FULL SPEED AHEAD

echnology companies seeking international growth have found an ideal launchpad in Turkey. At the same time, multinational tech giants have begun expanding more aggressively to capture market share of Turkey’s young population.

While Turkey has long had a young population keen on new trends, only in recent years has it begun to have tech penetration to match. Mobile phone subscription penetration has reached 99.5%, while fixed broadband penetration stands at 16.8%. Though these figures trail OECD averages, more telling for the future of the Turkish ICT sector are investments in next-generation connectivity like 5G and fiber optic broadband.

The development of the 5G network is an important area of cooperation between Turkish and international tech companies. Turkcell—the largest mobile operator with a 42% market share—has partnered with Huawei, Ericsson, and Samsung to introduce 5G network technologies in Turkey. Turkcell’s investments in the area are in line with its ongoing transformation from a traditional telecom company into a ‘digital operator’ - a move that has prompted its major investments into digital business solutions, services, and fintech solutions.

While the rollout of the 5G network is forthcoming, investments into fiber optic infrastructure are progressing full steam ahead. Türk Telekom has invested significantly, its 289,000-km fiber network constituting 79% of the overall

Tnetwork. Its reach will serve as an important platform for the broader tech industry. These market conditions have attracted the attention of multinational tech giants interested in claiming their share of the pie. E-commerce is a particularly attractive area for them, as shown by the entrance of Alibaba and Amazon last year. The comparative success of their different entrance strategies might help determine the future of the Turkish tech landscape. Alibaba entered the Turkish market by acquiring a majority—but undisclosed—share of Turkish e-commerce giant Trendyol for USD728 million. On the other hand, Amazon introduced its own marketplace. The results are to be determined, but Amazon’s bet on a Turkish adoption of its own product seems riskier than Alibaba’s acquisition of a tried-and-tested market leader.

It is not all smooth sailing ahead for global tech giants in Turkey. A draft digital services tax law is expected to be implemented soon, and will levy taxes on digital platforms and content providers that do not have a physical presence in the country.

This move on multinational tech companies may work to the benefit of their domestic competitors. Investors are also sure to act on this, and continue their binge on Turkish tech startups. Among the 41 transactions involving private equity funds in 2018, 29 were acquisitions of IT companies. This surge of capital into the sector is sure to provide stability as start-ups scale up into regional markets. ✖

Murat Erkan

CEO, TURKCELL How will the digital transition change Turkcell’s international operating strategy from one of acquisition to digital penetration?