Doany : We Compliant With Our Concession Aggreement Obligations – 5

First 4 parts of interview would be read at

We talked about Turkish Telecom’s investment plans with Dr.Doany in that section of interview;

Question – 11 : Does the concession agreement include any condition regarding the investments? If yes, what is the amount specified? What are your criteria for investments?

Dr.Paul Doany : Our investment plans are budgeted at around $3.4 billion over the first six years. We are working with management to refine tender processes, in order to expedite the investments, and to allow flexibility and ensuring that the company obtains the ‘right’ products at the most competitive prices.
The budgeted investments are a combination of:

network and system facilities (including upgrading of existing facilities, and the introduction of new technologies);
introduction of new product and services,
improvement of sales/distribution facilities, and
operational and business support systems.

In addition, we will invest in human resources development and training, including personnel (train the trainers), and related training systems and facilities.

I would further like to confirm that Turk Telekom will favour Turkish content, in terms of goods and services. This is important to the country, and as we need to support Turkish talent as far as possible.

In relation to the Concession Agreement, I would like to clarify the following: we have submitted to the Telecommunications Authority the due information in relation to the Business Plan as initially filed by Oger Telecom in its tender for the 55% block sale (i.e, a six year plan, commencing mid 2005. Accordingly, there was a need to shift the time-line, as they are not fully compatible, but of course, without affecting the sum total budget over an equivalent period of years, namely six years). In that regard, we have submitted the business plan as approved by the TT board in 2006, which aims to achieve the bid plan mentioned, and provided an update for the following three years.

We have an annual filing obligation, and we update the TA periodically. This caters to important considerations, including market conditions (such as increased demand), and of course market prices (noting that we have managed to obtain much reduced costs in recent tenders).

In summary, we are compliant with our concession agreement obligations.

Question – 12 : What was the investment amount in FY2006? On what areas did you invest? Does it include maintenance costs?

Dr.Paul Doany : As mentioned above, there was both a shift in the initial budget, and also six month delay due to transition. Our realisation plan for 2006 was around 2/3rd, mostly in line with previous years, and have increased the budgets for the next three years to make up for this shortage, with particularly high investments in 2007.

In 2006, we progressed mostly with ADSL expansion, IP/MPLS network, rural switch programme, in addition to cable network expansions and upgrading (although the latter was impacted contractually due to copper prices increases, and will now be extended in 2007 to make up for the delay). We have recently concluded a new IT tender (billing and customer care).

When we report investments, we normally refer to ‘capital investments’ (such as for equipment, facilities, installation, construction, etc.). Hence, we don’t include maintenance (in terms of operational expenditure), but of course we include the related capital expenditure (such as replacement parts in spares or cables).

We are working on new ‘project evaluation processes’ and ‘tendering procedures’, in order to expedite the time.

To clarify again: we have increased our budget for 2007, due to shift in the timeline in addition to the transition delay, further to reduced prices obtained in recent tenders. This is in compliance with our obligations.

At the following chapter, Doany : Investment Plan for 2007 is 1,3 Billion YTL

Turkish translation of that part at Doany : TT, Yatrmlarnda Trk irketleri Tercih Edecek – 5