International Mobile Roaming Market in Turkey ALİ DEMİRÖZ SENIOR COORDINATOR, TCA Internatıonal COMPETITION DAY INTERNATIONAL WORKING GROUP FOR RESEARCH OF COMPETITION ISSUES IN THE MARKET OF INTERNATIONAL TELECOMMUNICATIONS 3RD MEETING 08-10 SEPTEMBER, 2014 ST. PETERSBURG

Works 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

Presentation 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

Turkish Telecommunications Markets-1 Telecoms Mobile Turkcell Vodafone Fixed Türk Telekom Avea Turkcell Superonline TTNET

Turkish 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.

Turkish Telecommunications Markets-3 Mobile telecommunications are growing fast while fixed telecommunications are becoming «obsolete»; Fixed vs. Mobile Volume (million minutes)

Turkish 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

Turkish Telecommunications Markets-5 Regulation Policy Setting: Ministry of Transport, Maritime Affairs and Communication Sector Specific Regulation: ICTA Competition Law: TCA

Turkish 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)

Turkish 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)

Allegations - 1 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.

Allegations - 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.

Analysis 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.

Analysis 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.

Analysis 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.

Analysis 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

Regulations 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.

IMR 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

Methodologies 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

Retail 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

Quarterly International Roaming Traffic (EU+US+RF)

International 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.

International Roaming Traffic with Russian Federation

Yearly International Roaming Traffic (RF)

Quarterly 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 811.311 897.381 899.868 10.835.529 15.850.742 15.180.758 Q3 914.643 1.033.617 n/a 18.312.297 18.412.542 Q4 747.146 934.704 4.756.870 5.384.450

International 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

Average International Roaming Prices (EU+US+RF)

Average 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.

Average International Roaming Prices with Russian Federation

Average 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)

International 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 €

International 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

International 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.

The 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

The 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…