TURKCELL ANNUAL REPORT 2010

Get More Out Of LIfe WIth Turkcell CONTENTS PAGE Our Vision / Our Values / Our Strategic Priorities 4 Turkcell Group in Numbers 6 Turkcell: Leading Communication and Technology Company 8 Letter From the Chairman 10 Board Members 12 Letter From the CEO 14 Executive Officers 16 Superior Technologies 22 More Advantages 32 Best Quality Service 40 More Social Responsibility 46 Awards 53 Managers of Turkcell Affiliates 54 Subsidiaries 56 Human Resources 62 Mobile Telecommunication Sector 66 International Ratings 72 Investor Relations 74 Corporate Governance 78 Turkcell Offices 95 Consolidated Financial Statement and Independent Audit Report 96 Dematerialization Of The Share Certificates Of The Companies That Are Traded On The Stock Exchange 204

The Board’s Dividend Distribution Proposal 205

2 3 OUR VISION OUR STRATEGIC PRIORITIES

To ease and enrich the lives of our customers with communication and As a Leading Communication and Technology Company, technology solutions. • to grow in our core mobile communication business through increased use of voice and data, • to grow our existing international subsidiaries with a focus on profitability, OUR VALUES • to grow in the fixed broadband business by creating synergy among Turkcell Group companies through our fiber optic infrastructure, • We believe that customers come first • to grow in the area of mobility, internet and convergence through new • We are an agile team business opportunities, • We promote open communication • to grow in domestic and international markets through communications, • We are passionate about making a difference technology and new business opportunities, • We value people • to develop new service platforms that will enrich our relationship with our customers through our technical capabilities.

4 Turkcell Annual Report 2010 5 Turkcell Group IN Numbers 2010

xxxxxxxxxxxxxxxxxx TRY Group revenue slightly improved to ebITDA contribution of subsidiaries 9.0 TRY9.0 billion mainly due to increasing improved to 9% in 2010 from 5% in billion mobile internet revenues and the higher 2009, mainly due to the significantly contribution of Group companies, improved operational performance of despite the negative impact of regulatory Superonline and Astelit. TRY decisions in Turkey. Revenue 2.9 Despite challenging market conditions billion Turkcell Turkey’s revenue was TRY8.0 and regulatory changes, Group EBITDA billion, which included higher mobile margin was maintained at 33%, while internet revenues, up 74% to TRY454 Group EBITDA was at TRY2.9 billion. EBITDA* million and a higher postpaid subscriber 33% base, despite the negative impact of Group net income increased by 4% to significant regulatory changes. The share TRY1.8 billion. TRY of mobile internet and service revenues EBITDA Margin 1.8 in Turkcell Turkey’s revenues increased Turkcell’s capital expenditures totaled billion by 4 percentage points to 20%. TRY18 billion since inception and TRY1.7 billion in 2010. Topline contribution of subsidiaries 60.4 increased to 11% in 2010, mainly due Net Income to strong revenue growth of 33% to million TRY335.1 million at Superonline.

Group subscribers

* ebITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note, however, that following the publication of the reconciliation in our Q4 2010 results on February 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our presentation of prior periods, including the Q4 2010 reconciliation.

6 Turkcell Annual Report 2010 7 Turkcell: LEADING COMMUNICATION AND TECHNOLOGY COMPANY

1 Turkey - TURKCELL Subscribers (mn) 33.5 Market Share 54% Revenues (million TRY) 7,991 3 9 60.4 3rd in Europe 2 Ukraine - life :) 2 4 million Subscribers (mn) 9.1 subscribers Market Share 18% 7 Revenues (million $) 339 6 Operating 3 Belarus - life :) 1 5 14th in the in World Subscribers (mn) 1.5 9 countries Market Share 14% Revenues (million $) 49 8

4 Kazakhstan - Kcell Turkcell is a leading Subscribers (mn) 8.9 Market Share 50% regional player, with Revenues (million $) 1,013 market leadership in five of the nine 5 Azerbaijan - Azercell Subscribers (mn) 4.0 countries in which Market Share 55% it operates with its Revenues (million $) 504 approximately 60.4 6 Georgia - Geocell million subscribers as Subscribers (mn) 2.0 of 2010. Turkcell has Market Share 44% Revenues (million $) 152 been listed on the NYSE and the ISE since July 8 TRNC - KKTCell 7 Moldova - Moldcell 2000 and is the only Subscribers (mn) 0.4 Subscribers (mn) 0.9 Market Share 69% Market Share 32% NYSE-listed company in Revenues (million $) 81 Revenues (million $) 67 Turkey. 9 TURKCELL Europe- Germany MVNO operations commenced in Q1 2011

8 Turkcell Annual Report 2010 9 Letter from the ChaIrman COLIN J. WILLIAMS

In 2010, the Turkcell Group has once again executed well, which lize on the considerable growth potential of mobile data which we is mainly attributable to growing contribution from its subsidiari- perceive as the growth engine of our business, while building up on es, mobile internet and services revenues, despite the challenging our strong voice revenues. competitive and regulatory environment. In 2010, we recorded TRY9.0 billion in revenues, an EBITDA margin of 33% and TRY1.8 During the year, Turkcell Group’s success was also attributable to billion in net income. significant improvement in international subsidiaries, in which the management team focused on profitability. Gradual improvement in The Turkish mobile market, had gone through a difficult period in macroeconomic environment of our international subsidiaries also 2009 and its ripple effects prevailed in the market during 2010 in contributed to this outcome. In 2010, our subsidiaries’ contribution to terms of competition and regulation. Turkish mobile market wit- consolidated revenues increased to 11% from 10% a year ago and ex- nessed some radical changes during the year, with interconnection pected to improve further. Meanwhile, our fixed broadband business rates and maximum prices decreasing significantly, which had a Superonline improved its contribution to Turkcell Group as a result of material impact on our financials. In the face of these develop- its increased synergy with the Group. Additionally, outside of Turkey ments, we responded and adapted rapidly to these critical changes we continue to look for opportunities to expand our business into new and maintained our market leadership in the sector. markets. In this context, we made a wholesale traffic purchase agre- ement in Germany in 2010, which allows us to introduce the Turkcell During this difficult period, we continued our investments, which brand, know-how and benefits to a Western European market. totaled TRY 1.7 billion in 2010, in order to maintain our techno- logical leadership. We established a strong 3G network and fiber All along, Turkcell’s long-term success has been built on three core infrastructure while further strengthening our existing 2G network. values: responsibility, sensitivity, and service. Our objective has We built up our business model on mobile broadband and total te- been to enrich the country’s social and cultural life in different fi- lecom solutions, and prepared for the future. Through this strategic elds, ranging from education to sports, from culture to employment focus, in the first year of 3G in Turkey we established one of the through our corporate social responsibility projects. world’s leading 3G networks and I am proud to say that we are pro- viding mobile internet speed, which is faster than average speeds Based on our dividend policy, we have consistently distributed of many European mobile operators. dividends for the last seven years. Based on our dividend policy, our Board of Directors proposed cash dividends of approximately Looking ahead, we are moving into a new era, in which we will TRY1.3 billion (about $0.9 billion) of Turkcell’s 2010 distributable continue to grow our business model through our mobile data and net income to the approval of General Assembly. services as well as applications tailored for our customers’ needs. In this new period, the market is characterized by increasing smart- Managing the only Turkish company with a dual listing on the New phones and expanding 3G network. We strongly believe that Turk- York and Istanbul Stock Exchanges, Turkcell’s board of directors is cell is well-positioned to push the technological boundaries. For determined to conduct all our business by ensuring the high stan- this purpose, we benefit from the increasing synergies with our fi- dards of corporate governance. Our aim is to enhance our corporate xed broadband business Superonline and also Turkcell Technology, governance practices and to generate long-term economic value for which contributes remarkably to the Group on research and deve- the company’s shareholders. lopment activities. Going forward, we remain determined to capita- In conclusion, I would like to emphasize that Turkcell faces the fu- ture with confidence, supported by our strong, agile and dedicated All along, Turkcell’s long-term success team across the Group and our growing fixed and mobile broadband has been built on three core values: business. On behalf of the Board, I take this opportunity to convey my gratitude to Turkcell’s management team, employees, retailers, responsibility, sensitivity, and service. suppliers, and associates and, most of all, to our loyal customers for Turkcell’s board of directors is determined their continued support which has made our success possible. to conduct all our business by ensuring the high standards of corporate governance.

10 Turkcell Annual Report 2010 11 1 Colin J. Williams 2 Karin Eliasson 3 Oleg Malis 4 Mehmet Bulent Ergin Chairman Member Member Member

Colin J. Williams, age 69, was appointed as the Chairman of the Karin Eliasson, age 49, was appointed as a member of the Board Oleg Malis, age 37, was appointed to the Board of Directors on Mehmet Bulent Ergin, age 63, was first appointed as a member of the Board of Directors on February 25, 2010 and re-appointed on April of Directors on April 29, 2010. Ms. Eliasson has been Senior Vice May 22, 2006 and re-appointed on April 29, 2010. He is also Se- Turkcell Board of Directors on April 29, 2005 and was re-appointed on 29, 2010. He also serves as a Voting Member and Chairman of the President and Head of Group Human Resources at TeliaSonera sin- nior Vice President of Altimo. Mr. Malis began working for Altimo April 29, 2010. After having taken responsibility in Hochtief AG’s First Audit Committee of Turkcell’s Board of Directors. He is Chairman of ce 2008. Prior to joining TeliaSonera, Ms. Eliasson was Senior Vice as Chief of the Current Project Management Unit in 2005. Betwe- Bosphorus project and Tekfen A.S.’s Iraq-Turkey pipeline project, Mr. Er- B oard M embers* Clondalkin and Chair of the Audit and Remuneration Committees of President of Human Resources at Svenska Cellulosa Aktiebolaget, en 2003 and 2005 Mr. Malis was Senior Vice President and M&A gin worked in various positions at Cukurova Group companies. He held Clondalkin, a consumer and industrial packaging company. From SCA. From 2000 until 2003 she served as the CEO of Novare Human Director at Golden Telecom. Before joining Golden Telecom, Mr. a managerial position at Cukurova Ithalat ve Ihracat T.A.S. and was a January 2001 to December 2004, Mr. Williams served as President Capital AB. Ms. Eliasson is a member of the Board of Directors of Malis founded Investelectrosvyaz and Corbina Telecom. Mr. Malis managing director at Maysan A.S. and Baytur Trading S.A. Currently, Mr. of SCA, North America, which is active in the packaging sector, per- Proffice AB and Insurance company PRI Pensionsgaranti mutual. holds a degree in Systems Engineering from Moscow State Aviation Ergin is the Chairman of the Board of Directors of Genel Denizcilik Nak- sonal care and paper tissue products. He was a long-term board She holds a Bachelor of Science in Human Resources from Mid Technological University. liyati A.S., Show TV, Aksam Gazetesi and Genel Enerji A.S., and he also member and Vice Chairman of ICCA, the International Corrugated Sween University. holds the position of Board membership in Cukurova Holding. Mr. Ergin Packaging Institution, the European Federation of Packaging and majored in Civil Engineering at Robert College, Turkey. the Federation of Paper Producers (CEPI). Mr. Williams is the fo- unding President of Propak Europe and was a board member of Tero Erkki Kivisaari Gulsun Nazli Karamehmet the Greater Philadelphia Chamber of Commerce between 2002 and 5 6 7 Alexey Khudyakov Member 2004. From 1988 to 2001, Mr. Williams was the President of SCA Williams Member Packaging, prior to which he served as the Managing Director of Member Bowater, a corrugated packaging company, for four years. From Tero Erkki Kivisaari, age 39, was appointed to the Board of Direc- Alexey Khudyakov, age 40, was appointed to the Board of Directors 1978 to 1984, he was first the Sales Director and then the Gene- tors on May 14, 2007 and was re-appointed on April 29, 2010. on May 22, 2006 and re-appointed on April 29, 2010. He is Vice Pre- ral Manager of Chicopee in the Netherlands, a non-woven fabrics Mr. Kivisaari has been the President of TeliaSonera in Eurasia Gulsun Nazli Karamehmet Williams, age 33, was appointed to our sident of Altimo, a leading investor in telecoms, and also serves as company of Johnson & Johnson. Mr. Williams holds an MBA degree since May 1, 2007 and the Chairman of the Board of Directors of Board of Directors on April 29, 2010. Since 2004, she has worked non-executive Chairman and Chair of the Audit Committees of High in finance from New York University, an M.Sc. degree in physi- Fintur Holdings B.V. Previously, Mr. Kivisaari has served as the in different positions at Digiturk (Digital Platform İletisim Hizmet- River Gold Mines, a gold mining company. Prior to his appointment to cal chemistry and an honorary doctorate from Lund University in chief financial officer and vice president of TeliaSonera in Eura- leri A.S), where she currently holds the positon of Chief Content Altimo, Mr. Khudyakov held a Vice President position with Alfa Bank, Sweden. sia. Mr.Kivisaari is a member of the Board of Directors of Azercell, Officer and Executive Member of the Board. Prior to Digiturk, she managing the bank’s direct investments in the telecom sector. Before Moldcell, A.S OJSC Megafon and Nurminen Logistics Plc; and the worked at BSkyB England. She studied at Sarah Lawrence College that, he was a management consultant with McKinsey & Co. Mr. Khud- Chairman of Fintur Holdings BV board. He served as CFO of Fintur (USA) and Richmond University (UK) and has a B.A in Communi- yakov holds a Master of Business Administration degree from INSEAD Holding B.V from 2003. Mr. Kivisaari has been the CFO of Smart- cations. and a Master’s degree in Applied Mathematics and Physics from the Trust AB, a mobile software company owned by Carlyle Group, GE Moscow Institute of Physics and Technology. He is a non-executive Capital, Eqvitec and Sonera Group. Before that, Mr. Kivisaari held board member of Turkcell. He is also an Observer Member of the Audit the position of Vice President of Sonera Group’s International Op- Committee of Turkcell’s Board of Directors. Mr. Khudyakov was named erations. Mr. Kivisaari served as an associate professor of finance to the Audit Committee in reliance on Rule 10A-3(b)(1)(iv)(D) under at the Helsinki School of Economics and holds an MBA in finance. the Securities Exchange Act of 1934.

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12 Turkcell Annual Report 2010 * The term of office of Board of Directors is three years upon selection. 13 Letter from the CEO SUREYYA CILIV

I am pleased to note that we achieved solid execution in 2010, even and 2G and 3G networks. Our capital expenditures since inception have though regulatory environment remained a challenge. totaled TRY18 billion. We differentiate ourselves from the competition through completed core investments in our 3G and fiber-optic infrast- During the year the sector was characterized mainly by non-profit ori- ructure. ented and market share focused competition. As Turkcell, we essentially attribute our strong execution and commitment to long-term growth to While mobile internet will be a key focus going forward, we will retain two items, which will remain our core focus areas: attention on the core mobile business and rising contribution of our subsidiaries. In 2010, we were delighted to observe that our invest- 1. Notable contribution from mobile internet and services revenues, ments in domestic and international subsidiaries begin to yield desired 2. Significant increase in profitability of our subsidiaries. results. In Ukraine, our turnaround strategy led to improved operational profitability to 19% from 5.7% a year ago. Meanwhile, our fixed bro- These two main focus areas will decrease the share of voice revenues adband subsidiary, Superonline, increased its full-year EBITDA margin in our consolidated revenues going forward, and diversify our portfolio, to 9.8% from 1.4% a year ago. Looking ahead we remain confident of which will make us stronger in such a competitive environment. our subsidiaries’ continued solid performance. We also expanded our operations into nine countries by initiating MVNO services in Germany Without doubt, a new era of mobility is emerging with its key pillars through the wholesale traffic purchase agreement signed in 2010. being mobility, internet and convergence. Global trends point to mobile internet revenue as the key growth driver. Indeed, going forward, we During the year in the Turkish market, mobile line penetration decre- anticipate a rise in mobile internet user number through wider inter- ased by 2 pp to 85%, mainly due to the continuing decline in multiple net usage in the remotest corners of the world. For this reason, we SIM card usage, while we maintained our leadership with a 54% subs- are very excited by the industry we operate in, and remain committed criber market share. Throughout 2010, we offered our customers even to our smart investments. In line with this technological revolution, as more affordable prices, thereby increasing both usage and customer Turkey’s technology leader, we continued with investments whereby satisfaction. our 3G technology available in Turkey has been certified as one of the fastest in the world. As such, within a year we have reached population As the only Turkish Company with a dual listing on the NYSE and ISE, coverage of 82% in Turkey. over the past 17 years we have continuously provided service to Turkish people with the same passion we felt on our very first day. We are ope- In 2010, time and results thoroughly justified our actions and invest- rating in line with the best-practice international standards and regu- ments in 3G, and we have every reason to be proud of this outcome. lations of the capital markets, adhering to professional ethical values, Our mobile internet revenues have climbed 86% on average over the realizing projects of social responsibility, protecting investor interests past two years. Today, the number of smartphones in our network has and building strong investor relations through enhanced transparency. reached 2 million, thus 6% of total subscribers from 3% a year ago, In 2010, we continued to extend scholarship to school-age girls who confirming further significant growth potential. Meanwhile, we clearly cannot continue their education due to financial reasons. We provided identify fixed and mobile communications convergence as the next plat- educational grants to 10,000 girls in a year with the “Snowdrops” pro- form to substantially impact our lives. Our continued fiber-optic backbone ject, which has grown from a drop into an avalanche. We have touched investment through fixed broadband subsidiary, Superonline reflects this the lives of 130,000 children within three years via our “Bridge of He- belief. Meanwhile, with Superonline’s recently-signed Regional Cable arts project” carried out in conjunction with the Ministry of National Network project, Istanbul will become the East’s internet gateway to Eu- Education. At the same time, Turkcell has continued to provide employ- rope, and the world’s new internet hub due to its geostrategic position. ment opportunities for young people through its Erzurum and Diyarba- kır Call Centers in the east and south east region on Turkey since 2006. As Turkcell, we are both aware of our pioneering role in this new era with our new strategic responsibilities. Turkcell is well-positioned for All in all, we are pleased to observe the tangible benefits of the business this new era, deriving strength from its strategy, entitled “Turkcell 2.0”. model that we have successfully implemented. I feel confident that we Our strategy may be summarized as sharpening our customer focus, will continue to lead the way through further investment in cutting edge offering superior solutions, delivering the best value propositions and technology, and by increasing the quality and range of our services. I increasing user experience in data usage. While our story over the past trust that you share the excitement we feel at our role in this new era – 17 years has been about “voice”, the next chapter is definitely about both in our industry and the world. I would like to express my gratitude “data”. Accordingly, we have introduced our “Mobile Constitution” ge- to all of our customers, employees, business partners, and sharehol- ared to ensuring customer satisfaction and trust through operational ders for their continued support. excellence, transparency, and cultural change.

During the year, in line with our long-term strategy of providing super- lative services, we have continued to invest in our fiber-optic backbone

14 Turkcell Annual Report 2010 15 9 10 11 12 13 14 15 E xecutive O fficers

5 6 7 8

2 3 1 4

Sureyya Ciliv Burak Sevilengul Koray Ozturkler Ilter Terzioglu 1 2 3 4 9 Emre Sehsuvaroglu 10 Umit Akin 11 Hulusi Acar 12 Tayfun Cataltepe CEO Chief Consumer Chief Corporate Chief Network Division Head Corporate Chief Legal Affairs Chief Consumer Sales Chief Corporate Strategy Business Officer Affairs Officer Operations Officer Risk Management Officer Officer & Regulations Officer

Emre Sayin Lale Saral Develioglu Selen Kocabas Serkan Okandan 5 6 7 8 13 Ilker Kuruoz 14 Cenk Bayrakdar 15 Ekrem Yener 16 Meltem Kalender Ozturk Chief Consumer Chief Group Marketing Chief Corporate Chief Financial Officer Chief Information Chief Products and Chief International Chief Human Resources Strategic Projects Officer Services Officer Business Officer and Communication Services Management Expansion Officer Officer* Technologies Officer * As of March 14, 2011

16 Turkcell Annual Report 2010 17 1 Sureyya Ciliv 5 Emre Sayin 9 Emre Sehsuvaroglu 13 Ilker Kuruoz Chief Executive Officer Chief Consumer Strategic Projects Officer Division Head of Corporate Risk Management Chief Information and Communication Technologies Officer Sureyya Ciliv, age 53, was appointed the Chief Executive Officer of Turk- Emre Sayin, age 44, is the Chief Consumer Strategic Projects Officer of Turk- Emre Sehsuvaroglu, age 40, joined Turkcell in 2006 and has served as the Ilker Kuruoz, age 42, is Turkcell’s Chief Information and Communication Tech- cell on January 9, 2007. Having previously worked as Microsoft Turkey cell. Prior to his current position, he was performing as the Chief Corporate Division Head in charge of Corporate Risk Management since November 13, nologies Officer as of September 2009. He joined Turkcell in 2006. Kuruöz has country manager between 1997-2000, he served in various manage- Business Officer and Chief Consumer Sales Officer of Turkcell. Sayin worked 2006, working on such issues as compliance with the Sarbanes-Oxley Act, in- started his professional career in 1994 in ABT. He then worked in NCR as a ment positions in Microsoft Global Sales, Marketing and Service Group for Evyap Pazarlama ve Tic. A.S. as the Deputy General Manager in charge ternal audit, corporate risk management, business continuity program man- System Consultant, in Garanti Teknoloji as a Business Unit Manager and in

