Türk Telekomünikasyon A.Ş. 2010 Annual Report
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TÜRK TELEKOMÜNİKASYON A.Ş. 2010 ANNUAL REPORT TABLE OF CONTENTS 1. MESSAGE FROM THE CHAIRMAN OF THE BOARD 2. MESSAGE FROM THE GROUP CEO 3. MESSAGE FROM THE CEO 4. MISSION, VISION, VALUES, GOALS AND STRATEGY 5. THE BOARD OF DIRECTORS AND THE AUDIT BOARD, SENIOR MANAGEMENT 6. TÜRK TELEKOM GROUP IN 2010 7. THE GROUP THAT HAS CREATED HIGHEST VALUE IN COMMUNICATIONS AND INFORMATICS 8. TÜRK TELEKOM, THE HIGHEST VALUED AND MOST POPULAR BRAND OF TURKEY IN 2010 9. VALUE TO TURKEY, VALUE TO THE WORLD! SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY 10. ADD VALUE TO LIFE: NEW PRODUCTS AND SERVICES, SPONSORSHIPS 11. TO PREPARE TURKEY TO THE FUTURE: TECHNOLOGICAL AND INFRASTRUCTURE INVESTMENTS 12. VALUE CREATING THE FUTURE: TÜRK TELEKOM R&D STUDIES 13. VALUE CREATING VALUE: IN-COMPANY TRAINING - TÜRK TELEKOM ACADEMY 14. MACROECONOMIC OUTLOOK 15. TÜRK TELEKOM GROUP AND TURKISH TELECOM SECTOR OUTLOOK 16. IMPORTANT DEVELOPMENTS AFTER THE PERIOD 17. CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 18. DIVIDEND DISTRIBUTION AND BOARD RECOMMENDATION 19. RESPONSIBILITY STATEMENT 20. CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDIT REPORT 2 1. MESSAGE FROM THE CHAIRMAN OF THE BOARD Turkey continues to be a leading star among emerging markets with its young dynamic population and growing economy which displayed a remarkable performance over the last couple of years. I am happy and proud to see that Türk Telekom is playing an integral role to enhance and grow the Turkish economy and the quality of life for her people. Türk Telekom and group companies continue to drive telecommunication industry in Turkey with strong operating performance and leading technology and convergence initiatives. Our group had an outstanding performance in 2010 delivering almost TL 11 billion in revenues and TL 2.45 billion in net income. We achieved growth both in our fixed line and mobile business segments. Building on synergies between Türk Telekom group companies we continued offering total telecommunication solutions and value added services to our customers. In 2010, we took an essential step for a more dynamic and efficient management of Türk Telekom Group and appointed Mr. Hakam Kanafani as Türk Telekom Group CEO and Mr. K. Gökhan Bozkurt as Türk Telekom CEO, which will ensure a strong and sustainable growth of the Group’s operations which reached ten companies. While keeping pace with the technology, Türk Telekom group continues to invest in Turkey’s digital future. As Türk Telekom, we lay foundations of this future with our continuing investments in line with our current convergence strategy in the most powerful way. In the last five years, our total amount of investment reached to TL 9 billion. Our investments cover infrastructure, technology and more importantly Turkey’s human capital. Türk Telekom group invested TL 1.7 billion and recruited more than six thousand new and skilled employees last year, mostly young Turkish university graduates. As we focus on investing in technology and our employees, we enhance the quality of services provided to our customers. Our focus is to enable customers to collaborate, communicate, and access information or media on any device, in a cost effective way in order to manage and engage in personal, social and business life anywhere. Our strategy in Türk Telekom is to ensure our leadership in communication services by creating a unique value with convergent services and to become the main communication hub in the region. Following this strategy, we acquired Pantel International (formerly Invitel International) and launched JADI Fiber Link Project in 2010. As Türk Telekom group, we place great emphasis on supporting education in Turkey. I am especially proud of our online education software services developed by our group company Sebit. Vitamin, an online education support service for students and teachers became a global brand with English, Spanish and Arabic versions available in other countries and reached to millions of students. I am happy to see that thousand of students are attending schools built by Türk Telekom and about 1,000 Internet Houses donated by Türk Telekom are visited by 200,000 people each day. We also continue to improve our corporate governance practices in accordance with international standards. Türk Telekom became the first and only telecommunication company in ISE Corporate Governance Index soon after IPO and improved its Corporate Governance Rating in 2010. I would like to express my sincere gratitude and warmest thank-you to all members of the Turk Telekom family for making their individual contributions to the success achieved by the Türk Telekom Group in 2010. 