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The Turkish mobile market has been in the headlines lately, mainly because of Vodafone. The UK-based group wrote down the value of its Turkish operation by £2.25bn in the last quarter, amid increased competition and a slower rate of uptake of advanced data services, compared to other parts of eastern Europe. Whether or not Vodafone Turkey is transferred to Deutsche Telekom, as rumored, as part of an asset swap for T-Mobile UK, the pressure on the country's cellcos will only increase, especially as wireline incumbent Turk Telekom is introducing a fixed/mobile offering using Wi-Fi.

Telekom is emulating other wireline providers, such as British Telecom, by using Wi-Fi to enhance its broadband proposition. This will help it defend itself against leading cellco Turkcell, which undercuts the incumbent's DSL offering with a wireless broadband package, priced from just €14 a month with two-year contract, that is positioned as a fixed as well as mobile connection. It runs over the most advanced 3G network in the country, which Turkcell is upgrading to 21Mbps HSPA+ in urban areas. Turk Telecom, unlike BT, does own a mobile operator, Avea, but this has been far less aggressive about 3G than Turkcell and could not pretend to offer a true broadband service over wireless.

So Telekom has launched Wirofon, which establishes a homezone based around a Wi-Fi hotspot in the home, backhauled by the Telekom DSL line. Within this zone, users can make calls and perform other tasks on dual-mode Wi-Fi cellphones, gaining cheap rates by running over the WLan connection, which is handed off using the UMA (Unlicensed Mobile Access) technology. Outside the zone, the user roams onto the cellular network, and call charges are included in the home line billing. Wirofon users can also make VoIP calls from PCs.

This is not a new approach, and indeed, some operators are already moving on from the UMA system to supporting fixed/mobile with DSL-backhauled 3G femtocells. But Telekom's launch indicates the tactics that incumbents need to adopt as their competitive landscape changes and becomes tougher. The firm's Avea arm, as well as Vodafone, have both suffered hard in the recession, as Turkcell has leveraged its more advanced 3G network to mop up the high value contracts that are still available, and to improve its cost of delivery.

The Turkish mobile market actually lost customers in the second quarter, to the tune of 700,000 users - partly because of recession, and partly because fewer users are owning more than one SIM card, since the government introduced mobile number portability late last year. Turkcell told Total Telecom that Vodafone had suffered the worst of the mobile defections, and that the two smaller carriers had not invested sufficient efforts in their 3G roll-outs. The largest operator said it had lost only 42,000 subscribers in Q2, compared to 200,000 at Avea and 500,000 at Vodafone. Turkcell's market share was 57% in Q2, Vodafone's was 23.5% and Avea's was 19.5%. Avea is still gaining share over the year, but Vodafone has lost four percentage points since last year. Vodafone suffers from the sub-standard network and consequent poor image it inherited when it acquired Telsim in 2005.

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