E xecutive O fficers in the USA between 2000 and 2007. Prior to 1997, Mr. Ciliv was the of Marketing in 2005-2006 and for Kodak A.S. as the General Manager in agement and data security. Mr. Sehsuvaroglu started his professional career Accenture as a Senior Manager. Prior to his current position at Turkcell, he was General Manager and Chairman of Novasoft Systems Inc., a company 2002-2005. Prior to that Emre Sayin was the Chief Marketing Officer for at Deloitte Independent Audit in 1993 and then served as Audit Group Director the Capability Management Division Head of Turkcell. Ilker Kuruoz graduated he established in Boston, USA. Sureyya Ciliv received his MBA degree Microsoft Turkey between 1999-2002. Sayin worked as the Marketing and at Arkas Holding between 2003 - 2006. Mr. Sehsuvaroglu is a graduate of from Bilkent University Computer Engineering in 1992 and holds a Master’s from Harvard University in 1983 after successfully graduating with Category Manager of Unilever Turkey between 1992-1999. Emre Sayin is Marmara University Department of Management, a Certified Accountant and degree from the same department. honors in Industry & Operations Engineering and Computer Engineer- a graduate of Bosphorus University’s Department of Industrial Engineering a Certified Internal Auditor. ing from the University of Michigan in 1981. and holds a Master’s degree in Systems and Industrial Engineering from Rutgers University. 14 Cenk Bayrakdar Umit Akin Chief Products and Services Management Officer 2 Burak Sevilengul 10 Chief Legal Affairs Officer Cenk Bayrakdar, age 43, joined Turkcell in 2000 and was appointed Chief Chief Consumer Business Officer Umit Akin, age 41, joined Turkcell in 2002 and was appointed Chief Legal Product and Services Management Officer on September 1, 2009. Having Burak Sevilengul, age 38, joined Turkcell in 2001 and has been Chief 6 Lale Saral Develioglu Affairs Officer on February 1, 2010. Prior to his current position, he was the started his professional career at Arcelik, he held several managerial positions Consumer Business Officer since August 2010. Prior to this appoint- Chief Group Marketing Services Officer Division Head of Turkcell’s Regulatory Legal Affairs department. Mr. Akin be- on the IT and Production Teams. He then worked at Corbuss as the Business ment, he was the Division Head for the Consumer Business group and Lale Saral Develioglu, age 43, joined Turkcell in 2003 and since August gan his professional life in 1996 at Ankara University’s Faculty of Law as a Development Coordinator between 2001-2002 and served as the Partnership had various other managerial responsibilities within the Marketing 2010 has been Chief Turkcell Group Marketing Services Officer. Prior to Research Assistant. He then worked as a Lawyer at Ericsson. Umit Akin gradu- Development Division Head of Turkcell between 2002 and 2004. Prior to his Department. Burak Sevilengül is a graduate of Middle East Techni- this position, she was the Chief Marketing Officer from 2006 to 2010 and ated from Ankara University, Faculty of Law in 1995 and holds a master’s current position at Turkcell as the Chief Product and Services Management Of- cal University’s Department of Business Administration and holds an the Individual Marketing Division Head of Turkcell between December degree in Public Law. ficer, Mr. Bayrakdar acted as the Chief Information and Communication Tech- MBA degree University Of Georgia, Terry College of Business. 2003 and June 2006. Starting her career at Unilever, Lale Saral Develioglu nologies Officer. served as Brand Manager for 5 years and Marketing Manager for 7 years in various product categories and markets between 1992 and 2003. She is a graduate from the department of Industrial Engineering of Bogazici Hulusi Acar Koray Ozturkler 11 15 Ekrem Yener 3 University. She also holds a Master’s degree in Management Engineering Chief Consumer Sales Officer from Rensselaer Polytechnic Institute, New York. Chief International Expansion Officer Chief Corporate Affairs Officer Hulusi Acar, age 40, joined Turkcell in 2000 and was appointed Chief Con- Koray Ozturkler, age 48, joined Turkcell in 1998 and since April 9, 2008 Ekrem Yener, age 50, joined Turkcell in 2007, and has held positions as Chief sumer Sales Officer on December 10, 2009. He graduated from Istanbul Uni- he has been the Chief Corporate Affairs Officer in charge of corporate Corporate Business Officer and Chief Special Projects Officer. Currently, he is versity’s Business Administration department in 1995. Mr. Acar worked in communications, investor relations and Corporate Citizenship. Prior to acting as Turkcell’s Chief International Expansion Officer. He worked for Aysu 7 sales positions in THY and Koctas A.S. At Turkcell he worked as Area Sales this appointment he was the Investor Relations division head at Turkcell Selen Kocabas Dis Tic. A.S. and Digital Equipment A.S. as a Sales Manager from 1991-1998. Manager, Marmara Region Coordinator and Turkey Sales Manager between since 2002 and before that he was the division head of International Chief Corporate Business Officer Yener worked as the Ankara Regional Manager of Microsoft Turkey in 1998. 2000-2004. Between March 2004 and November 2006 he was Sales and Business Development. Mr. Ozturkler started his career in the USA at Selen Kocabas, age 43, joined Turkcell in 2003 and she is the Chief He was appointed Microsoft’s Deputy General Manager in Charge of Market- Customer Relationship Chief Executive Officer of Astelit. Prior to his current Accenture Consulting. He continued his career at Yapi Kredi Bank. Mr. Corporate Business Officer. Prior to this appointment, she was the ing in 2002 and was the Deputy General Manager in charge of Business and position as Chief Consumer Sales Officer, he worked as the Sales Management Ozturkler is a graduate of Johnson C. Smith University Marketing Divi- Chief Business Support Officer in charge of human resources, corporate Strategy Development between 2004-2007. He graduated from the Istanbul and Wholesale and Distribution Management Division Head. sion and he received his MBA majoring in MIS from Mercer University. information systems, procurement and contract management, and Technical University’s Department of Metallurgical Engineering in 1982 and administrative issues. Mrs. Kocabas started her professional career received a Master’s Degree in Material Sciences from the University of Califor- as a Management Trainee at Koc Holding, Mrs. Kocabas later worked nia at Berkley in 1986 and in High Level Marketing Management from Kellogg as Human Resources Expert at Arcelik, then as a Human Resources 4 Tayfun Cataltepe University. Ilter Terzioglu Coordinator at Marshall, followed by Groupe Danone SA where she 12 Chief Corporate Strategy & Regulations Office Chief Network Operations Officer worked as Human Resources Director. Selen Kocabas is a graduate of Economics from Istanbul University. She also obtained a master’s degree Tayfun Cataltepe, age 50, is the Chief Corporate Strategy & Regulations Offic- Ilter Terzioglu, age 45, joined Turkcell in 2003 and since April 1, 2006 in Human Resources Management from Marmara University. er. After graduating from the Electronic Engineering Department of Bospho- he has been the Chief Network Operations Officer. Mr. Terzioglu has 16 Meltem Kalender Ozturk rus University, Cataltepe received his MSc degree from Michigan Technology worked in the communications sector since 1993 and served as As- Chief Human Resources Officer University and doctorate degree from the University of California, Los Angeles. sistant General Manager at Ericsson, Superonline and Show TV. Mr. * Meltem Kalender Ozturk, age 37, joined Turkcell in 1998. She was From 1990 to 1998, he worked as a Research and Development Engineer in Terzioglu is a graduate of the Department of Econometrics at Istanbul assigned as Division Head of Employee Relations Management between the Bell Laboratories. In 1998 he moved on to AT&T as the IP Network and University. Prior to his current position in Turkcell as the Chief Network 8 Serkan Okandan 2001 and 2011 in charge of training, performance and talent management, Service Planning projects manager, where he worked until 2003. Following Operations Officer, he was performing as the Head of Business Strate- Chief Financial Officer remuneration, employee relations, organizational development and AT&T, he started to work at Aycell as the Deputy General Manager in charge of gies, Regulation and Risk Consolidation in Turkcell. Serkan Okandan, age 41, joined Turkcell in 2000. Since January 1, 2006, quality management. Mrs. Ozturk, the Chief Human Resources Officer since Technical Operations. He was then Deputy General Manager in charge of Net- he has been the Chief Financial Officer of Turkcell. Prior to this appoint- March 14, 2011, worked also in Human Resources areas in Logo Business work Operations at AVEA from 2004 to 2006. In 2007, Mr. Cataltepe served ment, he was the Financial Control and Reporting Division Head of Turk- Solutions and Işıklar Holding. Meltem Kalender Ozturk is a graduate of as the Europe Telecom Sector Expert in the Transaction Integration Services cell. Mr. Okandan started his professional career at Pricewaterhouse- Business Administration from Marmara University. Department of Ernst & Young. Since 2007, he has been working at Turkcell Coopers in 1992. He then worked for DHL and Frito Lay as a Financial as a Chief Officer. Controller. Serkan Okandan is a graduate in Economics from Bosphorus University.

18 Turkcell Annual Report 2010 19 Technology evolves and improves every day. Technologies that we Get More Out Of couldn’t have dreamed of just five years ago are today essential ele- ments of our existence. We now carry our daily lives and our busi- ness in our pockets. We all want to be accessible anytime, anywhere, Life With Turkcell and we want effortless access to our loved ones, and to information.

With its technology, innovation, services, and corporate social res- ponsibility projects, Turkcell strives to provide more – to its subscri- bers and to Turkey.

In the 17 years since its inception, Turkcell is making a difference with its technological infrastructure, Turkcell has developed customized with the advantages and services it offers, and with its investments in Turkey. In the 17 years since its inception, Turkcell has developed communication solutions, changed Get More customized communication solutions, changed lifestyles with its in- lifestyles with its innovations, supported novations, supported young athletes and national teams and held the hands of the Snowdrops who want an education; Turkcell has young athletes and national teams and become Turkey’s Turkcell. Out Of held the hands of the Snowdrops who And now, from the East to the West, it is time to bring more life right want an education; Turkcell has become across Turkey. Because there is life in this nation, and we all have Turkey’s Turkcell. And now, from the dreams for the better. LIfe WIth East to the West, it is time to bring more For that reason, we need more well-being, more success, more Turkcell life across Turkey. Because there is life simplicity, more communication, more returns, more abundance, in this nation and we all have dreams more support, more hope, more options, more freedom, and more education. for the better. Now, get more out of life with Turkcell.

20 Turkcell Annual Report 2010 21 SuperIor TechnologIes Get More Out Of LIFE

22 Turkcell Annual Report 2010 Superior Technologies We have made greater investments into more advanced technologies towards broader, higher-quality and faster communication S uperior Technologies

Turkcell Group made a TRY1.7 billion investment We reached a speed of 42 mbps with our 3G technology optic infrastructure of more than 22,000 km in 73 provinces. Superonline now carries 69 in 2010. We have achieved a speed of 42.2 Mbps in 3G through dual carrier percent of our network traffic. technology to become one of the first ten operators worldwide to implement this technology. We executed, together with Superonline, one of the world’s longest marine crossover 82% Broadest Coverage 42.2 Mbps 3G projects in radio link connection of 95 km, to provide an alternative transmission method coverage We doubled our speed in 2G technology to Northern Cyprus-Turkey fiber optic line. We continued to deliver the highest quality services to Turkey’s lar- speed with We have ranked among the firsts to successfully test the EEDGE gest mobile subscriber base, with population coverage of 99.07 per- 3G (Evolved EDGE) technology, one of the latest technological advan- In December 2009, Superonline won the public tender for the fifteen-year lease of cent, geographic coverage of 86.97 percent and EDGE coverage of ces in mobile communications, on our network. EEDGE technology BOTAS’s fiber optic infrastructure of 11,280 km, with a bid of EUR20.9 million. Thanks 100 percent in our network, in 2G technology, as of December 31, provides the best user experience in mobile internet applications to this tender, Superonline was able to use these BOTAS routes to access all geographi- 2010. We maintained our leadership of 3G in Turkey with populati- and data services, and doubles the speed for customers in GSM/2G cal regions of Turkey. Along with the route provided by the tender, Superonline added 22,000+ km on coverage of around 82 percent. services. new international exit points to the two existing ones, increasing their number to seven fiber-optic by the end of 2010; its fiber optic infrastructure exceeded 22,000 km. Superonline is As a first among global 2G/3G operators, we used the iDirect VSAT The Fastest Mobile Internet set to continue with selective investments in this infrastructure in 2011. It signed the backbone systems under “3G service via satellite communication” technology, In 2010, as well as 2009, we were again certified as the leader in Regional Cable Network (“RCN”) project, involving seven operators from five countries, linking the 3G base station to the network via satellite. Consequ- terms of 3G Internet speeds among mobile operators in Turkey by P3 in December 2010. The project involves the establishment of the longest uninterrupted ently, we were able to offer 3G speeds usually only available in Communications, an independent international ranking and audit land Internet infrastructure in the region, through the placement of a 7,750-km fiber urban areas anywhere within the borders of our country (in rural company, following field tests conducted in Istanbul, Ankara, and optic cable line from the city of Fujairah, in the United Arab Emirates, to Istanbul. The areas to which the infrastructure companies cannot bring service, Izmir. project is scheduled to commence operations in the second half of 2011, and to become and where microwave communication is impossible under severe Two of Turkcell’s the internet gateway for 2 billion people. Consequently, Istanbul will become the East’s weather conditions, during disasters and festivals, etc.). We ranked first in the“Average Mobile Internet Speed” among fif- internet gateway to Europe, and the world’s new Internet base, due to its geostrategic six Radio Network teen European mobile operators in field tests conducted to com- position. Controllers ranked first Broad International Coverage pare 3G mobile Internet speeds of mobile operators in Turkey and Europe. The tests were conducted in Paris, Berlin, and London; Superonline came together with Turkey’s six leading Internet service providers (Borusan and second in data We provide an international roaming service via 662 operators in and in Istanbul, Diyarbakir, and Trabzon, and are certified by IRIS Telekom, Dogan Telekom, Global Iletisim, Grid Telekom, Koç.net, and TurkNet) to establish 208 countries as of December 31, 2010. We cover 95 percent of the Telekom, an independent testing and evaluation organization. In the Turkish Network Infrastructure Platform (“TNAP”), contributing to the Turkish compo- speed among 657 RNCs world and 100 percent of Europe in terms of number of countries. addition, two of Turkcell’s six Radio Network Controllers (“RNC”) nent of international investment into positioning Istanbul as the world’s new internet base. to be evaluated in the We also continue to enable our customers to experience 3G speed ranked first and second in data speed among 657 RNCs to be eva- abroad via 204 operators in 108 countries. luated in the Global 3G Performance Comparison Report issued by We continued to increase mobile internet usage with devices and applications that deli- Global 3G Performance Ericsson in 2010. Our remaining four RNCs also ranked among the ver the best Internet experience The Latest Technology ten fastest. We have continued to make a difference in the lives of our customers in 2010 with our Comparison Report innovative 3G products and services. In March, for the first time in Turkey, we introduced issued by Ericsson in As always, we have strived to continue to make our network available We gained strength through the fiber optic infrastructure the Turkcell 3G MultiVINN, allowing five individuals to feel the freedom of enjoying wire- with the latest technology, and to maintain our technological leadership. We reinforced our network infrastructure with Superonline’s fiber- less Internet with 3G speed - anytime and anywhere. 2010.

24 Turkcell Annual Report 2010 25 At Turkcell, we provide even more of the best mobile Internet experience to our customers, enabling them to connect to life - We increased the penetration of anytime and anywhere. The Turkcell 3G VINN modem, with 43.2 Mbps, is compatible with dual carrier technology; by using it our internet usage from handsets with customers have doubled their Internet speed to an unparalleled applications we developed, and by S uperior Technologies level. facilitating easier mobile access to In March, for the first time in Turkey, we introduced the Turkcell 3G MultiVINN, allowing five individuals to enjoy the freedom of wireless social networking sites. Internet with 3G speed - anytime and anywhere. Wireless internet for In October, we introduced the three-month VINN campaign, the to use the 3G enabled device of their choice, with a very advantage- shortest contract campaign in the market, which won much attenti- ous Turkcell offer. 5 individuals on from our customers. with 3G On September 24, we also introduced Apple’s iPhone 4, which has MultiVINN We increased the penetration of Internet usage from handsets with generated huge interest worldwide, with special Turkcell offers. We applications we developed, and by facilitating easier mobile access designed different Internet and voice packages for two models of the to social networking sites. With two campaigns launched in January iPhone 4 - the 16 GB and 32 GB memory capacity models. and May, Facebook Free and Facebook Zero, we provided all Turkcell subscribers with free access to Facebook on their handsets. Our cam- Nokia’s global music platform, Comes With Music (“CWM”), was offered Turkcell paigns particularly attracted the interest of the youth segment; each to the Turkish market for the first time, by Turkcell and on the Turkcell 3G VINN day, an average of 1.2 million subscribers accessed Facebook on their channels, with the launch of two new Nokia products, the X6 and 5235. with 43.2 1.2 million handset. We provided free local and international music downloads to purchasers Mbps daily of those Nokia phones for a period of one year with the CWM concept. In 2010 we continued to increase mobile internet usage through Facebook our smartphone device bundled offers. And as of year-end 2010, Turkcell also introduced to the Turkish market Samsung’s 2010 users the number of smartphones on our network had reached 2 million, flagship product: the Galaxy S. representing 6% of total subscribers. We additionally offered our customers the Nokia E72, with affor- In the first year of 3G technology, we designed and executed the “3G dable payment options to enable users to enjoy the Internet with 3G Enabled Mobile Devices” campaign. Including for the first time seven speed and make video calls. The Turkcell 3G VINN producers and more than 70 models, we enabled more users to fully modem, with 43.2 enjoy life with Turkcell, introducing the campaign with broad-based We offered Turkcell customers, for the first time, the HTC Touch2, communication efforts. We provided our customers with the liberty with a computer-like Internet experience and touch screen; and the Mbps, is compatible HTC HD2, with the largest screen (4.3’’) and the fastest processor (1 GHz) on the market. Both phones were introduced to Turkcell consu- with dual carrier mers with extremely advantageous campaign offers. technology; by using As of year-end 2010, the number of smartphones on our network had We also brought the Samsung Galaxy Tab to the Turkish market for it our customers the first time, with Turkcell 3G differentiation and advantages. In ad- have doubled their reached 2 million, representing 6% dition to the features found on a regular tablet, the Samsung Galaxy Tab includes features like voice and short messaging, and video call internet speed to an of total subscribers. capability. Turkcell subscribers can have this tablet with advantage- ous call, messaging, and Internet offers. unparalleled level.

26 Turkcell Annual Report 2010 27 We introduced the first Turkcell-branded mobile device: Turkcell T10 TV & Video Services We introduced the Turkcell T10, the first Turkcell-branded device, With Turkcell MobileTV service providing data flow with 3G speed, subscribers may with the slogan, “A Smartphone for Everyone”, with the objective of watch TV channels and recorded content on their mobile phones. Turkcell also provides providing equal opportunity in mobile Internet usage. recorded video services via turkcell-im and Expert TV WAP pages. The Turkcell-im WAP page offers popular videos collected from various web sources that are open to public

S uperior Technologies A standout, with its easy-to-use menu and attractive design, the access. Turkcell T10 ensures seamless connection to life through an advan- ced mobile Internet experience. The stylishly-designed Turkcell T10 Social Community and Entertainment Services 3,000+ won kudos, providing mobile Internet service with 3G speed, mobile Turkcell provides a variety of sports services focusing on football given the size of the applications TV service, a touch screen, Turkcell applications and access to the fan base and popularity of this sport within Turkey. Partnering with a major national TV most popular Internet sites with one click – at an affordable price. provider, Turkcell provides a social football platform Footbo.com in Turkish to consumers 19 million With the T10, we continued to empower our subscribers’ internet to create fan pages, forums and discussions. Also, Turkcell launched an online social download habits, increasing their mobile Internet use by 10 times, compared game Footbocity in 2010, widely appreciated by football fans, which enable users to play with usage prior to purchasing the T10. interactive games and build their own virtual cities. 22 Turkcell We continue to provide new products and services Launched in 2010 as a location-based social micro-blog service, Gezenzi enables our branded to further ease the lives of our customers users to share their status information, photos and comments, and follow comments and messages in their areas of interest. applications We closely follow global trends, both to meet local market needs 2 million and to continue to provide creative and pioneering solutions in co- Information Services smartphone operation with our business partners. In 2010, our mobile internet Turkcell developed the IBB Mobile Traffic application in cooperation with the Istanbul in network and service revenues represented 20% of the total Turkcell Turkey Metropolitan Municipality to ease the lives of its users with updated, reliable information revenues. Our value-added services, with the exception of data and on Istanbul traffic. This application has been downloaded one million times since its messaging, were used by more than 20 million customers in 2010. launch in 2008. T10: First Turkcell Enablers & Platforms With the location-based Turkcell Compass application, users can determine the nearest Turkcell Turkcell invests in platforms that enrich user experience and increa- police stations, pharmacies, hospitals, etc. within a specific area around their own loca- branded se the distinctiveness of its products and services. The Turkcell Appli- tion. Introduced smartphone cation Store enables users to download more than 3,000 free or paid Samsung applications, with more than 1,000 compatible mobile devices. With Turkcell Seyahat is a travel companion service, enabling users to buy tickets or make Galaxy Tab in a download rate of one application per second, the Application Store reservations with major airline companies and view live flight information as well as Turkey had more than 4 million distinct users who downloaded 19 million weather conditions at their destinations. applications in 2010. The download numbers for 22 Turkcell appli- cations - including Compass, Travel, Goals on Your Mobile, Mobile “Who Called Me” is an information service that notifies users of any calls received – and TV, Gezenzi, Footbo, and Click to Win - exceeded 3.8 million. those numbers - while their mobile device was shut off and/or outside coverage area. We introduced the We closely follow global trends, both “Who Called Me” retrieves callers and numbers when the user’s device is again in ser- Music Services vice. With the common address book feature, the calling numbers are matched with the Turkcell T10, the first to meet local market needs and to GncPlay’s vision is to be the go-to place for unlimited online music contact in address book, to ensure a fuller experience. streaming. Although the platform can be used by everyone, the user Turkcell-branded continue to provide creative and interface is particularly designed for the young segment. Users can Education Services device, with the slogan, pioneering solutions in cooperation create their own play lists and share them with friends. Users can School (Okul.com.tr) is an online educational platform developed for teachers, parents listen to limitless music, follow specific radio stations, create song and students. It combines rich educational materials with socialized content to reinforce “A Smartphone for with our business partners. lists and share them with their friends. The “Ring Back Tone” Turk- communication. School is also intended to be a platform where adults can receive life- cell service enables users to play music for their callers. long education. Everyone”.

