Investing in the Future…
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Investing in technology… Investing in the future… 2008 Annual Report Contents 2 Türk Telekom in Brief 4 Key Highlights 5 Initial Public Offering of Türk Telekom 8 Türk Telekom Group Companies 14 Chairman’s Statement 16 CEO’s Statement 18 Macroeconomic Outlook 20 Telecommunications Industry in Turkey and Türk Telekom’s Position in the Sector 24 Developments in Products and Services 34 Targeted Advertising, Targeted Sales and Perfect Service 38 Investment in Technology 42 The Key to Our Success: Our Human Resources 44 Corporate Social Responsibility 48 Material Events After the Closing of the Reporting Period 50 Board of Directors 52 Senior Management 54 Corporate Governance Principles Compliance Report 66 Dividend Distribution for 2008 68 Consolidated Financial Statements as of 31 December 2008 and Independent Auditors’ Report 1 - Türk Telekom 2008 Annual Report Türk Telekom achieves new successes every year with its commitment to reflect innovation and advanced technology in its services as is embodied in its vision of being “the preferred communication operator carrying to the future”. Since 1840… 2 - Türk Telekom 2008 Annual Report Türk Telekom in Brief Blazing new trails for the Türk Telekom’s strong and widespread As of 2008 year end, Türk Telekom Group sector communication and information companies have 17.5 million fixed line, technology infrastructure, its value added 5.8 million ADSL, and 12.2 million GSM Distinguishing itself through services and its ability to reflect the state- subscribers. its value added products, of-the art technologies in its services give it Türk Telekom today is blazing a unique position in the sector. Even stronger with privatization and new trails for the sector with initial public offering… Türk Telekom offers a wide range of “convergence” products that products and services to residential and Türk Telekom experienced one of the most it develops through its group- corporate customers everywhere in Turkey important developments in its corporate wise synergies. through its modern infrastructure that history in 2005 when the company was covers the whole country. privatized and 55 percent shares were acquired by a consortium of Saudi Oger The fully-integrated service provider and Telecom Italia. Working in concert with its group This development created opportunities companies, Türk Telekom is a world-class, to combine Türk Telekom’s technical fully-integrated telecommunications infrastructure, deep market experience, and service provider offering its customers the solid reputation with the energy of a strong complete range of fixed line, mobile, data shareholding structure. and internet services. In 2008, Türk Telekom concluded a Distinguishing itself through its value successful initial public offering of 15% of added products, Türk Telekom today is its shares owned by the Treasury. blazing new trails for the sector with “convergence” products that it develops through its group-wise synergies. In addition to its wholly-owned subsidiaries, namely TTNET, Argela, iNNOVA, Sebit, and AssisTT, Türk Telekom owns an 81.12% share in Avea, one of Turkey’s three GSM operators. Türk Telekom also controls indirect minority stakes in Albtelecom, the incumbent telephone operator in Albania. 3 - Türk Telekom 2008 Annual Report The crucial importance of investing ranked among the country’s leading Our Vision in technology generators of tax revenues and it heads the list of corporate taxpayers every year since To be the preferred Türk Telekom connects people to 225 2002. communication operator countries all over the world over a dynamic technological platform consisting of 96.5% Aware of its responsibilities for contributing carrying to the future. cable, 3.1% satellite, and 0.4% radio links. in creating an information society and putting its innovative approach, Türk Our Mission With one of the fastest-growing broadband Telekom’s essential strategic goal is to service infrastructures in Europe, Türk lead the growth of the market by further To provide customer-focused Telekom provides international internet strengthening its position as a fully integrated communication interconnections over its infrastructure integrated service provider by especially solutions to our customers installed and operated in Amsterdam, focusing on convergence based solutions in anywhere and anytime. London and Frankfurt in order to satisfy the line with global trends. internet connectivity needs of its corporate Our Values and residential customers in Turkey. Shareholding structure To be customer focused, Never-ending contributions in 55% of Türk Telekom’s shares are owned Turkey’s future… by Ojer Telekomünikasyon A.