Leading Communication and Technology Company

LeadingLeading CommunicationCommunication andand TechnologyTechnology CompanyCompany Annual Report 2007 CONTENTS 01 - Our Vision Strategic Priorities Our Corporate Culture Values 05 - Letter From The Chairman 07 - Board Of Directors 09 - Letter From The CEO 11 - The Management Team 13 - Managers of Turkcell Affiliates 15 - We Believe That Customer Comes First 23 - We Are An Agile Team 29 - We Promote Open Communication 35 - We Are Passionate For Making a Difference 43 - We Value People 53 - GSM Sector Operational and Financial Review of 2007 Major Subsidiaries and Business Development Activities 73 - Compliance with Corporate Governance Principles 87 - Consolidated Financial Statement and Independent Audit Report 173 - Dematerialization of the Share Certificates 175 - The Board’s Dividend Distribution Proposal 177 - Reconciliation of Non-GAAP Financial Measures 178 - Abstract of Auditor's Report to General Assembly of Turkcell İletişim Hizmetleri A.Ş. Annual Report Our Vision To ease and enrich the lives of our customers with communication and technology solutions. Strategic Priorities To maintain our market and technological leadership while retaining our competitive advantage. To increase our customers' satisfaction and loyalty through improving our customers' experience. To maintain growth through new investments and business models. Our Corporate Culture Values The Corporate Culture Values we adopted in 2007 will frame our priorities in 2008. We believe that customers We are passionate for come first making a difference We believe our customers deserve the best. We lead in everything we do. We build trust in our customers. We encourage creativity and innovative We solve it fast. thinking in all areas, technology being the first. We approach our customers in a simple, We reach our goals by taking responsibility and transparent and consistent way. making bold decisions. We are an agile team We value people We believe in being fast, flexible and result oriented as We believe in our people as the primary primary reasons for success. source of our success. We are ambitious and passionate about our work. We respect and add value to the society with social We run for the common goal in a team spirit. responsibility. We promote open communication We establish honest and sincere relations at every level. We share the knowledge with each other, encourage different points of view. We are self-critical and challenge each other to achieve the best. Our Customers Come First We Are an Agile Team We Promote Open Communication We Are Passionate About Making a Difference We Value People TURKCELL - A YEAR OF RECORDS In a year of intense competition, we achieved significant growth in all business areas and retained our focus on providing our customers with the best value and user experience available, while our strong brand and technological leadership gave us a distinct advantage over our competitors. In summary, as of December 31st 2007: We were the Turkish GSM leader with 35.4 million With this infrastructure and our R&D team (gathered subscribers and a 57% share in a highly competitive under one roof in 2007 and which is specialized in IT), market with three major operators. we are a communication and technology leader with a pioneering vision and a developing portfolio of services, Through our various partners and affiliates outside of some of which are unique in Turkey and abroad. Turkey, we served an additional 20 million subscribers and a population of 80 million in a market with huge The emphasis on value propositions further strengthened growth potential. our leadership, which is also confirmed by the awards the Company has received. In the face of intense We increased our revenue steadily in 2007 to reach competition, our activities contributed more than US$4 US$6,329 million, on which we recorded US$2,627 billion to the Turkish state in 2007 as a result of the million EBITDA and US$1,350 million net profit. contributions of our customers and the payments we made as a requirement of the agreements we are a To return the value we created in 2007, our Board of party of. Directors has recommended to the General Assembly on April 25th, 2008 that dividends totaling US$557 We have created employment opportunities for young million be distributed to shareholders. Turkish people through establishing a call center in Anatolia. Our social responsibility projects are also an We are Turkey's only GSM operator to achieve coverage investment in Turkey's future through the support they of 98% of the population and to extend EDGE technology give to young people's education, culture, and sports. coverage to 85% of its network. Operational and Financial Summary 2006 2007 Change % Subscribers (millions) 31.8 35.4 11.3 % Post-paid Subscribers 5.8 6.4 10.3 % Pre-paid Subscribers 26.0 29.0 11.5 % Average Revenue per User (ARPU) blended (US$) 12.1 14.3 18.2 % Churn Rate (%) 14.7 19.9 - Average Minutes of Usage (MoU) per Sub. blended 70.3 76.3 8.5 % Revenue (US$ millions) 4,700 6,329 34.6 % EBITDA* (US$ millions) 1,820 2,627 44.3 % EBITDA Margin (%) 39 % 42 % 3 p.p. Net Income (US$ millions) 876 1,350 54.2 % * EBITDA is a non-GAAP financial measure. See page 177 for the reconciliation of EBITDA to net cash for operating activities. “Proving its technological leadership with each step it takes, Turkcell exploits every opportunity that benefits Turkey. One of the Turkcell family's most important goals is to develop those technologies that will project Turkish society to the forefront of global competition and create added value for the Turkish economy.” Our valuable partners, being integrated into a combined service A crisis-resistant economy has been formed model. Most importantly, as a result of all During the first half of 2007, the economic Turkey's communications sector, of which these developing technologies, mobile expansion of the developing markets caused Turkcell is a leader, is developing very communications, as a way of life and of rapid growth. However, the weakening of rapidly. As new technologies are developed doing business, are becoming an the US real estate sector set off a wave of internationally, they are quickly applied in indispensable part of our daily lives. financial fluctuations and, in response, a new commercial products and services and range of precautionary monetary policies. launched on the Turkish market. Before summarizing the results of all these developments, we need to talk about the In the Turkish economy, market parameters In the area of telecommunications, mobile current status of the economy. The Turkish were set in the summer term. On the one communication is replacing fixed line economy is well-placed to benefit from hand, the ripples of the US-based real- communication and internet developments in the world of estate crises reached Turkey while, on the communication and non-voice services are telecommunications. other hand, a period of political crisis LETTER FROM THE CHAIRMAN culminated in consecutive elections in July development of our economy. We all know that speed means increasing and August. These events, following so our global competitiveness in every sector. hard on the heels of each other, were a Turkey will grow with technology! The ease of data and information transfer revealing test for our economy. The Yes, Turkey is growing. However, it lags thanks to 3G will enable Turkish reactions of market and economic players behind in adopting the technologies that industrialists and exporters to compete with demonstrated that our economy has would put it in harmony with the hi-tech their rivals on a level playing field. developed a certain resistance to crises and global competitive environment. that the government's emphasis on As Turkcell, we want to move into the new sustainable macroeconomic stability has Turkcell proves its technological leadership communication age that starts with 3G. We borne fruit. with each step it takes and it exploits every want to pave Turkey's way to global opportunity that benefits Turkey. One of the competition and bring Turkish people the Even though the 2007 economic results did Turkcell family's most important goals is to technology they deserve. We look forward not meet the government's projections fully develop those technologies that will project to the completion of the 3G tender in 2008. because of the general environment, the Turkish society to the forefront of global fact that the inflation rate closed the year competition and create added value for the Turkcell's contribution to employment at 8.4% was widely assessed as quite Turkish economy. Turkcell, as Turkey's leading communication reasonable in the circumstances. The and technology company, invested US$8 privatizations scheduled for completion in This is why we tendered for the 3rd billion from the day it was established until 2008, suggest that Turkey's growth trend Generation licenses, though the bidding the end of 2007. These investments have will continue into 2008. process was first deferred and then ameliorated Turkey's unemployment cancelled in 2007. As we constantly say, problem to some degree. However, fluctuations in global markets Turkey is the only country among the EU's and an increase in the trade deficit have member states and candidate countries At Turkcell, we know that call centers caused a slight decrease in domestic without 3G infrastructure. This means that provide good job opportunities for young economic confidence and unemployment Turkey will remain 70-times slower in terms people with little or no work experience. has increased to 11%. of speed in mobile communications. In this regard, in 2006 Turkcell has made an important contribution to job creation At this juncture in Turkey's economic The 3G tender will be a revolution, not only in Erzurum, which the Company chose for restructuring, the issues of greatest for the telecommunications sector, but also its first major investment in a city in Eastern importance are clear: the completion of the for the Turkish economy, as it will accelerate Turkey.

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