28 Turkcell Annual Report 2010 29 Mobile Financial Services With Turkcell Mobile Payment service, users can use their Turkcell In just one year, we added 26 invoice or TRY accounts for expenses of up to TRY 35 in participating stores. The Turkcell Mobile Payment service can be used in more more patented applications to than 470 locations. Turkcell launched the first contactless payment S uperior Technologies our existing 31, while increasing solution for iPhone in Europe in 2010 in cooperation with Visa Eu- rope and Yapı Kredi Bank. the number of our international

Other Services applications to 18. Click to With the “Click to Call” service, we offer our subscribers the op- Compass portunity to make calls without using their mobile phone numbers. Win When the “Click to Call” button is pressed on contracted websites, Mobile Signature enables customers to sign electronic documents the call between two subscribers begins without dialing numbers. and transactions with a legally-accepted digital signature using GSM SIM cards. There are currently 50 application providers in the mar- If, for any reason, Turkcell customers do not wish to share their mo- ket, representing industries as diverse as banking, e-government, Travel bile phone numbers, they may acquire a Rumara number to call ot- insurance, healthcare and e-commerce. MobileTV her Turkcell subscribers. Rumara users can receive calls from other Rumara users, and also from all Turkcell subscribers. We made our mark on the world of R&D with TURKCELL TEKNOLOJİ We conducted different projects with more than 200 leading tech- Machine-to-Machine Communication (M2M) nology companies and research centers from Europe. In just one Since 2009, Turkcell has been focused on its M2M business, the year, we added a further 26 patented applications to our existing 31, Goals Gezenzi principal markets of which in Turkey are car telematics, team trac- while increasing the number of our international applications to 18. king, fleet management, POS terminals, security alarms, smart me- on Your Already last year’s leader in patent applications in our sector, this Mobile tering and sales force automation applications. year we further overtook other applicants.

Location and Authentication We developed unique products: IBB A first in its area, the location-based survey application enables re- With our expertise in SIM card technology, we developed an inf- Mobile searchers to display the location-based distribution of votes on a rastructure that can manage the SIM cards of Turkcell subscribers, Traffic map, adding a new dimension to their decision-making. along with the vast majority of applications run on the cards, from a single point. We also introduced the Mobile Signature Platform in the second quarter of 2010 to reduce licensing and additional deve- With a download rate lopment costs, as well as to provide more consistent service. The Turkcell Application Store of one application per enables users to download more than In the last months of 2010, we accelerated and completed the second, the Application 3,000 free or paid applications, with development studies, which has begun in 2008 on NFC (Near Fi- eld Communication) technology. With this technology, Turkcell Store had more than 4 more than 1,000 compatible mobile acquired the necessary infrastructure for the secure transmission of applications used in the banking sector, such as credit cards million distinct users devices. to the SIM card, and for the development of the “mobile wallet” concept. who downloaded 19 million applications in 2010.

30 Turkcell Annual Report 2010 31 MORE ADVANTAGES Get More Out Of LIFE

32 Turkcell Annual Report 2010 More Advantages We presented more varied offers, in more ranges, at affordable prices

M ore Advantages and with higher quality

We continued to present more advantageous offers units to Turkish lira. One week before the transition date, we announ- vantage of special offers ranging from fuel to food, textiles to transport, and tourism to for various needs and differentiated solutions for ced the Turkish lira fees of our tariffs to all of our HazırKart customers, technology, by using the passwords we sent them. With 2.5 million hits, our “Turkcell Users our consumer and corporate customers through SMS, as well as our websites, voice response system, dealers, Win” campaign saved each customer an average of TRY21. and call centers. We converted the units remaining on our customers’ lines at a higher unit price than the one they had paid to load them, Turkcell Platinum continued to expand privileges As the market leader, our aim in 2010 was to enable not only our Counter to acting on the principle of customer satisfaction. The transition was Turkcell Platinum subscribers continued to benefit from various exclusive advantages and own subscribers, but everybody, to easily experience Turkcell quality; TRY completely smooth and entirely flawless for 26 million customers. privileges in 2010. Platinum subscribers received dedicated support regarding their Turk- transition of thus we launched the “My Turkcell is Your Turkcell” campaign. In just As of April 1, our subscribers were able to view on their screens the cell lines and mobile phones from a Special Service Team, who were dispatched to the 26 million about one week, more than 1.5 million people had enjoyed Turkcell amount used, the total, and the remaining amount after each use. We customer – wherever they were – with related services and products; and with the 24/7 customers quality and difference. With our “Thanks” campaign, we offered free provided assistance for the Turkish lira transition through a dedicated Special Customer Services, which provided a timely free-of-charge response. minutes for up to three days, from 6:00 a.m. to 6:00 p.m., to our long- service line and answered all related questions. term post-paid subscribers in the consumer segment as a “thank you” Platinum subscribers also benefited from special discounts on their mobile phone bills, for the years they have spent with us. We let them know how much we We continued to offer more freedom to young subscribers VINN 3G modem, and mobile devices; and from home delivery services for any device they 2 million 65 campaigns have valued their loyalty to us over the years as Turkcell customers, We introduced an advantageous postpaid tariff to the youth segment desired. subscribers TRY20 million and cemented that loyalty by providing them with a satisfying present. and created an alternative to HazırKart, also leading the sector in this TRY53 benefits with We continued to offer advantageous offers to meet the needs of our area. We diversified our SMS packages, a very important communica- Over the summer, Turkcell Platinum subscribers were given the opportunity to attend Turk- million gnçtrkcll benefits customers with special tariffs and community offers such as for far- tion tool for youth. cell Kuruçeşme Arena concerts with a guest; they could also attend - again with a guest mers and public employees. The Turkcell Farmer Package, designed - special film previews and parties. In addition, Platinum subscribers could participate in to aid Turkey’s farmers in increasing their production, attracted wi- With gnçtrkcll club, we supported and encouraged youth Flugtag, the Yeşilçam Awards Ceremony and IF Festival. despread interest. We provided not only useful and informative com- throughout the year, providing young people with platforms munication offers, but also mobile training programs to raise produc- where they could demonstrate their power Turkcell Platinum subscribers were periodically presented with special discounts and gifts, As the market leader, tivity, location-based daily weather forecasts, local and global news, In 2010 Turkcell’s youth club, gnçtrkcll, provided total savings of across more than 10 brands. product-based information, and discounts through co-branded offers. TRY20 million to millions of gnçtrkcll members, through 35 campa- our aim in 2010 was igns. We offered free meals at McDonald’s and Burger King in diffe- We continued to offer advantageous tariffs and packages to our corporate customers With local campaigns, we offered several advantages to our customers rent periods, and a free ticket with each ticket purchased at movie the- We revamped our corporate tariff structure in January 2010, offering more advantageous to enable not only in rural regions and priority provinces, further expanding our market aters, throughout the year. We also supported our young customers packages to our customers and simplifying the options, making it easier to choose the our own subscribers, share in these regions. with special offers and prices on online shopping. In addition to brand optimal package for employees. We introduced Plus Packages in 2010; these allow our partnerships and price advantages, we reached 440,000 people with corporate customers to meet all their local voice, data, and SMS needs with a single, price- but everybody, to In the world of HazırKart (prepaid service), we provided our customers 14 activities/sponsorships. predictive tariff package. with monthly “Pomegranate Packages”, which offer five free units for easily experience each unit purchased that included both voice and SMS services. We provided more benefits to our customers with continuing brand In July 2010, we launched Easy Packages to enable our corporate customers to easily allo- Turkcell quality; thus partnerships cate lines to employees and business partners. Also launched in 2010, the Italy campaign, We made a difference in the transition from units to Turkish lira We continued our brand partnerships in 2010, offering numerous ad- Russia-Ukraine campaign, U.S.–Canada package, Saudi Arabia package, and the Great Bri- we launched the We, together with Turkcell Technology, successfully completed the vantages to our customers through 65 campaigns that included 35 tain–Germany–France Daily Voice package met the international communication needs of unit-to-TRY transition period, an important IT transformation project. brands. Two million Turkcell customers gained a total value of app- our corporate customers at more advantageous prices. We gradated our international data “My Turkcell is Your Turkcell conducted the most transparent and seamless transition from roximately TRY53 million in shopping benefits. Customers took ad- tariffs to provide our heavy users with data service at more advantageous prices. Turkcell” campaign.

34 Turkcell Annual Report 2010 35 We provided special advantages to different professional groups With the objective of meeting the communication needs of craftsmen within a single package, we introduced the İşTcell Craftsman Packa- M ore Advantages ge, treating them as corporate customers and offering them corporate advantages.

Following the 2009 launch of its first packages for self-employed in- dividuals like physicians, lawyers, and pharmacists, İşTcell focused on real estate agents in 2010. We addressed the needs of these leading groups in the self-employment sector and accordingly enhanced offers İşTcell for these clubs. Family doctors who are affiliated with the İşTcell Doc- İşTcell tors Club benefit from discounts, with a mobile application specifically Doctors Craftsman designed for them, while all member doctors have free access to the Club Package WAP portal that contains customized information and applications. Real estate agents affiliated with the İşTcell Real Estate Agents Club can post discounted ads on the website at sahibinden.com, while attorneys affiliated with the İşTcell Lawyers Club have discounted access to UYAP TRY18 (National Judicial Network Project) using their mobile signature. million We provided total benefits of TRY18 Million to 30,000 corporate benefit for customers with the İŞTEKAZAN program 30K corporate We launched our corporate loyalty program, İŞTEKAZAN, on March customers 1, 2010. The program provided our corporate customers with savings of up to 50 percent on expenditures including food, fuel, cargo, office materials, insurance, finance, security, transport, software, hardware, meetings, hotel accommodation, training, advertising, Internet, and technology. We provided total 30,000 companies gained total savings of TRY18 million through benefits of TRY18 discount contracts signed with more than 30 different brands across different sectors; contracted brands recorded a total turnover of app- million to 30,000 roximately TRY219 million as of year-end 2010. corporate customers With the objective of meeting the On November 23, 2010, we organized the first İŞTCELL Technology with the İŞTEKAZAN communication needs of craftsmen Summit, with the theme of “Opportunities to Make a Difference in your Business with Mobile Technologies.” Notable speakers included program. Contracted within a single package, we world-renowned technology gurus Geoffrey Moore and Don Tapscott, brands recorded introduced the İşTcell Craftsman as well as Turkey’s top brand managers, who met with our corporate customers. a total turnover of Package, treating them as corporate approximately TRY219 customers and offering them We provided more advantages to our customers through our corpo- rate loyalty program, İŞTECEP million as of year-end corporate advantages. The corporate loyalty program with contracts, İŞTECEP, produced a catalog with 26 alternatives in total, including 29 offers and 12 de- 2010.

36 Turkcell Annual Report 2010 37 vice options from all manufacturers, with the launch of 11 new offers hed, and offered unlimited Internet packages with a fair use policy. With our bulk introduced in September and November 2010. İŞTECEP provided more Within the Total Telecom Solutions purchase advantages, we gave special discounts to users who immediately made further advantages to our corporate customers with an increased number of commitments with us. M ore Advantages gifts. Provider, we designed a first joint offer by Turkcell and Superonline. We continued to deliver technological advances and innovations to our customers via We made a difference to the special needs of our customers through our digital platforms corporate solutions and increased their efficiency We continued to employ a number of new technologies and launched micro-sites and de- As the leading communication and technology company in Turkey, mos, including micro-websites with video productions, demos on our services, and appli- we endeavor to fully understand the needs of our corporate custo- Provider (“TTSP”), and will provide our total solutions from a single cations utilizing social media tools as well as through the use of interactive media. In 2010, mers, and maximize their efficiency in terms of business-team, as- source. Our product and service catalogue, expanded with our tran- we introduced many new micro-sites and demos. sets and customer management, with tailor-made mobile solutions. sition project, will provide our customers with faster and more global Accordingly, in 2010, we introduced approximately 5,000 initiatives solutions, with more advantageous total costs and higher service qua- The Facebook “100 Things To Do While You Are Young” page created within the context 1,600 to meet the needs of small, medium and large companies. We hel- lity. After this transition, we will provide the business world with total of “100 Things To Do While You Are Young” campaign became a video sharing platform ped our corporate customers to reduce their operating costs, increase solutions through our voice (mobile, fixed), internet (mobile, fixed), during the campaign period. This page then became an interactive communication plat- mobile their efficiency, and make a difference among the competition. end-to-end communication, network, and data center services and form for the sharing of the movie, music and entertainment content of gnctrkcll, and the marketing corporate applications within our revised product and service cata- communication of gnctrkcll campaigns. This page has the highest subscriber number of project In 2010, logue. 350,000 among Turkish brands. • We enabled our corporate customers to communicate with their cli- ents and employees through approximately three billion messages, We position a variety of office products and offers to comply with all With www.turkcellliningucu.com website, we created a platform for our subscribers to • The Turkcell Vehicle Tracking Service, used in 150,000 vehicles ac- office needs, most notably voice and Internet services enable them to create their own videos interpreting our coverage theme song. We then ross Turkey, ensured fuel savings of up to 30 percent for companies, Accordingly, on the office mobile voice service side, we enhanced the broadcast our selected submissions on TV as an advertisement. Sponsored and reduced their maintenance costs by 10 percent, FCT voice (Ekomini) package contents for both local and international free • With our “Remote Meter Tracking” solution, we prevented electricity calls and created Ekomini offers with free devices in 2010. With these Gnctrkcll club designed an engaging micro-site, www.iliskininadinikoy.com, for Valentine’s and water losses and theft by up to 80 percent. We reduced incorrect voice packages, we helped our customers to reduce their fixed phone Day, using Facebook Connect. A micro-site directed towards the gnçtrkcll audience, www. packages for meter reading rates by 7 percent, expenses by at least 65 percent. gnctrkccsessizsinema.com, which is an entertaining micro-site with a video-based online 4.4 million • With the VINN 3G MultiModem solution, implemented in cooperati- charades game, was launched in March 2010. people on with the Istanbul Public Transport authority, we provided 18,000 Within the TTSP, we designed a first joint offer by Turkcell and Supe- passengers with Internet access at 3G speed in public buses, daily, ronline and provided ADSL and 3G together for SOHOs (small offices/ We also completed the design of the home and sub-page for Gezenzi, Turkcell’s location- • With the 3G Backup solution, we shortened the supermarket chains’ home offices) through the Corporate Solution Centers. We introduced based mobile micro-blogging service, and launched www.gezenzi.com in 2010. new store opening time by three days, an automatic 3G backup service with a VINN device attachable to the • With our field automation solutions, we reduced companies’ field ADSL modem and provided companies with uninterrupted communi- We offered Turkcell subscribers who wished to participate in the “Turkey’s Got Talent” Mobile Marketing operating expenditures. cation. We drew up a Service Level Agreement (SLA) for the infrastruc- television show an opportunity to post their videos online. A jury evaluated videos posted team qualified to the ture of the “Corporate Package Data Access” and added value for our on the www.turkcellleyeteneksizsiniz.com website that met predetermined criteria; those As a Total Telecom Solutions Provider we continued our corporate customers, thus increasing their satisfaction. In addition, selected by the jury showcased their talent on the television show. finals in six categories investments in more advantageous services for our customers with an unlimited 3G Backup package, we meet their need to back up We embarked on our goal of becoming a Total Telecom Solutions land lines and switch to 3G technology. We delivered data traffic at its We provided more advantages with Mobile Marketing of the Global Mobile second level through L2TP tunneling to those of our customers who In 2010, we developed 1,600 projects with 353 different companies across 50 assorted Marketing Awards; We made a difference to the special requested it, thus taking the first steps into the “Buy and Sell” model sectors within our mobile marketing service, which always provides more advantages. In of mobile Internet; this will begin entering our lives through Virtual Europe’s largest permission-based database, 11.4 million people received various benefits. and published the first needs of our customers through Mobile Operators in the near future. With 700 million advertisement impressions realized in the year, sponsored free packages Mobile Marketing book corporate solutions and increased benefited 4.4 million people. Mobile Marketing team qualified to the finals in six categories In the world of mobile Internet, we broke new ground throug- of the Global Mobile Marketing Awards; and published the first Mobile Marketing book in in Turkey in cooperation their efficiency. hout 2010. We provided VINN owners with cost control options, Turkey in cooperation with McGraw Hill. with packages that discontinued when the first limit was reac- with McGraw Hill.

38 Turkcell Annual Report 2010 39 best qualıty Servıce Get More Out Of LIFE

40 Turkcell Annual Report 2010 Best Quality Service With our expanded, widespread and trained Service Team, we produce more innovative and practical solutions to better meet your needs. B est Quality S ervice

More service with the most widespread sales • Fast Battery Charger: a feature unique to Turkcell among global Other Channels 17,000 network operators, these devices quickly complete charging in 15 minutes. We have been providing service to our customers through Electronic Chain Stores since In 2010, the device was used 1.1 million times. 2008; we can offer the Turkcell advantages at any point where our customers come Turkcell Turkcell Communication Centers • Telephone Backup Device: a feature unique to Turkcell in Turkey, together with technology. Our customers can meet both their subscription and device Sales We have around 1,000 exclusive Turkcell Communication Centers, this device is used both for telephone backup and the downloading needs through the partnerships with eight brands and in approximately 100 stores. We Points providing expertise in communication technologies; these centers of various applications, to make life easier. In 2010, approximately 1 also provide our customers with other channels for their routine needs, including bank offer customers a warm, reassuring atmosphere at the most frequ- million applications were downloaded. ATMs and online branches, call centers, kiosks, post office (“PTT”) and the Turkcell ented and accessible locations (81 cities, 222 districts), and provide website. 50 Turkcell standard and solution-oriented services. At the Turkcell Communi- We provide our customers with efficient product Distribution cation Centers, our widest exclusive face-to-face service channel, we supply, and fast and efficient information at We maintained our focus on customer satisfaction in our Call Centers continue our efforts to win the hearts and minds of our customers. 17,000 Turkcell Sales Points and 50 Turkcell Center and remained the acknowledged leader; our success was We continued to lead the market by reflecting our leadership appro- Distribution Centers recognized with awards ach back to entire retailing sector with our Turkcell Communication Telephone Centers which act on the motto, “Technology is a way for us to make Turkcell Sales Points Turkcell Global Bilgi formed special service teams in 2010 as part of the service segmen- your life easier” and the vision of, “Specialist retailing in communi- There are approximately 17,000 Turkcell Sales Points, offering the tation efforts carried out in Turkcell Consumer Operations; thus enabling those users Backup cation technologies.” Our stores are visited by 22 million people on products of all operators in Turkey and providing service even in with different service needs to obtain these services from trained expert customer repre- Fast Device average each month, and our customers are served by a competent the most outlying locations. With this figure, Turkcell is one of the sentatives. Designed under the leadership of Turkcell Global Bilgi Customer Relationship Battery team composed of 6,500 trained, well-natured people with experti- most prominent examples of a telecom supply chain in Europe. It is Management, and with the efforts of the IT department, the system differentiates itself Charger se in communication technologies. essential for us that our customers can easily access Turkcell pro- from other practices in the sector with its technological features and process for the ducts and services and get the best service possible at these stores. maintenance of satisfied customers. Protected by “Tasdix”, the first digital time stamp Technology Experts, who have been providing service in our stores Accordingly, we established 50 Turkcell Distribution Centers to make introduced to the end-user in Turkey, this program was entered into TÜBİTAK registers, since 2008, present our customers with a variety of devices equip- weekly visits to these sales points, thus ensuring efficient product and its usage rights are under proprietary protection. ped with the latest technology and applications to make life easier. supply, as well as providing correct, fast and efficient information on At around 1,000 They also focus on the development of store employees to ensure the our products and services. In 2010, Turkcell Global Bilgi ranked first in the world and the EMEA region in the satisfaction of customer needs at first contact. We continue to invest Turkcell Communication “2010 Top Ranking Performers” assessment by ContactCenterWorld.com; for the in consistent training for store employees towards ongoing impro- In 2010, we introduced another distinctive service for Turkcell Sales “Gaining New Customers - SOHO*” project, designed for professional groups in Turk- vement of our service quality. Accordingly, we provided 200,000 Centers, our widest hours of training in 2010. We have engaged independent research Points: Turkcell Ambassadors Club. With this club, Turkcell Sales Po- cell Corporate Operations. The SOHO project is a club, covering professional groups exclusive face-to-face companies to measure the quality of our services, and to track the ints win points for their performance and use them in shopping. This including doctors, lawyers, pharmacists, public accountants and real estate agents. It advances in our performance. Our stores are routinely audited to system ensures the creation of a one-to-one communication plat- operates under the membership system to provide members with exclusive services service channel, we ensure sustainable, standardized, and high-quality service. form with Turkcell Sales Points, thus improving their performance related to their own professional groups. and motivation. Our customers are also able to purchase their units continue our efforts We provide our customers with more comprehensive service thro- on digital environments via digital POS use generalized in 2010. With the aim of facilitating its members’ businesses, the project enriches customer to win the hearts and ugh the distinctive applications in our stores, two of which draw the They can thus meet their unit needs anytime and anywhere, either experience with benefits that include customer services through a free, dedicated greatest attention; fast battery charger and telephone backup: by cash or credit card payment. number; educated customer representatives who have a command of the terminology minds of our customers. *Small office home office

42 Turkcell Annual Report 2010 43 of the related professional group; bulk SMS packages; web assis- tant service; mobile knowledge banks; and special discounts from brand partnerships. The SOHO project speeds up campaigns and club membership sales compared with traditional sales methods, B est Quality S ervice as well as providing cost efficiency.

With the achievement of many firsts since its establishment, and with an investment of TRY 125 million over 10 years, Turkcell Glo- 15,000 bal Bilgi contacted 230 million customers in 2010. It responded to video 15,000 video calls through mobile internet technology with 3G spe- calls ed, and provided for the first time a video call center for the hearing- impaired. Turkcell Global Bilgi has won 25 national and internati- Voice onal awards over the past five years as a result of its differentiating signature service approach.

We both increased customer satisfaction and reduced costs, by implementing voice recognition 25 awards for our customers in 5 years to Global Bilgi We introduced voice signature on February 9, implementing voice recognition so that our customers are no longer obliged to answer security questions before speaking to a service representative.

We eased the lives of company executives with refinements to Corporate Online Transaction New features were added to Corporate New features were added to Corporate Online Transaction, which enables company executives to manage corporate lines through Online Transaction, approximately 200 transaction options; companies were provided which enables company with 24/7 online transaction capability. With the addition of new reports, customers can produce any report they need from this chan- executives to manage nel. With the achievement of many firsts corporate lines through since its establishment, and with an We provide corporate customer services customized to company approximately 200 employee profiles investment of TRY 125 million over 10 With “İşTcell Business Class Customer Services” for company exe- transaction options; cutives and decision makers; “Technical Support Service” for IT companies were years, Turkcell Global Bilgi contacted executives; and “İşTcell Corporate Customer Services” for company 230 million customers in 2010. employees, we provide exclusive services with tailor-made solutions provided with 24/7 for the varying requirements of different profiles. online transaction capability.