Ş. and 30% by trustworthy, innovative, Undersecretariat of Turkish Treasury. The responsible and dedicated. Türk Telekom is a leading company which remaining 15% are listed on the İstanbul has built up a solid corporate culture in line Stock Exchange (ISE) since May 15, 2008. Our strength is Solidarity and with its values of being customer focused, Team Spirit. trustworthy, innovative, responsible and dedicated, and which continues to shape Turkey’s future with its own strong and competent human resources. One of the biggest employers in Turkey, Türk Telekom’s contributions in the national economy are further amplified by its tax payments. Türk Telekom is always 4 - Türk Telekom 2008 Annual Report Key Highlights Key Performance Indicators Solid financial structure and 2007 2008 increasing profit Consolidated Türk Telekom EBITDA Total Sales Revenues (TL million) 9.424 10.195 increased 3% in 2008 to Capital Expenditure (TL million) 1.187 1.756 4.3 billion TL giving a margin Operating Income (TL million) 2.566 2.710 of 43%, whilst operating Amortization and Depreciation Expenses 1.638 1.632 profit increased 6% to (TL million) 4.204 4.342 2.7 billion TL. EBITDA (TL million) 45 43 PSTN PSTN ARPU (TL) 24,0 24,4 PSTN Subscribers (million) 18,2 17,5 PSTN per Employee 492 587 ADSL ADSL Subscribers (wholesale) (million) 4,5 5,8 GSM GSM Market Share (subscription basis %) 16,2 18,5 GSM ARPU (TL) 15,9 15,6 GSM MoU (minutes) 182 173 GSM Subscribers (million) 9,9 12,2 GSM Base Stations 8.718 10.203 GSM Population Coverage (%) 94 95,2 GSM Area Coverage (%) 70 72 Financial Ratios 2007 2008 ROE (%) 41 34 ROA (%) 20 14 Borrowings/Equity (%) 107 148 5 - Türk Telekom 2008 Annual Report Initial Public Offering of Türk Telekom “Group D” bearer shares with a total During the public offering, “on the spot” Lebanon, and 6% to Singapore while the nominal value of TL 525 million which publicity meetings were conducted in six remaining 19% were bought by investors belonged to the Turkish Treasury and which countries (Germany, USA, Sweden, UAE, in other countries. Total proceeds from correspond to 15% of Türk Telekom’s paid- UK, and Saudi Arabia). Of the listed shares, the sale of the 40% allocated to domestic in capital were publicly offered following 30% were allocated for Türk Telekom and investors amounted to TL 966 million the authorization of the sale by the Capital PTT employees and for small investors, (USD 767 million). Of these shares, 1.75% Markets Board. Once the public offering 3% for major individual investors, 2% for were bought by PTT employees, 5.6% had been completed, the shares have been institutional investors, and 65% for foreign by Türk Telekom employees, 15.1% by listed on the national market of İstanbul non-resident investors. On the basis of small investors, 9.7% by major individual Stock Exchange as of May 15, 2008. the finalized bids that were received, it investors, and 6.8% by institutional was decided to revise the allocation for investors. The 2008 public offering of 15% shares domestic investors to 40% and the share of Türk Telekom was the seventh biggest for foreign non-resident institutional All of the bids submitted by PTT public offering in the world and the investors to 60%. During the final bidding employees, Türk Telekom employees, and biggest ever in Turkey. As a result of this period, which took place in May 7-8-9, small investors were satisfied with shares. offering, the Turkish Treasury secured a domestic investors submitted bids for In the case of institutional investors and total of USD 1.9 billion (TL 2.4 billion) in 995 million lots worth a total of TL 4.6 individual major investors, the satisfaction revenue. The floor and cap prices set for billion while 1.4 billion lots worth a total rates were 95% and 6% respectively. A the public offering were TL 3.90 and TL of TL 6.3 billion were bid on by foreign total of 95,000 bids were received from 4.70 respectively. The final issue price was investors. These numbers correspond to domestic resident investors during the TL 4.60, which corresponded to a company 4.7 and 4.3 times the respective allocations public offering and final sales were made to valuation of USD 15.5 billion and a share made to those two groups. The total public 94,000 of them. The Türk Telekom public valuation of USD 12.7 billion. During the offering was valued at USD 1.9 billion, offering represents one of the biggest bookbuilding period (April 28-29-30, 2008), USD 1.15 billion of which was based on offerings ever undertaken in Turkey in potential investors in Turkey submitted bids by foreign institutional investors. Of terms of the domestic allocation and sales. bids for 1.1 billion shares worth a total of the total international sales of shares, TL 5.3 billion. 30% went to the UK, 15% to the UAE, 11% to the USA, 10% to Sweden, 9% to One of the world’s leading integrated service providers… 8 - Türk Telekom 2008 Annual Report Türk Telekom Group Companies Strong subsidiaries TTNET Avea In addition to its wholly- Turkey’s leading internet service The youngest and most owned subsidiaries, namely provider innovative mobile operator in TTNET, Argela, iNNOVA, Turkey Sebit, and AssisTT, Türk TTNET, Turkey’s leading internet service Telekom owns an 81.12% provider, is also its most dynamic.