

Those capabilities – together with providing connectivity services – make the Turk Telekom Group not only a first choice for delivering ICT services to different verticals at the enterprise customer segment level, but also a turnkey solution provider to deliver big system integration projects. We are investing in our ICT and data centre infrastructure, and broadening our ICT product portfolio to make ICT services reachable throughout Turkey with high service quality and right price.
We have to be innovative and agile.  We have to be innovative as we always have to bring something new to the table, to our customers.

We are doing this through unified communications. We are the only company that can connect large corporations in a safe, speedy and effective manner via unified communications, so we always have to be unified to bring something new to the table. We always have to be agile in order to react quickly and efficiently and effectively to the changes in our environment, industry and markets. We do not believe that you can forecast what can happen in the future – things happen, and things happen quickly.

It is about your ability to change and react and create opportunities, and adapt to what is happening. The most important thing for us is innovation, to bring new ideas to our customers, and agility, to be able to react, respond and create opportunities in a changing market. 

You recently put in a bid to buy 53% of Digiturk. Is this part of the plan to innovate? Why is this an attractive acquisition for Turk Telekom?

Because entertainment is another industry. We know that we can do something in every industry, but in particular, it would be an opportunity to combine leading telecommunications and pay-TV business to offer more attractive multi-screen smart bundling propositions. 
We believe that the faster the internet, the more development you get on the supply side, and the more entertainment there will be on the web. This gives us an opportunity to deliver. In Turkey, we believe there is great demand for broadcasting, football games, political events, and news and media. These are all very important aspects of Turkish life, and people follow it and care about it. It is part of what the family does.

Do you see opportunities for growth internationally, in the UK for instance?

We are always on the lookout for something and to grow, but it has to be at the right price. We think there is a new wave that is going to come in the very near future, especially in Europe. We would like to be a player there, if there is a good opportunity. We know that there is a great need to consolidate some of the companies in Europe. The European Union is looking at ways to remove the communications borders in Europe and to try and make it a much bigger market, like the US.

There is also a wave of consolidation that is going to happen in the Middle East and near Asia. 
These are good opportunities. But we are a very prudent investor. We are very conservative and very patient, and we think that there are always opportunities out there. But in the near future, and the mid and short-term, there will be even better opportunities, and we are preparing ourselves for them.

What about potential UK investors who can enter the Turkish ICT market? What advice would you give them?

I think the most important things that they need to look at are the new ideas and innovations.

What is different in our market compared to most developing nations is the innovation. It is not just about professional efficiency and us wanting to improve our work and numbers, but there is always a sense of pride that I have the most developed tool and item in the company. It is something big in Turkey.

Sometimes European companies do not like to venture into top ideas and innovations in some of the developing nations, because in some incidences, they tend to misanalyse how the country is going to react to top of the line innovations. However 25% of the Turkish population is below 15 years of age, which translates into growth in our active, earning population in the coming years.

There is tremendous infrastructure in communications, highways and roads as well as broadband, so I think this will be very effective and will open a lot of doors for them in Turkey.

Turk Telekom is already a brand that is synonymous with excellence and quality, but how are you working to build this brand, to make it even stronger?

I think it takes a lot of time to build a brand. We have been selected as Turkey’s most valuable brand for five years in a row. It is a big endeavour for us, and it takes a lot of time. It is not something that you can enhance in a few months. But on the other side of the coin, it is something you can ruin very quickly. So we are very careful about where to put our name, and we try to be very effective. 
Sometimes you can see that expectations are very high, and customers always expect super services from us in terms of interaction with call centres, billing and quality, and that adds a lot of responsibility, but that is the only way to really invest in your brand and grow it, because it is a long-term endeavour, and you have to work for it every day, and make sure that you do not make big mistakes, and keep your eye on the ball, because you can ruin it very quickly.
What advice would you give to Turkish brands who aspire to have the same level of brand recognition and quality that you enjoy?

I would shy away from giving other companies advice. I am sure that they know their business better than I do. But this is an important point. This is going to take a long time. Today, there are some markets in the Middle East where Turkish brands are premium.

In Europe, many Turkish brands are still not premium brands, but are competing quite well. There are some Turkish brands that have done extremely well. Look at Turkish Airlines – today, it is a premium brand, and there are other Turkish brands around the world, from chocolate to clothing where it will take time. But the most important thing is the quality that we put into the product and how receptive we are to what customers need, and our ability to change and adapt to their needs and requirements. 

If we were to come back here and interview you again in five years’ time, as CEO of Turk Telekom Group, ideally what achievements or accomplishments would you have liked to have completed?

In five years’ time, I would like to see us transform most of our revenue. Our fixed PSTN (public switched telephone network) revenue is declining and our broadband and mobile is increasing. So today, we have more revenue coming from mobile than PSTN, which only happened last quarter.

In the first half of 2013, 18% of our income is called ‘other’, and I would like to see this 18% in five years’ time at much higher level, because this is exactly what we are talking about – it is about information technology and solutions, and data.

This is not just a challenge for Turk Telekom; it is a challenge for all industries. There is no growth in access anymore. Growth is going to be in corporate solutions, value-added services and how you can add new products to different industries, like education, healthcare and security. That would be the real transformation. If this happens in five years, we will be really A-plus and successful. 
When you transform your income, you are also transforming the whole company, and how you bring in new ideas, manage them, serve them and sell new ideas, and invest and finance them. You are actually changing everything in the company.

Only very few companies will be able to do this – only a few will be able to adapt and be agile enough to become solutions providers in the ICT world. We are in a very challenging industry.

What final message would you like to send to our readers about Turk Telekom or even Turkey as a whole?

Regarding Turkey as a whole, Turkey has a very unique duality. It is a developing nation of course, with the traits of one – it has a young population and economic growth – but it is also an established democracy, and the traits of a developed nation.

We have an independent judiciary system, a democratic process, freedom of expression and the media, and I think this is very unique. Very few developing nations have this duality, where part of you is developing and the other part is actually developed.

That is what makes Turkey very unique, and that makes economic growth a trend, and not a fad. This is one of the reasons why we have invested in Turkey. We see this. It is not just a developing nation – it is a great, established nation, and a not-so-young democracy. You get the benefits of growth and youth, but you are also working in an established professional environment with an independent judiciary system, and the separation of power and freedom of speech.