44 Turkcell Annual Report 2010 45 MORE SOCIAL RESPONSIBILITY Get More Out Of LIFE

46 Turkcell Annul Report 2010 More Social Responsibility As Turkey’s Turkcell, we continue to support not only technology, but also economic, environmental, and social development. M ore S ocial R esponsibility

We invest in the future of future generations in the areas of edu- began with 46 mentors and grew yearly, with 160 mentors in total 16 national cation, sports, and employment, by developing or supporting sus- mentoring their Snowdrops to date. and tainable, long-lasting and measurable projects that promote youth international development. The project recently opened up at different levels, gaining internati- awards to onal recognition. In 2008, the Snowdrops project was filmed by Na- Snowdrops Snowdrops tional Geographic. Prior to the documentary, an 11-person National Geographic team conducted interviews with Snowdrop girls and the- We provide educational grants to 10,000 girls every year with the ir families, in Istanbul, Kars, Erzurum, and Mardin, from September Snowdrops project, which has grown from a drop into an avalanche 2008 to April 2009. As a result, for the first time in Turkey, a social The Snowdrops project was initiated in 2000 in cooperation with the responsibility project was filmed as a documentary on the National Scholarships Society for Supporting Modern Life and provided grants to 5,000 girls Geographic Channel. A Snowdrops photo exhibition, displaying ima- 976 to 20,000 who are decisive and determined to study. Turkcell extended the project ges taken during the shoots, toured cities across Turkey. college girls in 2007 to increase the number of grants given every year to 10,000. graduates In March 2010, the Snowdrops project was selected by the United The Snowdrops project strives to provide equal educational opportu- Nations as an exemplary project and introduced to the world thro- nities to girls unable to continue their education due to the economic ugh a series of activities. disadvantages of their families; and subsequently to develop them We invest in the future into open-minded individuals with a profession. With this project growing from a drop into an avalanche, we now provide educational grants to 10,000 girls every year. Since 2000, of future generations Concluding its first decade in 2010, Snowdrops is Turkey’s pionee- 20,000 girls have received scholarships; 9,634 students have gradu- ring education project, also marking Turkcell’s first comprehensive ated from high school; 3,437 of them have entered college; and 976 in the areas of social responsibility initiative. Snowdrops has grown into an ava- are college graduates. Thus far, the Snowdrops project has garnered education, sports, lanche over the years with public support to become one of Turkey’s 16 national and international awards. most important social responsibility projects, providing educational and employment, opportunities to tens of thousands of girls. Bridge of Hearts by developing or A Mentorship Program was initiated in 2004 as a supporting process Initiated in 2008 in partnership with the Ministry of Education, the supporting sustainable, for the Snowdrops project, to further contribute to the development “Bridge of Hearts” project enables ten thousands of children from of real-life skill sets for the “Snowdrops” continuing their educati- around Turkey to visit different provinces and establish new and long-lasting and on at university level. Volunteers were chosen from among Turkcell long-lasting friendships with other children, while also discovering executives, leading female journalists and columnists in the media the natural and cultural beauties of our country. measurable projects world, as well as successful businesswomen to assume a “guiding” that promote youth role; they then joined the program as informed mentors, following Five-day tours are arranged as part of the Bridge of Hearts project, long and meticulous study and training. The Mentorship Program to support students’ personal and social development, as well as to development.

48 Turkcell Annual Report 2010 49 increase their awareness of social issues, diversity, and voluntary Turkcell is the main sponsor of the National Football and activity. Students visit historical and touristic sites, plant trees, and Basketball Teams participate in environmental activities during the first three days of the tour, according to the plan of the Provincial Directorate of Edu- From its start as the Official Communication Sponsor in 2002, Turkcell has continued its cation. The remaining two days are scheduled by the family hosting support for the National Football Team since 2005, as the main sponsor. Turkcell intends each student. to continue its support of the national team, recognizing the importance of the team’s ac- hievements in enhancing national morale, as well as our nation’s international prestige. M ore S ocial R esponsibility Having reached 130,000 students in three years, the Bridge of He- Support arts project continues to grow each year. In 2010, special day activi- Turkcell also supports the National Basketball Team, encouraging and inspiring upco- the training ties were included in the project. Students were taken to the Anıtka- ming generations. Starting off as the Official Communication Sponsor in 2002, we beca- of athletes bir Mausoleum on April 23 and to Samsun on May 19, to experience me the main sponsor in 2006. Turkcell was also the main sponsor of the World Basketball aged 12-18 the enthusiasm of national holidays. International tours were also Championship 2010, where our national team achieved great success by picking up a included to expand students’ horizons. silver medal. An eco-system Within the Bridge of Hearts project; Contribution to employment The main of 50,000 people • In 3 years, 130,000 students from 81 provinces visited provinces sponsor of the At Turkcell, we also prioritize investing in employment. Turkcell Group employs appro- they had never seen, and experienced new cultures, ximately 11,000 people. We have established an eco-system of 50,000 people, including National Football • More than 5 million kilometers were covered, our dealers and business partners. and Basketball • 3,250 administrators and 6,500 teachers were appointed to ac- company the students. Teams In line with the importance we place on employment, we have initiated an important pro- • Bridge of Hearts teams were formed in 81 provinces, ject in partnership with İŞKUR (Turkish Employment Agency). In 2010, we provided 1,600 • Thousands of students for the first time experienced: planes, the unemployed young people with comprehensive training opportunities in the retailing sea, the metro and trains, and call center sectors. More than 1,000 of them were employed in our eco-system. We • Hundreds of thousands of friendship were established. Employs will continue this partnership with İŞKUR in 2011, and provide training and job opportu- nities to more than 2,000 people. approximately Runners to the Future 11,000 people We also focus on employing physically challenged individuals. Accordingly, Turkcell Gro- Developed in cooperation with the General Directorate of Youth and up employs 285 physically challenged individuals, while Turkcell Global Bilgi has 180 Sports, the “Runners to the Future” project aims to support the tra- physically challenged employees. A project developed with the Ministry of Transportation ining of athletes aged 12-18 who can achieve success in individual employs 7 such individuals, who are able to provide call center service from their homes. sports. Turkcell was also With our Turkcell Global Bilgi call center, we employ 7,500 people in 12 locations in total, Included in the national plan of the United Nations’ project, Alli- including nine in Turkey (Istanbul, Izmir, Erzurum, Eskişehir, Diyarbakir, Ankara, and the main sponsor of ance of Civilizations, the project selects young athletes based on Karaman), two in Ukraine, and one in Belarus. their talent, and coaches them in sports, including weightlifting, the World Basketball skiing, swimming, tennis, and athletics, along with cycling for the We Offer Job Opportunities to Thousands of Young People Championship 2010, At Turkcell, we also prioritize visually-impaired, across Turkey; they are trained to become na- tional athletes who will successfully represent Turkey in the inter- through the Turkcell Academy - İŞKUR Cooperation where our national investing in employment. Turkcell national arena. team achieved great Group employs approximately 11,000 As retail and call center sectors prosper in Turkey, the need for human resources trained Within this project, Turkcell also sponsors Marsel İlhan, the number in technology and communication, and in marketing, sales, and customer-centric servi- success by picking up a people. one-ranking tennis player in Turkey and 90th in the world; as well as ces constantly increases. Acting on the ideas of “People Are Our Priority, People Are Our Cagla Buyukakcay, another national tennis player. Pioneers” and “Investing in People”, the Turkcell Academy established cooperation with silver medal.

50 Turkcell Annual Report 2010 51 Turkcell Continued To Win Awards in 2010 Awards

İŞKUR, the employment agency affiliated with the Turkish Ministry of non-governmental organizations, and ensures the individual sup- • Turkcell was presented with an “Alliance Excellence • Turkcell won the Trade Financing Solution of Labor and Social Security, to both introduce qualified labor to these port of Turkcell employees through in-house organizations. Awards” in 2009, in the “Growth Company: Alliance- the Year award. Turkcell and Astelit, a Turkcell Group sectors and offer employment opportunities to this qualified labor. Management Excellence” category, for our Turkcell company in Ukraine, signed a facility agreement in the amount The primary function of the Turkish employment agency is defined Turkcell Volunteers projects to date have included “Would You Share Partner Program. The Turkcell Partner Program is the major pillar of approximately $360 million to be used for the 2009 financing in its articles of incorporation: to meet the personnel needs of emp- Your Toy?”; “Let’s Heat the Yukarı Tandır Village”; “My First Holi- of all our Business Partnership Management Programs. We have of infrastructure investments originating from Ericsson. The loyers with qualified labor. day”; “A Book for Every Child”; “We Regenerate the Fatih Elemen- been implementing the Turkcell Partner Program at Turkcell since facility was arranged by Credit Agricole CIB and Nordea Bank tary School in Şırnak”; “Recreational Area Arrangement for the Ka- 2004 and at our Group Companies since 2010. AB with the guarantee of the Swedish Export Credits Guarantee M ore S ocial R esponsibility In this cooperative effort, we brought together the nationwide hu- pıkaya Elementary School in Siverek”; and “Curiosity Room.” Board, and was assigned to the Swedish Export Credit • The Corporate University Xchange is considered one of the most man resources of İŞKUR, the academic knowledge of the universities Corporation. This financing transaction was awarded as the respected organizations in the world in terms of designing in- and the Turkcell Group’s corporate knowledge and experience under Turkcell Volunteers were granted the “Excellence in Public Relati- Trade Financing Solution of the Year by Euromoney. the expertise of the Turkcell Academy; we designed two programs: ons – Golden World Award” by the International Public Relations house workshops. It presented the Turkcell Academy with the the “Turkcell Retail Sales Development Program” and the “Custo- Association (IPRA) in 2007; an honorary award from the PR News CorpU Award for Excellence and Innovation in the • We ranked high in thirteen categories in the mer Relations Development Program.” From the young people re- Nonprofit PR Awards in the United States in 2009; and “The Best “Learning Technologies” category for the 11th time this International Business Awards; in three of these, we gistered with İŞKUR, those with qualifications defined according to Social Responsibility Project Created by Employees” award, by the year. ranked the highest. Accordingly, we garnered First Place in the “Marketing Website” category with www.turkcell3g.com; business criteria passed through a three-stage selection procedure, United States-based E2E, in 2010. • We were honored with an award for “Best Financial including a telephone interview, general examination, and face-to- First Place in the “Financial Services” category, with Garanti Disclosure Procedures in Europe” at the 2010 face interview, for an opportunity to attend these programs. Responsible Technology e-trader; and “Production Development Team of the Year” with Investor Relations Global Rankings Awards in AdinAction Development Team. Turkcell also won ten Amsterdam. honorary awards in seven different categories. In these programs, instructors from Ege University, Erzurum Ata- We enabled location information for 112 emergency calls Turkcell’s CEO Süreyya Ciliv was presented with an honorary türk University, and Turkcell Academy offered theoretical lessons in We managed, through improvements to our network, to send call • kariyer.net recognized Turkcell with its “Company award in the “Executive of the Year in Europe” category, while classrooms and then practical instruction that covered in-store and location information to emergency institutions for the calls made to Receiving the Highest Job Applications” award; and the Snowdrops and Bridge of Hearts projects each received web-based call center sessions. the 112 Emergency Center in Ankara, Antalya, and Isparta; a first for the Turkcell Global Bilgi with its “Company Generating honorary awards in the “Social Responsibility Projects of the Turkey. At Turkcell, we are prepared to provide this service to other the Highest Employment” at the Respect for Year” category. The Turkcell Management Team was recognized In 2010, 1,600 young people were trained; and 110 of them were cities and continue the effort with the Ministry of Health. Humanity Award Ceremony. employed in Turkcell call centers and with dealers. We will conti- in the “Management Team of the Year” category; the Turkcell • In the Best-Managed Companies in Central and Eastern Europe nue this cooperation in 2011 and will hold new, augmented training Corporate Communications Team was recognized in the We opened our network infrastructure to the “Earthquake Informa- 2010 Survey, conducted by Euromoney magazine, Turkcell programs designed for the call center and retail sectors; offering job “Communication Team of the Year” category; Turkcell VINN in tion System” project ranked first in the “Most Satisfactory and Consistent opportunities for 2,000 unemployed young and talented individuals the “Marketing Campaign of the Year” category; TıklaKonuş and We signed a cooperation protocol with Bogazici University, Kandilli Company Strategy in the Mobile Sector” category, in twelve cities. Observatory, and the Earthquake Research Institute to conduct joint Turkcell Konuşanİlan in the “New Services of the Year” category; and third in the “Best Managed Company” category. studies on the Earthquake Information System Project. We opened and Turkcell Mobile Learning and Turkcell-NTV News Package in Turkcell Volunteers our base stations and network infrastructure to these scientific pro- • Turkcell Academy received an Excellence Award in the “New Telecommunication Services of the Year” category. jects. the “Leadership Development” category from ASTD • Digital Age Awards: The Turkcell Volunteers group, composed of Turkcell employees, (American Society for Training and Development). most Creative Viral Campaign: Certificate of Achievement: We saved energy identifies people in need and related projects in cooperation with • We won the Grand Prize from the International Public Gezenzi Lost A new generation feature recently integrated into our network enab- Relations Association (IPRA) in the “Best Service led us to reduce the power consumption of network equipment that most Creative Digital Centered, Launch” category for the 3G launch. Integrated Digital experiences less use during low-traffic hours. We achieved energy Campaigns Turkcell Volunteers were granted savings of 4-5 percent and reduced CO2 emissions by 8,800 tons. • Turkcell Global Bilgi ranked first in the “Call First: 100 Things To Do When You Are Young the “The Best Social Responsibility Centers” list in the Bilisim 500. most Creative Video: First Award: Gezenzi Internet Video We produced alternative energy solutions • We won the grand award in the Bilisim 500 competition for Project Created by Employees”, by the We increased the number of our base stations powered by hybrid our “Mobile Application”. • We won the Grand Prize at the Golden Drum in the “Best PR energy systems to 17. We used wind power at 217 base stations, United States-based E2E, in 2010. Event” category with the First Year Event of 3G. under the Greencell Project, supporting the production of green • Turkcell Global Bilgi won the Grand Prize in the “Best energy. Telemarketing” category for the EMEA (Europe, Middle- • We were awarded Capital Magazine’s Most East and Africa Region). Admired Company in 2010 Award.

52 Turkcell Annual Report 2010 53 Astelit – Alexander Barinov Superonline - Murat Erkan Alexander Barinov was appointed General Manager of Astelit on December 1st 2010. Mr. Barinov has Murat Erkan joined the Turkcell family as the General Manager of Tellcom in June 2008. After launching extensive experience in the telecommunications industry both in Ukraine and at the international level. his career at Toshiba, Mr. Erkan became Turkey’s first Systems Engineer at Cisco. Prior to joining Tell- Before joining Astelit he worked as Vice President of the Supervisory Board of StarLightMedia. From com, he worked as the Business Unit Manager at Aneltech, responsible for providing solutions to the June 2008 till April 2010 Mr. Barinov worked for Vympelcom Group, where he held the positions of Vice telecom, mobile communication, information and communications technology, defense and industrial President for Sales of Vympelcom (Beeline) Russia and General Director of Ukrainian Radio Systems production sectors. He also managed the merger of Tellcom and Superonline in 2008. Mr. Erkan gradu- (Beeline) Ukraine. Before that, Mr. Barinov had held a number of top-managerial positions, including ated from the Department of Electronics and Communications Engineering at Yıldız Technical University Vice President for Product, Marketing and Strategic Development of IBS Group (Russia), General Ma- in 1992. nager of Aegis Media (Russia), General Director of DEPO Computers (Russia) and Marketing Director of Philips CE Russia. Mr. Barinov graduated from Moscow State Academy of Chemical Engineering, where he completed his PhD, and also carried out his research in Dortmund University (Germany).

M anagers of Turkcell Affiliates BeST – Ozcan Ermis Turkcell Teknoloji – Kadir Semih Incedayi Ozcan Ermis has been serving as the General Manager of BeST in Belarus since October 2008. Mr. Ermis Kadir Semih Incedayi joined Turkcell Teknoloji Arastirma ve Gelistirme A.S. in April 2007. Before beco- was the Sales and Marketing Director at Astelit Ukraine in his previous post, and served as the Sales and ming the General Manager of Turkcell Teknoloji, he joined Turkcell in December 2006 as the Division Marketing Director of Vodafone Turkey until 2006. Prior to that, he served as the Marketing Director of Head of Research and Development. After ten years with the Koc Group, Mr. Incedayı served as manager Telsim until 2003. He started his career in the automotive sector in the marketing department in 1992. for four years at Telsim and two years at Borusan Telekom. Kadir Semih Incedayi graduated from the Ozcan Ermis is a graduate of the Department of Mechanical Engineering of Bosphorus University and Department of Computer Engineering at Middle East Technical University after attending Istanbul Erkek holds an MBA degree from the same university. High School.

Global Bilgi - Bahadir Pekkan Inteltek - Ahmet Sezer Bahadir Pekkan started working for Global Bilgi A.Ş., Turkey’s leading call center, in 2005, after holding Ahmet Sezer has served as the General Manager of Inteltek since 2004. After graduating from the De- managerial positions in various companies. At Global Bilgi, Mr. Pekkan served as the Chief Financial partment of Electronics and Communications Engineering at Istanbul Technical University in 1982, he Officer for approximately eighteen months and then, from June 1, 2006 on, as the General Manager. began his career as an engineer at Aselsan, and continued at IBM Turk Ltd. between 1988 and1994. Bahadir Pekkan is also the president of the Association of Call Centers, established in 2008. Born in During his career as a professional manager, he has been the Assistant General Manager of Intertech Istanbul in 1967, Mr. Pekkan is a graduate of the Department of Business Administration of Marmara A.Ş., 1994-1997, the Group Vice President of the Vestel Group of Companies, 1997-1998, the General University. He also holds masters degrees in Capital Markets & Stock Exchanges from Marmara Univer- Manager of Vestel Consultancy and Professional Services, 1998-2001, and the General Manager of sity and in Finance-Accounting from Yeditepe University. Probil A.Ş., 2001-2004.

KKTCell - Daghan Fellahoglu Global Tower - Ismet Yazici Daghan Fellahoglu joined the Turkcell family on August 1, 2008 and since then has been serving as the Ismet Yazici joined Global Tower on February 2, 2009 as Assistant General Manager for Business Develop- General Manager of KKTCell. His expertise, developed from holding senior positions in local and foreign ment & Sales and became Deputy General Manager on February 18, 2010. He became General Manager telecommunications and IT markets, rests in marketing, sales, product management and network de- at Global Tower on November 8, 2010. He joined Nortel Netas in 1993 as an R&D engineer. He received sign. Between 1996 and 2007, Mr. Fellahoglu served in various senior management positions at Erics- a master’s degree in Political Science at Marmara University (1998) and an MBA degree at the University son in Turkey and Sweden; between 2007 and 2008, he worked in Singapore as the Sales Development of Texas (2000). Mr. Yazici worked in the International Sales & Marketing Department at Nortel Netas bet- Director for South East Asia. Born in Baf in 1971, he is a graduate of the Department of Electric and ween1995 and1999 and served the same company as the Manager of the Romanian office between 1997 Electronic Engineering of Eastern Mediterranean University and Turkish Maarif College. and1999. Mr. Yazici was CDMA Product Marketing Manager at Nortel Networks Richardson, Texas, USA, between1999 and 2003, and became the Nortel Networks EMEA Product Marketing & Business Development Director in 2003. He was honored with the “Exceptional Contribution” and “Leadership Recognition” awards for his contribution to the introduction of CDMA technology to the region and to the expansion of Nortel Networks to new markers. Mr. Yazici served in the Turkey unit of Nortel in 2006 and held the position of Mar- keting, Business Development, and Corporate Sales Leadership until the end of January 2009. Born in May 1968 in Duzce, Ismet Yazici graduated from the Department of Electronic Engineering at Hacettepe University.