3 We will continue to create value for our shareholders, customers and all stakeholders with our innovative products and services. This is not only our future direction, but our general mindset and it is indeed, an obligation to this great nation. 2. MESSAGE FROM THE GROUP CEO Türk Telekom Group is an integrated operator that is now the leader of Turkey’s Telecommunications and Information Technology sector with our “smart growth” strategy and efficient corporate structure. Our vision is about converged building-blocks that encompass all communications services. Those building blocks cover holistically the full range of our customers’ needs, requirements, habits and aspirations. Today, we set a successful case study of converged technologies that has set the trends of the future. Inspired by their own success, our people are an integral part of Turkey’s economic progress. Our mobile and fixed broadband “building blocks” have demonstrated solid growth in the face of intensified competition. On the fixed broadband side, we continued our investments in fiber to the neighborhood (FTTN) which now covers around three million homes. In 2010, we enhanced our annual ADSL ARPU by 8% and increased the number of ADSL connections by 500.000 subscribers. By improving our infrastructure and our service quality, we have started offering higher quotas and speeds to ADSL customers. On the mobile side, AVEA has achieved significant EBITDA growth and noteworthy service level improvements. AVEA increased its postpaid customers by almost 10% yoy while the blended ARPU increased by 8% thanks to innovative tariff and VAS offerings and Türk Telekom Group cross selling activities. Innova’s creative mobile communications technology coupled with the company’s banking sector knowledge pioneered new and fresh approach in mobile banking with PayFlex application. Thanks to another Innova product “Innova Paying Kiosk”s, users can pay bills, load units, and perform various transactions such as tax payment and sale and purchase of exchange. Argela added new products for the future by developing Avatar technology. Argela, developed web TV and femtocell solutions and continues to focuss on developing technologies that will create value for our group customers in Turkey and outside the border as well. Sebit’s education software Vitamin, is a proven success case in Turkey and many other countries as well. Vitamin is used in different countries’ with the local curriculum (in Turkish, English and Arabic and Spanish). Our gaming and animation developer Sobee is an exciting venture. Sobee’s “I Can Football” project is a first in the world, and growing rapidly. AssisTT is Turkey’s leading call centre solution provider. The company invested in well trained human resources and top notch computer systems. Notably the call centre opened in Erzincan and with its other investments in the country, AssisTT also contributed to improving recruitment. Türk Telekom Group currently has more than 34 thousand employees and is one of the biggest employers in Turkey. We focus on contributing to the Turkish economy by creating career opportunities based on objective recruitment guidelines and fair guidelines. Our Human Resource plans are now implemented in most cities in Turkey. Our people are our most valuable asset. Our people deliver customer-oriented products and services with professional skills and warm enthusiasm. Our people are the team that ensures our success not only on the commercial level but also on corporate social responsibility projects and corporate transformation. 4 Türk Telekom Group is very well positioned to sustain the momentum and continue to build on our recent growth in 2011 and we will continue to improve our services to the market, capitalizing on our advanced distribution channels, strong brand name, converged products, team-work and synergies. In the name of our shareholders and board I am honored to thank all members of Türk Telekom Group family for a job well done. And I extend my warmest gratitude to our customers and business partners for their support and contribution to Türk Telekom Group’s ongoing success. 3. MESSAGE FROM THE CEO We have left behind another year in which we continued our investments in infrastructure and technology. We work very hard in order to make life easier for our customers and to create value for all of our stakeholders -especially our customers and business partners- and for our country. In 2010, we acquired Invitel International (rebranded as Pantel International) and signed a very important terrestrial fiber optic link agreement (JADI Link) with leading operators from Saudi Arabia, Jordan, and Syria making Turkey the new telecommunication hub in the region. Our innovative practices to increase fixed line traffic and the investments we made as the leading player at internet transformation in Turkey were the other focus areas.