54 Turkcell Annual Report 2010 55 Subsidiaries S ubsidiaries In 2010 Turkcell, continued its operations in a wide geography spanning from Germany to Kazakhstan

International Subsidiaries In 2010, Astelit’s EBITDA tripled compared to 2009 within the con- BeST was able to achieve 76.2% geographical coverage and 96.3% Deriving its strength mainly from its wide coverage area, strong net- text of the turnaround strategy and effective cost control initiatives. population coverage in just two years, while increasing its subscriber work structure, high quality service, extensive product range, highly Its EBITDA margin increased to 19.0% in 2010 from 5.7% a year market share to 14% in a market with a penetration rate of 110% professional staff and support of shareholders, Azercell allows its before. The main drivers of this increase were the tariff redesigns as of 2010. BeST’s subscriber base rose by 25% year-on-year to 1.5 subscribers to make calls using the networks of 406 operators in resulting in a decrease in interconnection costs, together with cost million. As the first mobile operator in Belarus to launch 3G services 152 countries around the world. As of the end of 2010, Azercell had cutting measures. in November 2009, BeST continued its investments, with a TRY185.4 approximately 4 million subscribers, and held the leading position Ukraine: Astelit million capital expenditure in 2010, which rendered the Company the in the telecommunication sector. By the beginning of February 2005, Turkcell’s 55% indirect subsi- In 2010, Astelit’s number of registered and three-month active subs- leader in the Belarusian market in 3G rollout, increasing its brand diary Astelit had launched its GSM operations in Ukraine under the cribers stood at 9.1 million and 6.1 millon, respectively. awareness to 88% with its own brand, namely life:). Additionally, the Company holds the majority stake in Azeronline, “life:)” brand name. Of the company’s shares, 45% belong to the the internet service provider established as a limited liability com- System Capital Management Group. Astelit covers 96% of Ukraine’s The 3-month active ARPU rose by 5.4% in 2010, mainly due to a FINTUR pany in December 1999. population and 88% of the country’s territory. decline in the number of active subscribers, along with the change Turkcell holds a 41.45% stake in Fintur Holdings BV. Fintur has focused in active subscriber definition. MoU increased by 8.3% in 2010 year- on GSM investments in growing markets of relatively low penetration Summary Data for Astelit 2009 2010 y/y % chg on-year. rates, such as Azerbaijan, Kazakhstan, Moldova and Georgia. FINTUR 2009 2010 y/y % chg Number of subscribers (million) Fintur’s subscriber base continued to grow in 2010. The overall subscri- Total 12.2 9.1 (25.4%) Subscriber (million) 1 ber number rose by 16.9% to 15.9 million, mainly as a result of strong Active (3 months) 7.8 6.1 (21.8%) Kazakhstan 7.2 8.9 23.6% growth in Kazakhstan. Fintur’s consolidated revenue increased by 8.2% MoU (minutes) 158.7 171.9 8.3% Azerbaijan 3.8 4.0 5.3% to US$1,737 million in 2010, mainly driven by a 17.4% increase in the Average Revenue per User (ARPU) in US$ Moldova 0.7 0.9 28.6% Belarus: BeST revenues of our Kazakhstan operation, along with strong subscriber ac- Total 2.5 2.6 4.0% Georgia 1.9 2.0 5.3% Turkcell purchased 80% of Belarusian Telecommunications Network quisitions and an improved macroeconomic environment. We account Active (3 months) 3.7 3.9 5.4% TOTAL 13.6 15.9 16.9% (BeST) for US$500 million from the State Assets Committee of the Re- for our investment in Fintur using the equity method. Fintur’s contribu- Revenue (UAH million) 2,740 2,691 (1.8%) public of Belarus in July 2008 as part of the Company’s strategy to tion to income was US$153.0 million in 2010. Revenue (US$ million) 351.1 339.3 (3.4%) Revenue (US$ million) EBITDA2 (US$ million) 20.2 64.5 219.3% capitalize on the emerging investment potential in neighboring co- Kazakhstan 863 1,013 17.4% EBITDA margin 5.7% 19.0% 13.3pp untries. The purchased amount is scheduled to be paid in three ins- Azerbaijan 501 504 0.6% Net Loss (US$ million) (111.8) (101.0) (9.7%) tallments: The initial payment of US$300 million was made on August Moldova 63 67 6.3% Capex (US$ million) 216.0 66.5 (69.2%) 26, 2008, and the second installment of US$100 million was made Georgia 175 152 (13.1%) on December 31, 2009. The remaining installment of US$100 million 1 Other* 3 1 (66.7%) Active subscribers are those who in the past three months made a transaction which brought was made on December 31, 2010. An additional payment of US$100 Azerbaijan: Azercell revenue to the Company. TOTAL 1,605 1,737 8.2% 2 EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at million falls due when BeST first announces a net annual profit. Established in 1996, Azercell was a joint venture between Azertel (*) Includes intersegment eliminations http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ and the Azerbaijani Ministry of Communications. Currently, Fintur release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note, The acquisition of BeST gives Turkcell the opportunity to enter a mar- owns approximately 51% of Azercell through direct and indirect (US$ million) 2009 2010 y/y % chg however, that following the publication of the reconciliation in our Q4 2010 results on February ket of growth potential. Belarus’ growing economy and young and 23, 2011, we have made changes to the manner in which we account for the impact of changes holdings. Despite incessant and intensifying price competition, the Fintur’s contribution to in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise well-educated population, make it an attractive market in a region Company has managed to maintain its market leadership since its Turkcell Group’s net income 119.6 153.0 27.9% our presentation of prior periods, including the Q4 2010 reconciliation. where Turkcell is keen to grow. first year of operation.

56 Turkcell Annual Report 2010 57 S ubsidiaries ranking among the largest cellular operators in Central Asia, Kcell Following its establishment, Superonline obtained the license for had 8.9 million subscriptions as of the end of 2010. long distance telephone services (LDTS), which allows it to provi- de long-distance call origination and termination for individual and On December 1, 2010, Kcell launched 3G services in Astana and Al- corporate customers, as well as wholesale voice-carrying services. Moldova: Moldcell maty, based on temporary permission. On December 25, 2010, the The Company received its Internet service provider license in Feb- Moldcell was granted its GSM 900 license in November 1999 and competent authority signed an addendum to the existing GSM licen- ruary 2005, and was granted a landline data transmission license Global Tower commenced operations in Moldova in April 2000. The Company is se, which provides Kcell with the rights to operate a 3G network. The in June 2005 and an infrastructure operating license in April 2006. Global Tower, which was established in 2006 with the vision of fully-owned by Fintur Holdings B.V. addendum requires Kcell to provide all locations with a population “spreading communication everywhere”, and with its new business exceeding 10,000 people with mobile services using UMTS/WCDMA Superonline won a major infrastructure tender initiated by the Tur- model implemented in Turkey for the first time, provides operators, Moldcell was the first operator in Moldova to provide services ranging standards until January 1, 2015. kish Electricity Transmission Corporation (TEIAS) in January 2007, TV and radio broadcasters, as well as civil and military communica- from SMS to roaming for prepaid subscribers, WAP/Internet Access, and has been granted the 10-year operational rights for a fiber-optic tion/monitoring corporations in wireless communication with instal- GPRS/EDGE, 3.5G and BlackBerry Enterprise Solution.Moldcell’s subs- cable between Istanbul and Ankara. In 2007, Superonline became lation, leasing, and maintenance services at international standards criber number had increased to 0.9 million by the end of 2010. the first alternative operator in Turkey to carry domestic traffic. Su- for tower, roof and on-premises infrastructural facilities. peronline provides its customers with affordable packages for fiber Internet, the most advanced Internet-access technology in the world. Serving its customers in more than 5,500 tower fields across Turkey, Turkish Republic of Northern Cyprus: KKTCell With its fiber-optic-infrastructure investments completed within a Global Tower stands out as one of Europe’s leading infrastructure Established in 1999, KKTCell is a subsidiary of Turkcell that operated relatively short timeframe, Superonline introduced its customers to operators, with its tower field portfolio. under a revenue-sharing agreement with the government of the Tur- 100 mbps Internet connections in 2007. Georgia: Geocell kish Republic of Northern Cyprus (TRNC) until the end of July 2007. In The services provided by Global Tower enable its customers to focus Geocell was founded in 1996 as a joint venture between the Geor- 2007, KKTCell signed an 18-year license agreement for the installation On December 2009, Superonline won the public tender for the 15-year their investments on the efficient use of their human resources and gian Ministry of Telecommunications and Turkish company Gürtel and operation of a digital, cellular, mobile telecommunication system lease of BOTAS’s fiber optic infrastructure, with a bid of EUR20.9 milli- energies in their main business areas, rather than on dealing with Telekomunikasyon Yatırım ve Dış Ticaret Anonim Şirketi (Gürtel) as with the TRNC Ministry of Communications & Works. This agreement on, and has been granted the right to use BOTAS’s 11,280 km of routes. exhaustive field operations, the high costs of tower and energy inf- the first GSM operator in Georgia. replaced the GSM-Mobile Telephone System Agreement that was based These routes enable Superonline to access all of Turkey’s regions. rastructure, ever-increasing leasing expenditures and its procedures. on revenue-sharing. By the end of 2010, KKTCell had 386,000 subscri- Geocell began commercial operations in March 1997 and was gran- bers and a 69% market share. KKTCell covers 100% of the population, In 2010, Superonline’s fiber-optic network reached 580,000 home Turkey’s first and only tower service provider, Global Tower aims to ex- ted a GSM 900 MHz operating license in April 1997. In 2006, the and its coverage reaches beyond the geographical borders of the TRNC. passes. In 2010, its contribution to Turkcell’s financials continued tend its rapid growth in Turkey to international markets. Accordingly, Company acquired its UMTS license (2100 MHz frequency), resulting In an exciting development in 2008, KKTCell introduced 3G techno- to improve with a 32.8% revenue growth and an EBITDA margin of in 2009 it began operations in Ukraine under the name of UKRTOWER. in improved network coverage, added capacity and the possibility logy to Northern Cyprus and began offering 3G services and pro- 9.8%. Throughout the year, the focus on the higher-margin residen- for prepaid subscribers to use 3G technology. As of December 2010, ducts to the people of Northern Cyprus on October 14, 2008. In 2010, tial segment increased, resulting in year-on-year segment revenue Geocell had 2 million subscribers. through its radio link project, KKTCell had the only international ga- growth of 70%. Corporate segment revenues grew by 30%, levera- teway other than that of the TRNC Telecommunication Board. ging the strengths of the Turkcell Group, while wholesale revenues grew by 26%, in line with increasing Group synergies. Domestic Subsidiaries Summary data for Superonline 2009 2010 y/y % chg Inteltek Inteltek was established in 2001 and owned by Turktell, a Turkcell Kazakhstan: Kcell Revenue (TRY million) 252.4 335.1 32.8% affiliate, Intralot and Intralot Iberia Holding, with respective shares EBITDA1 (TRY million) 3.6 32.9 813.9% Kcell commenced its activities in 1999 as a joint venture between Superonline of 55%, 20% and 25%. Established with the aim of exploring and EBITDA margin 1.4% 9.8% 8.4pp Fintur Holdings B.V. and Kazakhstan’s national telecommunications Tellcom İletişim Hizmetleri A.Ş., founded in 2004, merged its strength utilizing available business opportunities within the gaming sector, Capex (TRY million) 259.5 480.3 85.1% operator Kazakhtelecom. The Company operates on a renewable 15- and brands with those of Turkey’s leading Internet provider, Supe- the Company is the sole operator of sports betting games in Turkey. year licensing agreement that provides the right to run a standard ronline Uluslararası Elektronik Bilgilendirme, Telekomünikasyon ve 1EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ GSM 900 cellular network. Haberleşme Hizmetleri A.Ş. in May 2009, to operate under the brand release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note, Inteltek is successfully carrying out, on behalf of the Directorate of however, that following the publication of the reconciliation in our Q4 2010 results on February name “Superonline”. Turkey’s innovative telecom operator Superon- 23, 2011, we have made changes to the manner in which we account for the impact of changes the Spor Toto Organization under the General Directorate of Youth As the undisputed market leader in Kazakhstan, based on subscrip- line is continuing its investments in order to become a complete so- in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise and Sports (GSGM), work and related services regarding the estab- our presentation of prior periods, including the Q4 2010 reconciliation. tions, growth rate, investment volume and variety of services, and lution and service provider for its corporate and individual customers. lishment and operation of the central betting system for sports ga-

58 Turkcell Annual Report 2010 59 mes based fixed-odds and paramutual betting. It has also establis- S ubsidiaries hed and operates the risk-management system and services of the main dealership, using Intralot’s technology and know-how, and the strong GSM infrastructure of Turkcell. Turkcell Global Bilgi Turkcell Teknoloji Inteltek is now one of the world’s largest operators in the state- Turkcell Global Bilgi was established in 1999 as a call center. In Established to develop competitive services and products in informa- controlled betting-games sector, and has become an exemplary and response to developments in the sector, as well as evolving and tion and communication technology, Turkcell Teknoloji stands out as leading organization with its contributions to the public and Turkish increasing customer expectations, investments were made to trans- one of Turkey’s leading R&D and innovation companies. In 2007, the sports, thanks to its operations and “iddaa” trademark. As a result, it form Global Bilgi into a “Customer Relations Management Center.” decision was made to establish a techno-park company and enable has almost created a sector providing income for thousands of people. It now has the best technology system in its sector in Turkey, as well R&D staff specialized in information and communication technologi- as in Europe. es within Turkcell since 1994, to continue their R&D and innovative Inteltek won the tender held in August 2008 by the Directorate of activities in an optimal setting. Accordingly, in 2008, a building was Spor Toto Organization under the GSGM to acquire the rights to Operating within Turkcell Group, one of Turkey’s most valuable com- constructed for Turkcell Teknoloji in the Technology Free Zone; de- operate fixed-odds and paramutual betting games based on sports panies, and with a firm position on the world’s prestigious techno- signed with a 500-person capacity, the goal was to establish the most events for a period of 10 years until August 2018. logy lists, Turkcell Global Bilgi maintains its leadership with a 45% favorable living and working environment for those engineers respon- market share. sible for software research and development. This building ranked first The sales activities of Inteltek in Turkey are managed through a in the Architectural Design Awards held in Turkey in 2010. network of over 5,500 agents (incl. 1,000 mobile agents) across 81 Turkcell Global Bilgi provides services with a desk capacity of provinces, five electronic agents over the Internet, GSM, a call center 5,500, distributed among 12 locations – nine in Turkey (in Istan- Developing services and products in areas including customer relati- and a digital TV broadcasting platforms. bul, Izmir, Erzurum, Eskisehir, Diyarbakir, Ankara, and Karaman) ons and channel management, mobile marketing, business intelligen- and three abroad (two in Ukraine, one in Belarus). Turkcell Global ce solutions, SIM assets and services management, roaming soluti- An agreement to protect the ethical values of football has been sig- Bilgi, which has a young employee profile, solely serves Turkcell ons, value-added services, operational and business support systems, ned with the Turkish Football Federation and Spor Toto Organiza- customers, from the Erzurum and Diyarbakir locations. The Erzu- Turkcell Teknoloji employs 360 highly qualified engineers as of 2010. tion, and a guaranteeing position has been undertaken in Turkish rum Call Center, established in 2006, employs 880 people, 45% As the first and the sole company from Turkey to become a member football. Furthermore, a similar agreement has been signed with of whom are female and 55% are male. The average age of emp- of CISQ (Consortium for IT Software Quality), which is setting global UEFA and FIFA via a collective platform, constituted by official Euro- loyees is 26. Of the employees, 0.14% of those at the Erzurum standards of software quality, Turkcell Teknoloji focuses on chan- pean betting companies. Call Center hold a doctoral degree, 0.71% hold a master’s deg- ging, transforming and simplifying people’s lives through its innova- ree, 34.61% hold a bachelor’s degree, 36.31% hold an associate’s tive and customer-oriented approach. Products under development Inteltek has become a member of the World Lottery Association (WLA) degree, 28.09% are high school graduates, and 0.14% are secon- on in-house platforms incorporate the creative ideas of our employe- and the European Lottery Union (EL) in a bid to participate in the in- dary school graduates. es. The value given to innovative and creative ideas is demonstrated dustry at an international level and follow relevant developments. by the increasing number of patents that Turkcell Teknoloji obtains Following the success and increase in business volume achieved in Erzu- each year. Turkcell Teknoloji establishes partnerships with national Inteltek, through the iddaa brand managed on behalf of Spor Toto rum, the Company established the Diyarbakir Call Center in 2008. There and international R&D companies, universities and research centers Organization, continued to create added value for the Turkish eco- are 650 employees in Diyarbakir, of whom 56% are female, and 44% within its eco-system to develop new ideas, and to transform them nomy with tax income generated for the state amounting to TRY1 are male. With an average age of 26, 0.49% of the Diyarbakir Call Center into value-added products. Playing an active role in international billion, as well as contributions to Turkish Sports of TRY496 million holds a master’s degree, 16.37% a bachelor’s degree, and 41.57% an R&D programs, Turkcell Teknoloji is also working with leading R&D in 2010. As part of Inteltek’s strategy of capitalizing on the emer- associate’s degree, while 41.57% are high school graduates. technology companies and universities abroad. ging investment potential in neighboring countries, it received the authorization to organize, operate, manage and develop the fixed- Turkcell Global Bilgi is a major employer, creating employment for Ensuring the international expansion of differentiating products and odds and paramutual sports betting business in Azerbaijan from 7,500 people and providing value-added services to more than 50 solutions of Turkcell and its Group companies, and thus creating value Azerbaycan Azeridmanservis Limited Company in January 2010. In- million people in Turkey and 10 million in Ukraine. Given that the for other operators as well, Turkcell Teknoloji carries out successful teltek owns 51% of Azerinteltek, domiciled in Azerbaijan, for a period call center sector is undergoing rapid expansion both locally and technology and software export operations to the CIS, Middle East, Af- of 10 years. Azerinteltek commenced operations on January 18, 2011. globally, Turkcell Global Bilgi aims to grow in new locations. rica, and Europe, and aims to become a world brand in its area.

60 Turkcell Annual Report 2010 61 Human Resources There is More for Me in Turkcell Human R esources

Our Values and corporate growth. In accordance with the career opportunities The demographics of Turkcell employees are provided in the More Development: Turkcell Academy we offered, the internal promotion rate was 87%; 312 people were following table: We continue to actively sustain the values that guide our actions and transferred to, or rotated within different divisions in Turkcell to take We Develop Our Leaders, Our Employees, Our Business Partners and Employee 2007 2008 2009 2010 conduct, and to extend our sphere of influence through our motto, on new roles and responsibilities, supporting their career develop- Our Entire Eco-system, with our Development Solutions Male 1,854 1,798 1,728 1,778 “Get More out of Life with Turkcell.” We see our values as distinctive ment. In 2010, employee turnover rate in our company was 4.66%. As a leading technology company, Turkcell endeavors to commu- Female 1,021 1,011 981 1,011 behavior, defining the current success of the Turkcell Group: We be- nicate to our team the latest content and the most current issues Average Age 32 33 33 33 lieve that customers come first. We are an agile team. We promote More Sharing in development programs, through the most effective technological

open communication. We are passionate about making a difference. We offer “More Sharing” opportunities to our team through social solutions and infrastructures, due to its evolving working conditions Education Level We value people. channels like Habercell and Paylas Turkcell’li / Turkcell Blog. We and Turkcell’s own dynamic structure. We systematically follow the Post-graduate Degree 484 500 535 569 distribute news related to developments in the Company through performance and potential of all individuals within our eco-system, University Degre 2,066 2,025 1,918 1,986 Today, employees at all levels, from senior management on down, Habercell (News-cell); we offer our services to customers through in particular the Turkcell Group and field teams, and develop them in High School Graduate 316 277 248 226 participate in this process by declaring “There Is More for Me in our employees with the Paylas Turkcell’li application, a practice line with a dynamic business environment and our corporate strategy Secondary School Graduate 9 7 8 8 Turkcell”, and thus supporting our people-based culture. used by all Group companies. of being “Ready” for the competition. At Least One Foreign Language 2,064 1,910 1,819 2,046 Two or More Foreign Language 799 855 789 743 Our Employees: Our Most Valuable Asset More Convenience With these perspectives in mind, the Turkcell Academy offers dif- We offer More of Convenience to our team with additional bene- Acting on our philosophy, “People First in a Pioneering Turkcell”, we This chart does not include part-time employees and interns. ferent development solutions for topics that include “Customer”, consistently prioritize motivating and satisfying our employees. We fits that enhance their professional and private lives; including Flex “Technology” and “Leadership”. In 2010, Turkcell Academy pro- track technologies that will shape our industry, not only in Turkey, Menu, Turkcell Assist, and the Individual Pension Plan. vided 1,026,579 hours of training to 48,685 people in the Turk- but globally; we work to lead exemplary worldwide practices. More Appreciation cell Group eco-system. Our distinctive development solutions in Through Flex Menu, our flexible additional benefits program, our 2010: By creating a flexible, sensitive, and democratic work environment employees may select each year the package that best suits their ne- We Promote Innovation where change is supported, we constantly review the investments eds among available options including shopping vouchers, holiday At Turkcell, we continue to use the process called “I Have a Great • “Turkcell Group Sales Program”: covering all Turkcell Group emp- that add value to our company in order to motivate our team. Our packages, as well as interim payments for individual pension plans Idea!” that works via the Innovation Office, enabling our employees loyees - including dealers, business partners and corporate solution business setting is characterized beyond a “work environment” as and healthy living packages. to pass on original ideas that add value to the Company. We conti- centers - who have contact with Turkcell customers; the program was a “living environment”, and we proceed within this understanding. nue to reward ideas generated through the “I Have a Great Idea!” offered to more than 30,000 people, and featured a broad range of Turkcell Assist, the employee support line launched on September program, and to date Turkcell has recognized 612 employees under development solutions through training programs. These included We demonstrate our motto - More Joy – with the shopping advanta- 1, 2010, is available to employees and their families free of charge. this scheme. Their total contribution to the company has amounted common service issues and sales culture, products and services, and ges offered to Turkcell employees through contracted corporations With Turkcell Assist, they find easier and faster solutions to issues to US$236 million. specialization. We regularly measured the technical knowledge level in our TClub service, in order to make shopping more fun. Through in their private lives; general information and guidance services are of program participants and offered proactive distant learning soluti- Turkcell Social Activity Group (TSAG) we offer enjoyable programs provided 24/7 by experts on medical, financial, legal, psychological, Turkcell is Turkey’s Most Admired Company ons for areas of development. for our employees by organizing social and entertainment activities. and everyday issues. Our priority is to recruit and retain the best talent. Our distinctive Separately, in addition to regular vacation, all employees receive human resources practices continue “to create dedicated people who • The Turkcell Academy Offered Real Customer Experience through one additional day off for their birthdays. The Individual Pension Plan covers all Turkcell employees and offers yield successful results”. Our employees, in turn, say “There Is More “Customer 2.0”: We offered five different development solutions for them the opportunity to invest in their future through a mutual cont- for Me at Turkcell” and reward Turkcell with the highest rates in both improving the awareness and knowledge levels of Turkcell Group More Opportunities ribution model. Female employees with child(ren) aged 2-5 years the industry and in Turkey, in employee retention studies conducted executives and employees as Turkcell Ambassadors, through “Custo- We recruited 343 employees in 2010, in line with our new projects are offered a monthly child care allowance. by independent research companies. mer 2.0”, a customer-focused conversion program.

62 Turkcell Annual Report 2010 63 • We offered specialized training opportunities in “Mobile Commu- implement joint programs and events with universities under the innovative ideas in Turkcell’s focus areas into sustainable business nication and Knowledge Technologies”, with 300 different training “University-Industry Cooperation” program, conducted with Turkcell models that will add value to our society and support entreprene- TSAG organized approximately 500 programs in the Technological Development Program. We supported Academy, the corporate university of the Turkcell Group. urship and innovation.

Human R esources corporate progress with development programs specifically desig- activities in 2010 alone, in which ned for 45 different technical profiles, as well as 500 different class- In the knowledge that the upcoming younger generation will shape Turkcell Academy is Also a Leader in Training Technologies more than 30,000 employees and room training programs. both our nation and our technology, we have designed three prog- In parallel with our leading position in technology, in our training rams, the “Turkcell Mobile Communication and Technology Deve- programs, as alternatives to classical classroom training, we ende- their families participated. • Within the Leadership Development programs, we implemented lopment Program”, the “Turkcell Customer Relations Development avor to use the most suitable methods for individual development a specific management preparation program for high-performance Program,” and the “Turkcell Mobile Marketing Development Prog- with the platforms we have designed. As one of the first Turkish individuals who were candidates for managerial positions. ram” to, share our knowledge and experience with university stu- companies to provide its employees with e-learning solutions, Academy won the honorary award in the “Best New Corporate Univer- dents, and to introduce a qualified labor force to the rapidly evolving we continue to offer development opportunities to approximately sity” category of the Cubic Awards (Corporate University Best in Class) • With the Turkcell Academy Marketing Conferences, we continued information sector. 25,000 people through our Turkcell Academy e-learning platform. and was presented the “Excellence” award in the “Learning Technolo- to bring together Turkcell Group and top management of the other In 2010, we implemented 71% of our educational development so- gies” category of the “Annual Corporate University Xchange Awards for leading companies with globally known authorities in their fields. Turkcell Academy visited universities in 2010 under the “Life with lutions through distant learning methods, using education techno- Excellence and Innovation”, held by the Corporate University Xchange, Last year, Turkcell Academy hosted conferences with well-known fi- Turkcell” and “If You Are Young, You Are the Future” projects, co- logy. We thus saved US$10 million. for most effective use of learning technologies.Following this global gures such as Malcolm Gladwell and David Plouffe, and brought Dan ming into contact with more than 22,000 university students at 75 success, this Turkcell Academy-specific project was published in 2010 Ariely to Turkey in January 2011. universities in 25 cities, with seminars on “Mobile Innovation”, Mobile Training as a case study by the Corporate University Xchange, a leading and “New Technologies”, “Entrepreneurship”, and “Careers”. The Turkcell Academy Mobile Training platform brings training and highly respected international organization in the development sector, New Graduates are at Turkcell Group with Turkcell Academy PAF technology together to make life easier and ensure easy access to with members among corporate universities of leading international (First Step to Professionalism) Training Program… Turkcell Academy supports, in addition to many of Turkey’s most information. This platform can be used with any mobile device that companies in the U.S. Again, the mobile learning practices of Turkcell In 2010, Turkcell Academy continued its First Step to Professiona- prestigious universities, selected academic research and projects on has a mobile network (EDGE, WiFi, 3G, etc.) and WAP/web access, Academy were cited as a case study in a book on mobile learning, The lism (PAF) Program, which it initiated to enable successful young technology, innovation, entrepreneurship, and leadership at world- and stands out as a pioneering practice, in line with Turkcell’s lea- Mobile Edge, by Gary Woodill, an analyst at Brandon Hall; one of the talents to begin their professional life one step ahead and in the renowned universities such as Harvard Business School and the ding vision in technology. most prestigious research organizations in the distance learning field. right direction. The PAF Program encompasses the internship–part- Massachusetts Institute of Technology (MIT), facilitating their coor- time employment–new graduate recruitment phases, and aims to dination with its businesses units. Ranked among the business part- Virtual Classroom Turkcell Academy was also honored with “Leadership Development improve the awareness of these young people of professional life, ners of Bahçeşehir CO-OP (Cooperative Education) and Sabancı CAP The Turkcell Academy Virtual Classroom enables people from diffe- Program” and “Excellence in Practice” awards in 2010 by the Ame- business fields, companies, and jobs, while widening their perspec- (Company Action Project) programs, the Turkcell Academy continues rent locations to attend web-based training activities or conferen- rican Society for Training & Development (ASTD), the world’s largest tive. We seek to offer them part-time and then full-time job oppor- to carry out joint projects and programs with these universities. ces (webinars) independent of their locations. The virtual classroom organization engaged in learning and performance at work. In paral- tunities within the Group, according to their individual and project platform, accessible to large audiences through interactive presen- lel with these achievements, Turkcell Academy was invited to enter performance during their traineeship. In 2010, the Company offered We Support Technologically Promising Young Talent! tations, makes information sharing highly effective. the Corporate University Xchange/Global Leadership Advisory Board. internships to 195 students under this program. We have maintained the “Turkcell Academy Postgraduate Scholars- hip Program”, supporting the development of technologically pro- Web-Based Development Platforms Turkcell Social Activity Group We Add Value to Our Business through University-Industry mising young talent and introducing a qualified labor force to the With the growth of the Internet and social media, web-based self- The Turkcell Social Activity Group (TSAG) continues to design dis- Cooperation sector, since 2007. Designed with the valuable contributions of the learning tools gain increasing importance, allowing our employees tinctive activities for our employees with the motto, “The Fun Part of We support many local and international academic studies and Turkish Information Association, this program supports postgradua- to access best practices, reports, videos, and other resources in any Work”. Every week, TSAG organizes tours, tournaments, kids’ club te and doctoral students with whom we will conduct joint projects in areas they require. Within the Academy, the use of various platforms activities, training courses, competitions, parties, daytime events focus areas of the Turkcell Group, and we facilitate their collaborati- by our employees is increasing; including the virtual library (Ge- and dozens of special activities. TSAG organized approximately 500 Turkcell Academy visited universities on with our business units. tabstract), virtual dictionary (Information Dictionary), video learning activities in 2010 alone, in which more than 30,000 employees and (Academy Instructor TV), electronic database IEEE; “Harvard Manage their families participated. in 2010 under the “Life with Turkcell” The M.I.T. Enterprise Forum, established under the leadership of Mentor” offered to our executives (created by Harvard Business Pub- the Massachusetts Institute of Technology, one of the world’s most lishing and acknowledged as the world’s most effective leadership Our Corporate Sports Clubs and “If You Are Young, You Are the prestigious universities, was held for the second time in a European development portal), and the Harvard Business Publishing Portal. We continue to support approximately 150 athletes from Turkcell, Future” projects, at 75 universities in country – Turkey - with the cooperation of Turkcell. A significant with corporate sports teams for basketball, cycling, bowling, foot- part of our social responsibility vision is the investment in qualified Turkcell Academy Differentiated among International Platforms ball, carting, table tennis, volleyball, sailing, and swimming. We 25 cities. human resources and good ideas, and support of value-added pro- Turkcell Academy, the strategic development center of the Turkcell Gro- take unique pride in the achievements of our corporate sports te- jects in Turkey. With this collaboration, our aim is to transform the up, has been recognized with many awards in recent years. Turkcell ams, representing Turkcell in various leagues.

64 Turkcell Annual Report 2010 65 Mobile Telecommunication Sector With its young and dynamic population and the current penetration levels Turkish market still has a growth potential in the mid-term.

Penetration

The increased importance of operational profitability is in part due M obile Telecommunication S ector Mobile Line Penetration Source: BofA Merrill Lynch, the ICTA to the change in partnership structures in the Turkish telecommu- nications sector. This change came about with the sale of Telsim, the privatization of Türk Telekom, the sale of Telecom Italia Mobile’s shares in Avea to Türk Telekom, and the purchase of Telsim by Vo- dafone. Mobile number portability (MNP), which was introduced to 127% 101% the Turkish market on November 9, 2008, led to aggressive flat rate 85% offers that negatively impacted the previously rational approach to competition between operators in the Turkish market. Unlimited flat rates for calls resulted in a change in traffic composition from on-net Europe Developing Turkey to off-net and a decline in multiple SIM card usage. Together these Countries factors had a negative effect on operational profitability as well as a Source: the ICTA decrease in mobile line penetration. Mobile Subscriber Number (millions) 3G 2G 65.8 62.8 Mobile line penetration, which is approaching 130% in European 61.8 countries, fell 2 percentage points in Turkey to 85% in 2010 due to a decline in multiple SIM card usage. 42.4 55.7 65.8 On the other hand, with its young and dynamic population and the current penetration levels, Turkish market still has a growth potenti- al in the mid-term. In 2011, we expect the number of mobile lines to 19.4 grow in parallel to population growth, and mobile line penetration 7.1 2008 to remain in-line with the year-end 2010 level. 2009 2010

66 Turkcell Annual Report 2010 67 Direct cost of revenues: In 2010, direct cost of revenues including 2009, partially netted off by the decrease in interest income on de- Financial Review (Consolidated) Competitive offers in the market depreciation and amortization increased by 5.7% to TRY5,039.2 mil- posits due to lower interest rates and the increase in interest expen- Profit & Loss Statement lion. As a percentage of revenue, direct costs increased from 53.4% se on loans as a result of the increase in outstanding debt balance. have remained aggressive. Turkcell (million TRY) 2009 2010 y/y % chg to 56.0% at 2010, mainly due to increases in depreciation and Total Revenue 8,936.4 9,003.6 0.8% amortization (up 2.5 pp), network-related expenses (up 0.4 pp), and Share of profit of equity accounted investees: Our share in the net maintained its leading position with a 1 Direct cost of revenues (4,769.3) (5,039.2) 5.7% other items (up 0.7 pp); which were partially offset by the decrease income of unconsolidated investees, consisting of the net income/(ex- Depreciation and amortization (908.7) (1,139.7) 25.4% 54% subscriber market share. in interconnect costs (down 1.0 pp). pense) impact of Fintur and A-Tel, increased by 55.5% to TRY184.7 Gross Margin 46.6% 44.0% (2.6pp) Administrative expenses (421.2) (521.9) 23.9% million for the full year, mainly due to the higher net income contri- Competition Selling and marketing expenses (1,676.2) (1,633.9) (2.5%) Administrative expenses: General and administrative expenses as bution from Fintur (particularly from the operations in Kazakhstan). Competitive offers in the market have remained aggressive. All ope- EBITDA2 2,978.4 2,948.3 (1.0%) a percentage of revenue increased by 1.1 pp to 5.8% in 2010. This

M obile Telecommunication S ector rators focused on increasing their postpaid subscriber base by pro- EBITDA Margin 33.3% 32.7% (0.6pp) was mainly due to higher bad debt expenses arising from the inc- Income tax expense: For 2010, the total taxation charge decreased by viding high minute incentive port-in offers, launching lower priced Net finance income / (expense) 223.8 264.0 18.0% rease in the postpaid subscriber base together with higher wages 8.6% to TRY483.5 million as a result of a decrease in profit before tax. Finance expense (287.1) (153.4) (46.6%) voice packages and continuing to offer flat rate minute packages for and salaries. Of the total tax charge for FY 2010, TRY508.1 million is related to cur- all directions. The focus on segmented offers continued throughout the Finance income 510.9 417.4 (18.3%) Share of profit of associates 118.8 184.7 55.5% rent tax charges while the deferred tax income totaled TRY24.6 million. year, while 3G and terminal bundled offers gained pace towards the Income tax expense (529.1) (483.5) (8.6%) Selling and marketing expenses: For the full year, selling and mar- year-end. Net Income 1,701.6 1,764.3 3.7% keting expenses as a percentage of revenue decreased by 0.7 pp to Net Income: Net income increased by 3.7% to TRY1,764.3 million.

1 including depreciation and amortization expenses. 18.1% mainly due to lower selling expenses and frequency usage 2 Turkcell maintained its leading position with a 54% subscriber mar- 2 EBITDA EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at fees paid for prepaid subscribers as a result of the decline in the Consolidated Balance Sheet Data (million TRY) http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ (at period end) 2009 2010 y/y % chg ket share. release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note, prepaid subscriber base, which were partially offset by the higher however, that following the publication of the reconciliation in our Q4 2010 results on February Cash and cash equivalents 4,660.9 5,105.1 9.5% 23, 2011, we have made changes to the manner in which we account for the impact of changes wages and salaries. Regulation in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise Total assets 14,034.3 15,142.4 7.9% our presentation of prior periods, including the Q4 2010 reconciliation. The Turkish mobile market witnessed some radical changes in 2010. Long term debt 1,236.4 2,175.7 76.0% EBITDA: In 2010, nominal EBITDA was at TRY2,948.3 million, while Total debt 2,276.6 2,840.8 24.8% The significant decrease in interconnection rates by 52% and ma- the EBITDA margin was at 32.7%. 1.1 pp higher general and admi- Total liabilities 5,156.4 5,505.3 6.8% ximum prices by 38% negatively impacted the market and further tion of active subscribers lengthening the duration of prepaid churn nistrative expenses together with 0.2 pp higher direct cost of reve- Total shareholders’ pressured per minute revenue and profitability. Additionally, we to nine months from seven months. nues were partially compensated by the 0.7 pp lower selling and equity / Net Assets 8,877.9 9,637.1 8.6% have seen some regulatory changes, such as the introduction of an marketing expenses. TURKCELL GROUP: FINANCIAL AND OPERATIONAL PERFORMANCE upper limit for calls of up to 60 seconds; transition to TRY from unit- IN 2010 Total Debt – Cash Position: based pricing for prepaid subscribers, and the change in the defini- 19% The following discussion focuses principally on the developments Net finance income/(expense): For the full year, we recorded net Our Company has a significantly high net working capital and a 19% finance income of TRY264.0 million mainly due to an increase in in- strong balance sheet. Turkcell has a net cash position of TRY2.3 bil- Subscriber Market Share and trends in our business in 2010. All financial results in this an- terest income in 2010 arising from the absence of legal provisions in 19% nual report are prepared in accordance with International Financial lion as at year-end 2010. We manage the exchange rate - interest Turkcell 54% Reporting Standards (“IFRS”) and expressed in Turkish liras and/or risks of the balance sheet by using financial tools and keeping our Vadafone 54% Dollars unless otherwise stated. . foreign-exchange denominated assets at optimum levels. We plan to 27% Avea 27% Our Company has a significantly high use vendor financing that spread the payables to the vendors related 54% Revenue: For the year 2010, consolidated revenue slightly improved net working capital and a strong to our infrastructure investments over the long-term. 27% to TRY9,003.6 million, mainly due to the 26.4% increase in mobi- le internet and services revenues of Turkcell Turkey to TRY1,619.1 balance sheet. Turkcell has a net cash Consolidated debt amounted to TRY2.8 billion as of December 31, million, as well as the 11.1% higher contribution from subsidiaries position of TRY2.3 billion as at year- 2010. TRY941 million of this was related to Turkcell’s Ukrainian year-on-year (particularly, through Superonline, which increased operations. TRY1,878 million of our consolidated debt is at a floa- Source: the ICTA revenues by 32.8% to TRY335.1 million from TRY252.4 million), end 2010. ting rate and TRY665 million will mature in less than a year. During despite the adverse effects of MTR and price cap cuts. 2010, our debt/annual EBITDA ratio increased to 96.4%.

68 Turkcell Annual Report 2010 69 varied capital market tools in order to maintain capital diversity. All interconnection rates. The rise was mainly attributable to rising mo- Consolidated Cash Flow debt activities are managed so as to ensure not to negatively impact bile internet revenues and postpaid subscriber base. In 2010 we registered 734,000 (million TRY) 2009 2010 Postpaid ARPU in TRY terms fell by 2.4% to TRY40.0, while prepa- EBITDA1 2,978.4 2,948.3 ratings, while also taking into account fundamental debt ratios. id ARPU decreased slightly by 1.7% to TRY11.4. This was mainly net new postpaid subscribers. Our LESS: postpaid subscriber base increased Capex and License (2,664.0) (1,667.5) Subsidiaries included in the consolidation have no stake in share- due to the negative impact of declining MTRs and the reduction of the maximum price cap, as well as the dilutive impact of prepaid to Turkcell (1,823.1) (782.4) holders’ equity. by 7.4% in to 10.1 million, from 9.4 Ukraine2 (325.2) (102.7) postpaid switches. Investment & Marketable Securities (232.1) (64.3) Donations Made in 2010: million a year earlier. Net Interest Income/Expense 223.5 283.8 A total of TRY8,556,709 in cash donations was made in 2010 consis- Forward Looking Expectations Other (595.7) (662.6) Net Change in Debt 1,119.0 465.9 ting of TRY8,469,952 cash donations to various associations, foun- Going forward, we view mobile internet in Turkey and our subsidi- M obile Telecommunication S ector Dividends paid (1,098.0) (859.3) dations and institutions; and TRY86,757 donations in kind to schools aries’ contribution as an important growth driver. We will continue Cash Generated (268.9) 444.3 and projects approved by the Ministry of Culture and Tourism. In 2010, major cash outflows were the capital expenditures and divi- Cash Balance 4,660.9 5,105.1 to invest in our network quality. We will keep our value focus, maxi- dend payment. In 2010, our capital expenditures totaled TRY1,667.5 mizing customer experience to ensure loyalty, while building on our 1 EBITDA is a non-GAAP financial measure. See page 14-15 of 2010 Press Release at Operational Review (Turkcell Turkey) strong brand name. million, of which TRY782.4 million was related to Turkcell Turkey, http://www.turkcell.com.tr/c/docs/announcements/ announcements_2011_0223_Q4_2010_press_ TRY102.7 million to our Ukrainian operations, TRY185.4 million to release.pdf for the reconciliation of EBITDA to net cash from operating activities. Please note, however, that following the publication of the reconciliation in our Q4 2010 results on February Subscribers: Our subscriber base in Turkey totaled 33.5 million as In 2011, we expect our revenues to grow which will mainly be driven our Belarusian operations, and TRY480.3 million to Superonline. In 23, 2011, we have made changes to the manner in which we account for the impact of changes in foreign exchange rates in our statement of cash flows for 2010. As a result, we expect to revise our of December 31, 2010, down by 5.4% year-on-year. In 2010, we by increasing mobile internet revenues, as well as growing contri- 2010, we also paid a cash dividend of TRY859.3 million to our sha- presentation of prior periods, including the Q4 2010 reconciliation. maintained our focus on the postpaid segment with newly launched 2 The appreciation of reporting currency (TRY) against US$ is included in this line. butions from our subsidiaries. reholders. campaigns and offers, increased data lines and promoted switches from the prepaid to the postpaid segment. This resulted in a 7.4% Profitability and Solvency Ratios 2009 2010 y/y % chg Until the end of the 3rd quarter of 2007, Turkcell Turkey benefited increase in our postpaid subscriber base to 10.1 million, from 9.4 Gross Profit Margin 46.6% 44.0% (2.6pp) from investment incentives, and we did not use any in 2010. Group million a year earlier. Demonstrating the success of our value focu- EBITDA Margin 33.3% 32.7% (0.6pp) sed subscriber acquisition approach in 2010 we registered 734,000 subsidiary Turkcell Technology, received support for 60% of its ex- Net Profit Margin 19.0% 19.6% 0.6pp penditures accepted under the “Industry R&D Projects Supporting Total Liability/Equity Ratio 58.1% 57.1% (1.0pp) net new postpaid subscribers. Accordingly, the postpaid subscriber Program”, which is conducted in association with TUBITAK and the Total Debt/EBITDA Ratio 76.4% 96.4% 20.0pp base made up 30.1% of our overall subscriber base, up from 26.6% Undersecretaries of Foreign Trade. In 2010, TRY1.1 million is deduc- in the same period of the previous year. At the same time, we saw a Operational Summary (Turkcell Turkey) slowdown in the contraction of the prepaid subscriber base, which ted from the direct cost of revenues item. declined by 10.4% to 23.3 million, from 26.0 million a year earlier. Turkcell Turkey 2009 2010 y/y % chg Group capex for 2011 is expected to be in line with 2010 (TRY1.7 Number of total subscribers (mn) 35.4 33.5 (5.4%) Churn Rate: Churn refers to voluntarily and involuntarily disconnec- billion). Number of postpaid subscribers (mn) 9.4 10.1 7.4% Number of prepaid subscribers (mn) 26.0 23.3 (10.4%) ted subscribers. Our annual churn rate rose by 1.3 pp to 33.9%, mainly due to declining multiple SIM card usage. The majority of Turkcell Turkey had TRY713 million in loans as of year-end 2010. ARPU (Average Monthly churners comprised low ARPU generating prepaid subscribers. Also, at the Group level, there are some loans obtained from banks. Revenue per User), blended (US$) 12.0 13.0 8.3% ARPU, postpaid (US$) 26.6 26.6 - Currently, our company has no financial instrument in circulation in MoU: MoU increased by 33.4% to 179.1 minutes in 2010, up from ARPU, prepaid (US$) 7.5 7.6 1.3% We will continue to invest in our the capital markets. 134.3 minutes in 2009, driven by attractive tariffs and campaign of- ARPU, blended (TRY) 18.5 19.5 5.4% fers. network quality. We will keep our All Group companies meet their cash needs covered in their busi- ARPU, postpaid (TRY) 41.0 40.0 (2.4%) ARPU, prepaid (TRY) 11.6 11.4 (1.7%) ness plans and approved by their Board of Directors through cre- In 2011, we expect healthy growth in usage as our successful incen- value focus, maximizing customer

tives and loyalty programs continue. dit or capital increases in alignment with central management. The Churn (%) 32.6% 33.9% 1.3 pp experience to ensure loyalty, while Company may undertake long and short-term debt in accordance ARPU: In 2010, blended average revenue per user (“ARPU”) in TRY with Group financing needs and market forecasts. Debt tools used MOU (Average Monthly Minutes building on our strong brand name. of usage per subscriber), blended 134.3 179.1 33.4% terms increased by 5.4 to TRY19.5, respectively, despite decreasing range from bank loans to Export Credit Agency loans, and include

70 Turkcell Annual Report 2010 71 International Ratings Other Information About Our Operations International Ratings For Turkcell As of March 2011 Public Announcements from December 31, 2010 to April 4, 2011

Moody’s Standard & Poor’s February 22, 2011 sale process of 51% of Serbia Telecom’s shares. Following the eva- On November 5, 2010, we have announced that on September 22, luation process, we have decided not to bid in the tender for the 51% Local currency rating Ba2 Local currency rating BB+ 20101, Turkey’s Information and Communication Technologies Aut- of Serbia Telecom’s shares. In the event of any material development Foreign currency rating Ba2 Foreign currency rating BB+ hority (“ICTA”) has decided Turkcell to reimburse its subscribers in which needs to be publically disclosed, our Company will make the necessary announcements according to the Circular VIII, No: 54 of Outlook Positive Outlook Positive regards to a change in one of its tariff options (namely, BizBize Her Yöne Kamu 1500) following the ICTA’s decision of March 25, 20092 Turkey’s Capital Markets Board. and fined Turkcell an amount equal to 0.33% of Turkcell’s 2009 On January 8, 2010, Moody’s affirmed Turkcell’s Ba2 foreign On January 26, 2011, S&P upgraded the outlook on stand-alone revenues. Our company filed a lawsuit for the suspensi- March 23, 2011 and local currency ratings and upgraded the Company’s Turkcell’s long-term foreign currency rating from “stable” on of execution, then annulment of the mentioned decision and that Announcement regarding Turkcell ‘s Board of Directors’ decision on outlook from “stable” to “positive.” Moody’s attributed this to “positive” and affirmed both Turkcell’s long-term foreign Regional Ankara Administrative Court suspended the execution of the Ordinary General Assembly. (Detailed information is on page 84) revision to the Company’s robust operational and financial currency and local currency ratings as “BB+”. With this the Authority’s decision. performance, as well to as its profitability, sustainable cash- rating evaluation, Turkcell remains S&P’s highest rated (1) reference number 2010/DK-10/543 March 23, 2011 flow generation capacity, and the positive momentum in its company in Turkey. (2) reference number 2009/DK-07/149 Announcement regarding Turkcell ‘s Board of Directors’ proposal on Ukraine business. dividend distribution. (Detailed information is on page 179) The revision primarily reflects Turkcell’s improving March 1, 2011 On June 27, 2008 Turkcell has announced that the Information and March 24, 2011 Fitch Ratings profitability and the increasing profitability of Turkcell Communication Technologies Authority (“ICTA”) has issued a fine for Some of the media reported today that our shareholder TeliaSonera subsidiaries, particularly Superonline in Turkey and Astelit Local currency rating BBB- the amount of TRY32 million with regards to certain Turkcell cam- planned to take legal action against the Chairman of Turkcell, Mr. in Ukraine, as well as the Company’s improving cash Foreign currency rating BBB- paigns relating to some of its subscription packages that offered free Colin J. Williams. Since Turkcell has received no information regar- generation ability. Outlook Stable minutes to its customers under certain conditions. Turkcell also ad- ding this issue, we cannot share any development at this stage. ded that the Company would take the necessary legal steps to dis- pute this claim. Turkcell filed a lawsuit requesting the annulment of March 31, 2011 On March 18, 2010, Fitch Ratings affirmed Turkcell’s long- this decision immediately after the payment of TRY24 million with a As per the announcement on November 30, 2010, Turkcell stated term foreign and local currency Issuer Default Ratings 25% discount on August 1, 2008. The Court has rejected our claim, that the Company had prequalified to receive the specifications and (IDR) at “BBB-”, respectively. The outlook on both IDRs is and Turkcell is to appeal against this Court’s decision accordingly. tender documents for the third mobile license tender to be held by “Stable”. the Syrian Arab Republic. Following evaluation of the current tender March 9, 2011 conditions, Turkcell has decided not to bid for the third mobile licen- Fitch Ratings claim that the ratings reflect Turkcell’s leading In line with our strategic priorities, we have made changes to our se tender held by the Syrian Arab Republic. management team to be effective from March 14, 2011. Selen Koca- market share in Turkey’s mobile telecom sector, despite bas becomes Chief Corporate Business Officer. Emre Sayin, who was March 31, 2011 increased competition, as well as strong credit metrics the Chief Corporate Business Officer, has been assigned to manage Today; Capital Markets Board has requested an explanation from compared with peers in the neighboring region. Consumer Strategic Projects reporting to the Chief Executive Officer. our Company, after Sonera Holding BV’s announcement to the Is- Our Business Support Function is being restructured and renamed tanbul Stock Exchange in regards to the lawsuit initiated against our as the Human Resources Function and Meltem Kalender Ozturk be- Company’s Chairman of Board; Colin J. Williams. As per our announ- comes the Chief Human Resources Officer. cement following media reports on March 24, 2011, since Turkcell has received no information regarding this issue, we cannot share March 11, 2011 any developments at this stage. As per the announcement on December 17, 2010, we had stated that our Company was conducting research and analysis regarding the

72 Turkcell Annual Report 2010 73 Investor Relations Turkcell had the fourth highest market capitalization among all those listed on the İMKB as of December 31, 2010, with a market capitalization of US$15.01 billion. Investor R elations

Investor Information Five-year share performance and market capitalization Turkcell shares were simultaneously listed on the Istanbul Stock Shareholder Structure Exchange (İMKB) and in the U.S., on the New York Stock Exchan- Turkcell’s free float was initially 10.5 percent, and over time it rose ge (NYSE) on July 11, 2000. The shares are traded with the TCELL to 34.7 percent as of year-end 2010, as a result of the stake sales of symbol at the IMKB, and the TKC symbol on the NYSE, in the form of shareholders. American Depositary Shares (ADS). Currently, two ADSs represent

1 2 3 4 5 6 As of December 31, 2010, Turkcell’s shareholder structure is as fol- five tradable shares. The nominal value of Turkcell’s issued share lows: capital is TRY2,200,000,000, consisting of 2,200,000,000 shares with a nominal value of TRY1 each.

Shareholder Value of Stake (TRY) Share Capital (%) As the only Turkish company listed on both the İMKB and NYSE, Turkcell Holding A.Ş. 1,122,000,000.238 51.00% Turkcell had the fourth highest market capitalization among all tho- Sonera Holding B.V. 287,632,179.557 13.07% se listed on the İMKB as of December 31, 2010, with a market capi- MV Holding A.Ş. 26,021,712.590 1.18% talization of US$15.01 billion. Çukurova Holding A.Ş. 995,509.429 0.05% Müflis Bilka Bilgi Kaynak 137,199.575 0.01% ve Iletisim San. Ve Tic. A.Ş. Free Float 763,213,398.611 34.69%* 15.00 24.49 23.21 TOTAL 2,200,000,000.000 100.00% 22.28 10.00 17.27 20.0030.00 13.21 (*) Although our company’s free float is 34.69%, according to the “Active Circulation 5.00 10.00 Share Report” announced by the Central Registry Agency, pursuant to Capital Mar- kets Board’s (CMB) decision no. 21/655 of 23.07.2010, modified with its decision no. 24/729 of 18.08.2010, our company has 557,614,008.03 shares in active circulation 0.00 0.00 2006 2007 2008 2009 2010 as of 31.12.2010, its ratio being 25.34%. The difference results from the exclusion of Market Cap Share Price* Pınar Oz Varas Ozge Aydemir Nihat Narin “shares that i. are owned by public corporate entities, ii. are owned by corporations 1 2 3 associated with the company’s founders (companies subject to consolidation), iii. are *Based on closing prices (billion TRY) (TRY) Source: Bloomberg [email protected] [email protected] [email protected] owned by real and legal partners who own 5% or more of the company’s capital, iv. are owned by a) members of the Company’s Boards of Directors and of Supervisors, TCELL (TRY) 2006 2007 2008 2009 2010 Yesim Tohma Esra Agca b) the Director-General or his/her equivalents or superiors in terms of authorities and 4 5 6 Banu Uzgur roles, and c) top managers who report directly to the Director-General or his/her equi- Lowest 4.46 5.59 6.19 6.86 7.80 [email protected] [email protected] [email protected] valents in terms of authorities and roles, v. are owned by funds and foundations of the Highest 6.95 12.09 11.30 10.32 11.18 company, vi. are granted as equity capital pursuant to the capital markets legislation, collateralized after having been purchased by transaction on credit or granted as colla- Contact Information for Investor and International Media Relations teral, in addition to collateralized shares for clearing bank markets, vii. are legally rest- TKC (US$) 2006 2007 2008 2009 2010 ricted and cannot be traded, viii. are prohibited, and ix. are seized” from the definition Lowest 8.21 10.73 8.74 10.04 12.34 Phone: +90 (212) 313 18 88 of “ratio of shares in active circulation,” as specified by the SPK in its decisions. Since Fax: +90 (212) 292 93 22 the difference may be caused by one or more of the issues specified in the decision, it Highest 13.17 25.97 24.99 17.91 19.59 is not possible for our company to know it. E-mail: [email protected] Source: Bloomberg URL: http://www.turkcell.com.tr/en/investorRelations

74 Turkcell Annual Report 2010 75 investors, analysts, and other related parties. The Investor Relations Relative share performance in 2010 (TCELL) Relative share performance in 2010 (TKC) website received the “Excellence” award in both the “Telecommuni- 1.40 Kaynak: Bloomberg 1.20 Kaynak: Bloomberg In 2010, we won the “Best Corporate cation” and “Investor Relations” categories, from Interactive Media 1.30 Investor R elations 1.10 Awards (IMA), recognized as one of the world’s most prominent In- 1.20 Governance in Turkey” award at first 1.10 1.00 global corporate Governance Awards ternet organizations. 1.00 0.90 0.90 ceremony in London. Separately, Contact Information for Investor and International media Relations 0.80 0.80 Turkcell’s financial information and Company news is available on 0.70 0.70 Turkcell as selected as the “company its website, or may alternatively be obtained from the Investor Re- 0.60 0.60 of the Decade” in Turkey by World lations Department. ct-10 ct-10 ar-10 ar-10 ay-10 ay-10 ep-10 ep-10 Jul-10 Jul-10 O Jan-10 O Jan-10 Jun-10 Jun-10 Apr-10 Dec-10 Feb-10 Apr-10 S Dec-10 Feb-10 S Nov-10 Nov-10 Aug-10 M Aug-10 M M M Finance Magazine in 2011.

and on rules and regulations to which we are bound to investors Trading volume and foreign ownership Foreign ownership (%) and analysts through regular meetings, local and international con- Compared with 2009, Turkcell’s trading volume declined by 20 per- ferences, analyst days, and teleconferences. Accordingly, we met 100 cent to 9.4 billion in 2010. 2 percent of the total trading volume approximately 550 investors in 2010, by attending 15 local and in- 90 of İMKB-100 index was realized with Turkcell shares. The foreign 80 ternational conferences, visiting their premises in the U.S., Europe, ownership in Turkcell’s free float had reached 93 percent as of the 70 and Canada. Moreover, we conducted an Investor & Analyst Day on 60 end of 2010. 50 January 17, 2011 in London, attended by approximately 80 people. Investor Relations ct-10 ar-10 ay-10 ep-10 Jul-10 O Jan-10 Jun-10 Apr-10 Dec-10 Feb-10 S Nov-10 Aug-10 M M We have endeavored to continue providing both our company and We reinforced the difference we created in our shareholders with maximum value in 2010. Investor Relations with awards in 2010

The Turkcell Investor Relations Department strives to ensure Com- In February 2010, with World Finance Magazine’s combi- pany shares remain a favored investment tool for domestic and over- ned 175 years of business journalism and research, our Company seas institutional investors and shareholders in order to create value won the “Best Corporate Governance in Turkey” award for the Company and all its stakeholders. The Department also seeks at World Finance Magazine’s first global Corporate Governance to translate the Company’s operational performance into market va- Awards ceremony in London. lue and to promote the company in the most effective way possible. We strive to provide both our company On March 23, 2010, Turkcell was ranked among the top Since its shares are traded on both the U.S. and Turkish stock exc- 5 companies in Europe by its Financial Disclosure and our shareholders with maximum hanges, Turkcell has shaped its corporate governance model in ac- Procedures and received an award at the 2010 Investor Re- value, without compromising cordance with the requirements of both markets. lations Global Rankings (“IRGR”) Awards ceremony. A total of 503 companies participated in 2010 IRGR awards, including our corporate policy based on In line with these requirements, the Turkcell Investor Relations de- a number of the world’s leading corporate names such as Micro- timely and fair disclosure and our partment strives to provide both our company and our shareholders soft, IBM and Procter & Gamble. All companies were categorized in with maximum value, without compromising our corporate policy ba- 5 regions. Turkcell was evaluated in the Europe region along with principles of transparency, reliability, sed on timely and fair disclosure, and our principles of transparency, other leading European corporate names such as Deutsche Telekom, reliability, accountability, and integrity since the public offering date. accountability, and integrity since the Credit Suisse, Bayer and BP. public offering date. Therefore, in 2010, we continued to disclose information on our In addition, the Investor Relations Department continued to maximi- strategy and activities, on sectors and markets where we operate, ze our Investor Relations website to communicate with shareholders,

76 Turkcell Annual Report 2010 77 Corporate Governance Corporate Governance Framework of Turkcell Corporate Governance

The Company has adopted the following guiding nance Guidelines, the Board, taking into consideration the sugges- principles: tions of the Corporate Governance Committee, is to review its own size and determine the most effective number for future activities. Responsibilities of the Turkcell Board of Directors Together, the Corporate Governance Committee and the Board of The business affairs of our Company are managed under the di- Directors are, within the scope of the current structure of the Board rection of the Board, which represents and is accountable to our of Directors, to reassess the skills and qualification needed for Board shareholders. The responsibilities and authority of the Board consist membership. Each Board Member should have time to devote to the of, but are not restricted to, the following: activities of the Board, enhance their knowledge about the global te- lecommunications industry and related industries, and attend annu- • building the vision of the Company, approving of local and inter- ally at least 75% of Board meetings. Each Board Member is encou- national business strategies and determining short- and long- raged to limit the number of other public company boards on which term goals; he or she serves and to be mindful of his or her other existing and • Approving the Company’s annual budget and business plans planned future commitments, so that such other directorships and and its revisions; commitments do not materially interfere with his or her service as • monitoring the strategic and financial performance of the Com- an effective and active member of the Company’s Board. In addition, pany and ensuring that corrective measures are carried out as the Corporate Governance Committee is to develop and supervise an necessary; orientation program for new elected Board Members. • Controlling important expenditures not included in the annual operating plan of the Company; On our Ordinary General Assembly dated April 29, 2010, Colin J. • Consistent with applicable regulations, overseeing the prepara- Williams, Nazli Karamehmet Williams, Mehmet Bülent Ergin, Karin tion of the annual report and finalizing this report for presenta- Eliasson, Tero Kivisaari, Oleg Malis, Alexey Khudyakov were selected tion at the General Assembly of shareholders; as Turkcell Board of Directors for a period of three years. • Consistent with applicable regulations, approving quarterly finan- cial results, the audit report and amendments to the accounting Operations of the Board of Directors policies previously adopted by the Company or any material chan- As per Turkcell’s Corporate Governance Guidelines, the Board of Di- ge in the method or timing of reporting of the financial results. rectors should generally have at least 11 regular meetings per year at appropriate intervals to carry out their responsibilities. Additional Structure of the Board of Directors meetings may always be convened, upon reasonable notice, to add- The Board of Directors consists of at least seven members chosen ress specific needs of the Company. The first Board meeting of the year for a maximum three-year term. As per Turkcell’s Corporate Gover- should convene within one month of the Annual General Assembly.

78 Turkcell Annual Report 2010 79 The Chief Executive Officer should take the utmost care to ensure an al proposals to that end. As per Turkcell’s Corporate Governance General Assembly of Shareholders whether Board Members will be On March 23, 2011, our Board of Directors decided to propose an equal flow of information to all Board members prior to Board of Di- Guidelines, the committee is to establish a transparent system for remunerated and if such is the case, the form and amount of com- aggregate gross cash dividend of TRY1,328,696,972 , which corres- rectors meetings. It is the Chief Executive Officer’s responsibility to the determination, evaluation and training of board member can- pensation to be paid to the Board members. pond to 75% of Turkcell’s distributable income to be paid in cash to establish a system through which the Board of Directors access to the didates. The Committee also makes recommendations to the Board, our shareholders. work of the management and other employees of the company in or- where appropriate, regarding the Company’s compensation strategy Evaluation of the Board of Directors and Management, and Manage-

Corporate Governance der to provide an effective flow of information to the Board of Directors both for the Board Members and the Chief Executive Officer and Chi- ment Succession and Development Changes in the Articles of Association and to ensure a reasonable access to the management. ef Financial Officer and the Chief Executive Officer and Chief Financi- As per Turkcell’s Corporate Governance Guidelines, the Board sho- At the Ordinary General Assembly held on April 29, 2010, Article 3 al Officer succession plan. uld conduct a self-evaluation on an annual basis. The Board of Di- entitled Purpose and Subject Matter of Turkcell’s Articles of Associa- Committees of the Board of Directors rectors must determine performance targets for the Company, and tion was amended in line with Turkey’s Capital Markets Board’s ar- The Board of Directors has two committees, each consisting of at Furthermore, in the relations between the Company and its share- therefore, the Chief Executive Officer and Chief Financial Officer each rangement dated September 9, 2009 and numbered 28/780, which least two members: the Audit Committee and the Corporate Gover- holders, the Committee assists the Board. To that end, it oversees the year. In line with the financial and other targets specified, the Bo- rules that public companies can provide guarantees, pledges and nance Committee. If necessary, experts outside the Board may be investor relations activities. ard of Directors, with the assistance of the Corporate Governance mortgages, to third parties for them to carry out their ordinary busi- eligible to be commissioned on a committee. The Board of Direc- Committee, must evaluate the performance of the Chief Executive ness operationsonly if such third parties are fully consolidated in the tors can also establish additional committees as required or deemed Audit Committee Officer and of the Chief Financial Officer at the end of each year and, company’s financial statements. appropriate. Board of Directors’ members should not serve on more In compliance with laws and regulations applying to Audit Commit- determine their remuneration. The Board of Directors, taking into than two committees. Each committee serves as advisory bodies to tees, the chief duties of the Committee are: consideration the recommendations of the Corporate Governance Capital Markets and Corporate Governance Compliance Unit the Board of Directors and makes recommendations to it. Committee and with the assistance of the Chief Executive Officer, At Turkcell, in compliance with Article 8 of Series: IV, No. 41 • To assist in determining the quality and integrity of the will review and approve the plan for successions to the posts of Chief “Communiqué Regarding the Principles that apply to Public Com- At the Board of Directors meeting on May 27, 2010, within the con- Company’s financial statements and related disclosure; Executive Officer and the Chief Financial Officer. panies” issued by the Capital Markets Board, a Capital Markets and text of Turkcell’s Corporate Governance Principles and applicable • To oversee the implementation and efficiency of the Company’s Corporate Governance Compliance Officer was appointed in Febru- regulations, it was decided that Mr. Colin J. Williams and Mr. Alexey accounting system; Dividend Distribution Policy ary 2009 pursuant to a Board of Directors decision and Capital Mar- Khudyakov will continue their Audit Committee memberships and • To pre-approve the appointment of and services to be provided Turkcell has adopted a dividend policy, which is set out in its Corpo- ket Corporate Governance Compliance Unit was established in May that Mr. Colin J. Williams will continue as Chairman of the Audit by the independent audit company; rate Governance Guidelines. 2009, for the purposes of: Committee. At the same meeting, it was decided that Mr. Colin J • To approve and monitor the agreement between the indepen- Williams, Ms. Karin B. Eliasson, Mr. Mehmet Bülent Ergin and Mr. dent auditor and the Company; As adopted, our general dividend policy is to pay dividends to sha- • ensuring company compliance with capital market regulations Oleg A. Malis are appointed as Corporate Governance Committee • To oversee performance and efficiency of the independent audi- reholders with due regard to trends in our operating performance, and members of the Company and that Mr. Colin J. Williams will serve as ting system; financial condition and other factors. Since 2004, the Board of Direc- • Coordinating corporate governance practices of the Company. Chairman of the Corporate Governance Committee. • To oversee performance and efficiency of the internal auditing tors has endeavored to distribute cash dividends of at least 50% of mechanism. our distributable net profits per fiscal year, although the payment of Within the framework of ensuring compliance with capital market Corporate Governance Committee dividends remains subject to our cash flow requirements, applicable As per Turkcell’s Corporate Governance Guidelines, the fundamental The Board of Directors is to assess the independence and qualifica- Turkish laws and the approval of, or amendment by, the Board of regulations, rules and regulations pertaining inside information role of the Corporate Governance Committee is to assist the Board tions of every member of the Audit Committee to ensure that he or Directors and the General Assembly of Shareholders. were provided to management and employees on regular basis. with the development and implementation of the Company’s cor- she is qualified to be a Committee Member, and, if necessary utilize porate governance principles, and presents to the Board remedi- outside consultants or advisors. Pursuant to CMB regulations, a list of those having access to insi- Cash Dividend de information is maintained. Furthermore, information regarding Remuneration of the Board of Directors (TRY) Cash Dividend Bonus Share per Share rules and regulations pertaining inside information is published on The remuneration of the Members of the Board of Directors is to 2004 250,127,565 380,247,980 0.16962 Turkcell’s internal intranet pages and provided to every new Turkcell Turkcell Code of Ethichs reflects the be determined by shareholders at the General Assembly. Currently 2005 509,075,181 345,112,659 0.27445 employee through the Orientation Program and reminded via regu- lar e-mails and mobile training programs. plans regarding profit sharing, retirement and other similar subjects 2006 567,039,784 - 0.25775 values and principles of Turkcell and are not in effect. 2007 648,713,951 - 0.29487 applies to all employess, officers and Code of Ethics As per Turkcell’s Corporate Governance Guidelines, the Board, upon 2008 1,098,193,226 - 0.49918 The following is a summary of “Turkcell Common Values and Code of Board Members. the recommendation of the Corporate Governance Committee toget- 2009 859,259,101 - 0.39057 Ethics” (the “Code”) confirmed by the management and employees her with its own determinations, is to decide on a proposal to the of Turkcell are as below.

80 Turkcell Annual Report 2010 81 The Code reflects the values and principles of Turkcell and applies to customers of Turkcell. All employees are required to comply with Oxley”), and the rules issued by the US Securities and Exchange all employees, officers and Board Members of Turkcell. “Turkcell Information Security and Disclosure” policies and proce- Commission (“SEC”) there under, require an SEC reporting company Turkcell has been involved in dures, which is published in Turkcell’s internal intranet pages. to disclose whether or not it has adopted a written code of ethics Conflicts of Interest applicable to the Company’s senior financial officers, including the alternative capital markets to fund Employees, officers and directors are prohibited from (a) taking for Principles for Public Disclosure Company’s principal executive officer. The following rules have been and sup­port changing financial Corporate Governance themselves personally opportunities that are properly within the All communications with investors, financial analysts, press and si- adopted by Turkcell in accordance with these provisions and are scope of Turkcell’s activities, (b) using corporate property, informa- milar bodies shall be performed in accordance with the “Turkcell applicable to Turkcell’s senior executive and financial officers. structures during the process of tion or position for personal gain, and (c) competing with Turkcell. Disclosure Policy” which is published on Turkcell’s website. The Chief Executive Officer, Chief Financial Officer and other execu- operational growth. A “conflict of interest” exists when a person’s private interest inter- No employee other than those specifically authorized to perform this tive officers and financial officers hold important roles in corporate feres in any way, or even appears to interfere, with the interests of duty can make oral or written announcements on behalf of Turkcell. governance. Turkcell, according to the laws and regulations app- Turkcell. A conflict situation can arise when an employee, officer or licable to the Company, has adopted the following code of ethics. The Audit Committee of the Board of Directors will apply this code to director takes actions or has interests that may make it difficult to Compliance with Laws, Rules and Regulations specific situations. The Chief Executive Officer, Chief Financial Officer perform his or her work for Turkcell objectively and effectively. Conf- Turkcell actively promotes compliance with all applicable laws, rules This code of ethics is designed to deter wrongdoing and to provide and other executive officers and financial officers will report known licts of interest also arise when an employee, officer or director, or a and regulations. principles to which these officers are expected to adhere and which or suspected violations to the Audit Committee. The Audit Committee member of his or her family, receives improper personal benefits as they are expected to advocate. It complements any other appropriate will take all appropriate action to investigate any violations reported Turkcell policies or guidelines in force from time to time. result of his or her position in Turkcell. Working Principles to it. In a case where a violation has occurred, the Board of Direc- Turkcell is committed to providing a safe, secure and efficient working tors will take (or authorize) any disciplinary action that it considers Any change to this code of ethics and any explicit or implicit waiver Conflicts of interest are prohibited as a matter of Turkcell policy. environment to its employees. Therefore Turkcell expects all of its emplo- appropriate. This action may, in cases of severe breaches, include from it for these officers will be disclosed on this web page in ac- Each employee, officer or director is expected to avoid any outside yees to conduct themselves in accordance with the following principles: dismissal or the initiation of judicial proceedings. cordance with applicable law and regulations. A waiver is defined activity, financial interest or relationship that may present a possible as a material departure from a provision of this code and an implicit conflict of interest or appearance of a conflict. • Turkcell employees must conduct themselves at all times in a TURKCELL CORPORATE RISK MANAGEMENT waiver means failure to take action within a reasonable period of professional manner. Turkcell employees may not engage in an time regarding a material departure from a provision of this code Turkcell employees, officers and directors may give presents to or abusive, threatening or violent manner, or otherwise behave in Since its establishment in 1993, Turkcell Iletisim Hizmetleri A.S. that has been made known to an executive officer of the Company. receive presents from, persons, institutions and corporations with an aggressive or harassing manner towards customers, suppli- has been involved in alternative capital markets to fund and sup- whom they have business relations only in compliance within the ers or fellow employees. Turkcell employees are prohibited from The Board of Directors of Turkcell declares that the Chief Executive port changing financial structures during the process of operational internally defined rules. promoting religious or political views in the workplace. Officer, Chief Financial Officer and other executive officers and fi- growth. In the performance of its corporate obligations, Turkcell has • All Turkcell employees must not fraudulently alter official docu- nancial officers: complied with various regulations, laws and rules since 1994. The Protection and Proper Use of the Company Assets ments they issue for the performance of their duties. The emplo- obligations are liable to change, not only according to the financial Turkcell’s employees should protect the Company’s assets and en- yees are responsible timely and accurate preparation and delivery 1. Will act with honesty and integrity, including ethically handling regimes of the area in which the Company is active, but according to sure their proper use. All Turkcell assets should be used only for of reports to regulatory authorities and other similar bodies. actual or apparent conflicts of interest between their personal rela- the requests and obligations of the markets from which it is funded. legitimate business purposes. Information is one of the most critical tionships or financial or commercial interests and their responsibi- asset categories. Employees, officers and directors should maintain The full text of the Code is published in Turkcell’s internal intranet lities to Turkcell; Being listed on the New York Stock Exchange, Turkcell management is the confidentiality of information entrusted to them by Turkcell or pages. The Code is explained to each new Turkcell employee via the responsible for ensuring the compliance with the provisions of Article orientation program and the new employee is made to sign a cont- 2. Make full, fair, accurate, timely and understandable disclosure in 404 of the Sarbanes Oxley Act, as promulgated by the United States All communications with investors, ract proving that these rules shall constitute an inseparable part of all reports and documents that the Turkcell files with, or submits to, Securities and Exchange Commission (the “SEC”) as well as Corporate the employee’s condition of employment. the Turkcell’s capital markets regulators or otherwise makes public; Governance Principles since it is also listed on Istanbul Stock Exchan- financial analysts, press and ge. Accordingly, Turkcell has formulated an internal control mecha- The Code of Conduct rules are defined, updated and published by 3. Comply with all governmental laws, rules and regulations appli- nism for itself and for the consolidated group companies which, in similar bodies shall be performed the Ethics Committee. cable to Turkcell and to its relationship with its shareholders; audit scope, are in line with Corporate Governance Principles. Turkcell in accordance with the” Turkcell Corporate Risk Management Department coordinates Risk Manage- Declaration of Code of Ethics Made in Compliance with the Sarbanes- 4. Ensure that their actions comply not only with the letter but the ment, Internal Audit, Business Continuity Management, Information Disclosure Policy” Oxley Act spirit of this code and foster a culture in which compliance with the Security Management, and Internal Fraud Management processes. Section 406 of the US Sarbanes-Oxley Act of 2002 (“Sarbanes- law and Turkcell’s policies is at the core of Turkcell’s activities. By developing and applying a risk management methodology, the

82 Turkcell Annual Report 2010 83 Company strengthens its focus on corporate risk management prac- 6. Review, discussion and approval of the Balance Sheet and profits/ lations, hold regular meetings with analysts and investors to share nouncements are distributed by e-mail to addresses registered in tices. loss statements relating to fiscal year 2010; developments in Company strategy and operations, and the market, the Company’s database. Inquiries, verbal or written, made to the 7. Release of the Board members from activities and operations of industry and legal environment in which it operates. In addition, Turk- Investor and International Media Relations Department are replied Turkcell Corporate Risk Management Department, in compliance with the Company in year 2010; cell management regularly holds meetings with media representati- to as quickly as possible within the scope of publicly disclosed in- the “principle of independence” directly reports to the Audit Commit- 8. Release of the auditors from activities and operations of the Com- ves to share publicly available information and to answer questions. formation.

Corporate Governance tee, the Chief Executive Officer and the Chief Financial Officer. pany in year 2010; 9. Election of auditors for a period of one year and determination of An Investor Relations Department has existed since Turkcell’s ini- Provisions for appointment of a special auditor have not been inclu- Independent Auditor their remuneration; tial public offering. The Investor and International Media Relations ded in the Company’s Articles of Association. During this reporting In accordance with the Audit Committee’s recommendations, our 10. Discussion of and decision on the Board of Directors’ proposal Department functions under the Executive Officer in charge of Cor- period, no requests for appointment of a special auditor were sub- Company’s Board of Directors resolved on December 18, 2009, that concerning the distribution of profit for year 2010; porate Affairs. It monitors all disclosures to the public in accordance mitted. DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. 11. Informing the General Assembly regarding the donations made with Turkcell’s Disclosure Policy that seeks to provide information to shall be appointed as Turkcell’s Independent Auditor (as referred to in year 2010; the public in a timely, accurate, complete, understandable and equal 1.3 Information on the General Assembly of Shareholders in Article 16 of our Company’s Articles of Association) for a period of 12. Informing the General Assembly regarding the guarantees, manner. Detailed contact information of the Investor and Internati- The Company makes disclosures when the Board of Directors take two years regarding the audit of our Company’s consolidated finan- pledges and mortgages provided by the Company to third parties onal Media Relations Department can be found on our Company’s a decision regarding the General Assembly Meeting and its agenda cial statements and that this appointment was approved at the Ordi- or the derived income thereof, in accordance with the Decision of website (www.turkcell.com.tr) and under the Investor Relations he- and in addition regarding the resolutions of the General Assembly nary General Assembly Meeting of our Company on April 29, 2010. the Capital Markets Board dated 09/09/2009 and numbered 28/780; ading in the Annual Report. following the General Assembly meeting. The Ordinary General As- 13. Wishes and hopes; sembly met on April 29, 2010 with a quorum of 74.18%. The partici- DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. 14. Closing. Verbal and written questions submitted to this department are ans- pants of the General Assembly included shareholders and their rep- Sun Plaza, Maslak Mahallesi, Bilim Sokak No.: 5, Şişli, 34398 Istan- wered within the context of publicly disclosed information as quickly resentatives submitting blockage letters within the legal period, the bul, Turkey 2010 COMPLIANCE WITH CORPORATE as possible. Board of Directors, statutory auditors, chief executive officer, deputy Tel: +90 (212) 366 60 00 GOVERNANCE PRINCIPLES REPORT: executive officers, and the staff organizing the General Assembly. Fax: +90 (212) 366 61 65 The Company, in accordance with best practices, has a Disclosure The invitation to attend the meeting was published in the Turkish www.deloitte.com.tr Turkcell believes that high standards of corporate governance are im- Committee responsible for the Company’s disclosures in accordance Trade Registry Gazette and national newspapers. At the same time, portant for perpetuating successful business practices and generating with applicable regulations, and a Disclosure Team charged with invitations were issued to shareholders in foreign countries. For ow- Ordinary General Assembly long-term economic value for the Company’s shareholders. Accor- ensuring that material information is shared within the Company. ners of registered shares, invitations were extended by registered Turkcell’s Board of Directors has decided that the Ordinary General dingly, we have paid full attention to applying the principles laid out letter with return receipt, as the law requires. Assembly for the year 2010 is to be held at Turkcell Plaza, Confe- in the Corporate Governance Principles published by the CMB. Taking In compliance with Article 8 of Series: IV, No. 41 “Communiqué Re- rence Room, Mesrutiyet Cad. No:71 Tepebasi, Istanbul on April 21, into consideration relevant CMB regulations and best practices and garding the Principles that apply to Public Companies” issued by the In accordance with the Turkish Commercial Code, applications were 2011, at 3.00 pm to resolve the following agenda. with the aim of meeting the obligations of our Company brought by Capital Markets Board, at Turkcell a Capital Markets and Corpora- received from shareholders of publicly traded shares up to one week the capital market regulations and to ensure coordination in corporate te Governance Compliance Officer was appointed in February 2009 before the meeting. During the General Assembly, shareholders TURKCELL İLETİŞİM HİZMETLERİ A.Ş. governance practices, pursuant to CMB Communiqué Serial: IV, No.: pursuant to a Board of Directors decision and Capital Market Corpo- exercised their right to ask questions and these were answered by AGENDA OF THE ORDINARY GENERAL ASSEMBLY 41, in 2009, we have formed a Capital Markets & Corporate Gover- rate Governance Compliance Unit was established in May 2009, for the executive officers. All matters advised by shareholders were duly MEETING Dated 21 April 2011 nance Compliance unit. Accordingly, the Board of Directors within the the purposes of: recorded in the minutes and these minutes were registered and an- responsibilities enumerated in Turkcell’s Corporate Governance Gui- nounced in the Bulletin of Turkish Trade Registry. In addition, the • ensuring company compliance with capital market regulations and Extraordinary General Meeting planned to be held on October 20, 1. Opening and election of the Presidency Board; delines, has provided the necessary oversight for preparation of this • Coordinating corporate governance practices of the Company. 2010 could not convene due to the provisions of related legislations 2. Authorizing the Presidency Board to sign the minutes of the me- Annual Report which contains the Compliance Report. since the Government Commissioners failed to show up. eting; 1.2 Use of Right of Gaining Information of the Shareholders 3. Reading the Annual Reports of the Board of Directors relating to SECTION 1 In order for shareholders to obtain information concerning the 1.4 Voting Rights and Minority Rights fiscal year 2010; SHAREHOLDERS Company easily and without discrimination, all publicly disclosed Pursuant to the Articles of Association of the Company, there are 4. Reading the Annual Reports of the Auditors relating to fiscal year information is available on our website (www.turkcell.com.tr) in no privileged shares in terms of decision-making and voting rights. 2010; 1.1 Shareholders Relations Department Turkish and English in the Investor Relations section for the use by Apart from the independent member currently on the Board of 5. Reading the summary of the Independent Audit Firm’s report re- Representatives of the Investor and International Media Relations De- Turkish and foreign shareholders equally. In addition, all public an- Directors, shareholders possessing shares greater than 5% are lating to fiscal year 2010; partment within the Turkcell organization, pursuant to existing regu-

84 Turkcell Annual Report 2010 85 represented, while minority shareholders are not. With regard to nouncements in accordance with the domestic and international ca- Disclosure (Series: VIII, No. 54), which regulates the postponement 2.4 Announcement of Real Person Final Dominant Shareholder / the Company’s capital, there is no mutual participation. The CMB pital markets regulations to which Turkcell is subject was prepared of public disclosure of inside information. Shareholders Communiqué concerning the right to exercise cumulative voting is and presented to shareholders at the Ordinary General Assembly The shareholder structure of our Company is as follows: optional for the Publicly Traded Companies and this voting method held in 2005. Following the General Assembly, the Disclosure Policy 2.3 Corporate Website and its Contents has not been used as yet. Framework Document was published in the Investor Relations secti- Turkcell’s website is www.turkcell.com.tr. Information for share- Shareholder Value of Stake (TRY) % of Share

Corporate Governance on of the Company’s website, www.turkcell.com.tr, under Corpora- holders is provided under the following headings in the Investment Turkcell Holding A.Ş. 1,122,000,000.238 51.00% 1.5 Dividend Distribution Policy and Time of Dividend Distribution te Governance heading. Turkcell’s Disclosure Policy was revised in Relations section: Sonera Holding B.V. 287,632,179.557 13.07% We have adopted a dividend policy, which is included in our Corpo- 2009 and published on the website. MV Holding A.Ş. 26,021,712.590 1.18% rate Governance Guidelines. As adopted, our general dividend policy a. market Information Çukurova Holding A.Ş. 995,509.429 0.05% is to pay dividends to shareholders with due regard to trends in our Turkcell makes public disclosures in compliance with the CMB, ISE, b. shareholder Structure Müflis Bilka Bilgi Kaynak operating performance, financial condition and other factors. Sin- SEC and NYSE regulations to which it is subject. The purpose of c. Corporate Governance ve İletişim San. Ve Tic. A.Ş. 137,199.575 0.01% ce 2004, the Board of Directors has endeavored to distribute cash Turkcell’s Disclosure Policy is to ensure an active and transparent i. Corporate Governance Guidelines Public Share* 763,213,398.611 34.69%* dividends of at least 50% of our distributable net profits per fiscal communication which is complete, fair, correct, timely, clear, and ii. board of Directors TOTAL 2,200,000,000.000 100.00% year, although the payment of dividends remains subject to our cash cost effectively and equally accessible for all stakeholders including iii. board Committees flow requirements, applicable Turkish laws and the approval of, or shareholders, investors, employees and customers in accordan- iv. Dividend Policy (*) While 34.69% of our company is listed in the stock exchange, the number of our amendment by, the Board of Directors and the General Assembly of ce with the regulations to which the Company is subject. Turkcell v. Code of Ethics Company’s free floating shares on 31.12.2010 was 557,614,008.03 according to a “Report on Free Float Ratios” released by the Central Registry Agency in accordance Shareholders. follows-up news and rumors about the Company and in accordance vi. Articles of Association with Capital Markets Board’s decision 21/655 of 23.07.2010 as amended by its deci- with the Company’s Procedure on Follow-up of News and Rumors vii. Disclosure Policy sion 24/729 of 18.08.2010 and its free float ratio is 25.34%. The difference between those rates results from the exclusion of shares which are “ i. held by a public entity, The Dividend Distribution Policy adopted by the Board of Directors public disclosures may be made if deemed appropriate or necessary. viii. General Assembly Information ii. Held by the company’s incorporators and its affiliates (companies subject to con- is published in the annual report of the company as well as on its solidation), iii. Held by shareholders who may be a natural person or a corporate The responsibility to maintain and monitor this Disclosure Policy is ix. Compliance Report body and control at least 5% of the Company’s capital, iv. Held by a) the members of website (www.turkcell.com.tr) under Corporate Governance in the incumbent on the Company’s Investor and International Media Re- d. Announcements the Company’s Board of Directors and the Board of Auditors, b) General Manager or executives who are equal to or superior to a general manager in terms of their powers Investor Relations Section. lations Division. presentations and functions, c) senior executives who report to General Manager or executives who are equal to or superior to a general manager in terms of their powers and functions, v. owned by the savings funds or foundations of companies, vi. Provided as equity In accordance with our Articles of Association, there are no privile- 2.2 Public Disclosures e. Financial and Operational Information capital pursuant to regulations applicable to the capital markets legislation or as a ged shares and no privileges for dividend distribution. Dividend dist- collateral in respect of a margin trading or as a collateral except the ones which are In 2010, Turkcell made a total of 45 public disclosures to the domes- i. key Financial Data given as a collateral only for Central Depository Bank markets, vii. Which are legally ributions are made within the periods and in line with the principles tic and foreign capital markets to which it is subject. Since Turkcell ii. key Financial Data TRY restricted and cannot be subject to purchase and sale, viii) prohibited , ix. Seized “ in the definition of free float ratio. The difference may result from one or more situations stipulated by CMB regulations. shares are quoted on the New York Stock Exchange, these disclo- iii. Historical US GAAP Key Financial Data described in the decision and it is not possible for our Company to know. sures were made both in English and Turkish. Public Disclosures iv. key Operational Data 1.6 Transfer of Shares are available on the Turkcell website (www.turkcell.com.tr) in the v. Debt and Credit Rating 2.5 Disclosure on Insider Traders While there is no limitations in the Articles of Association of our Investor Relations section. vi. International Operations Turkcell’s Disclosure Policy contains guidelines concerning the Blac- Company with respect to the transfer of shares, Provisional Article vii. Investor Kit kout Period Practice relating to insider trading issues. In accordan- 4, paragraph c, sentence 4 of the authorizing regulations relating Information provided by our Disclosure Team and/or Disclosure viii. outlook & Strategy ce with these guidelines, employees are prohibited from selling or to the Electronic Communication Sector, to which Turkcell is sub- Committee is evaluated under the coordination of the Investor and ix. Annual Report purchasing Turkcell securities during the blackout period. Turkcell ject, makes states that the written approval of the Information and International Media Relations Division and with the compliance ad- f. Financial Calendar employees with access to inside information that can affect the price Communication Technologies Authority is required for “actions of vice of the Capital Markets and Corporate Governance Compliance g. share Information of capital market instruments are restricted from selling or purcha- gaining or transferring or movement of shares which shall result in Unit in accordance with the local and the international capital mar- i. Interactive Share Charts sing Turkcell securities regardless of blackout periods. change of control.” ket regulations to which our Company is subject. In cases in which ii. Investment Calculator public disclosure is required, such disclosure is to be made by the iii. Ticker Symbols Pursuant to CMB regulations, a list of those having access to inside SECTION 2 Investor and International Media Relations Division. iv. Analyst Coverage information is maintained, rules and regulations pertaining inside PUBLIC DISCLOSURE AND TRANSPARENCY h FAQ information were provided to management and employees, and Furthermore, in 2009, Turkcell created a mechanism for the postpo- i. Contact Us regular reminders were made through e-mail and mobile training 2.1 Company Disclosure Policy nement of the public disclosure of inside information, within the fra- programs. Furthermore, this information is provided to every new The Disclosure Policy Framework Document, regarding public an- mework of Article 15 of the Capital Markets Board Communiqué on Turkcell employee through the Orientation Program. Employees are

86 Turkcell Annual Report 2010 87 required to sign an affirmation stating that these regulations are an vironment not as “a place to work”, but as a “living space”; and we social responsibility, environmental awareness, and respect for the Compensation: The wages and profits of the supplier’s employees, indispensible part of their employment contracts. carry out our practices based on this approach. rights of its customers, suppliers and employees. As a matter of joint including overtime pay, must be equal to or higher than the mini- responsibility, suppliers are also expected to act in accord with these mum limit specified in the applicable laws and regulations. SECTION 3 To work with and retain the best talent is our priority. With our dis- principles, and improve their environment correspondingly. STAKEHOLDERS tinctive human resources practices, we continue “to develop dedi- Nondiscrimination: Suppliers must treat all employees based on

Corporate Governance cated employees who yield successful results”. Our employees also a. Success in Accord their talents and qualifications, without any discrimination of race, 3.1 Informing Stakeholders say, “There Is More for Me in Turkcell”, and evaluate Turkcell with • Turkcell suppliers have a crucial role in providing our costumers ethnicity, language, religion, sexual choice, gender, and political or In addition to the legislation that is currently in effect, company po- the highest ratings, both in the industry and across Turkey, in emp- with our products and services. ideological views in all its employment decisions, including but not licies and procedures have been created to inform Company emplo- loyee loyalty surveys by independent research companies. • We aim to establish with our suppliers a flexible and value- limited to recruitment, promotion, compensation, benefits, educati- yees and stakeholders. added business partnership based on transparency, incorpora- on, forced dismissal, and completion of work. To continue to be “a winning team”, we will carry on shaping and ting the principles of integrity, cooperation, and achievement. 3.2 Participation of Stakeholders in Management implementing our human resource strategies, based on our belief • Turkcell believes that long-term success is possible only with Health, Safety and Environment: Suppliers must ensure a healthy While there is no special provision concerning the participation of in the substance of our corporate culture and the employees and dedicated suppliers. Correspondingly, the quality of our relati- and safe work environment for its employees, to prevent accidents stakeholders in management, relevant information is shared with leaders who keep this culture alive. onship with our suppliers is of ultimate importance. and injuries, and also ensure healthy and safe residential faciliti- Turkcell’s business partners, staff and other stakeholders through es pursuant to local laws, where applicable. For this purpose, the defined and regular meetings, such as staff communication mee- Detailed information is available in the Human Resources section of b. Legal Obligations suppliers must take systematic actions to reduce any risks that thre- tings, platforms where the staff can communicate their ideas and the Turkcell Annual Report 2010. • While fulfilling their obligations, suppliers must follow and res- aten employee safety and to guarantee the health and safety of its suggestions, Supplier Day for the supply chain, Business Partner pect the applicable laws and regulations and guarantee their employees pursuant to the related standards and laws. The supp- Day for the firms Turkcell works with on value-added services, and 3.4 Information about Relationships with Customers and Suppliers compliance with the Labor Law in their conduct. Accordingly, liers must also be able to prove full compliance with all the legal dealer meetings. Turkcell uses an approach in line with global quality standards where- suppliers are expected to observe the following matters and ad- regulations on environmental protection in all their activities. ver the Company has contact with and/or provides services to its cus- here to them in its working principles. 3.3 Human Resources Policy tomers. The Company has a holistic view over all products and services c. Our Expectations from Suppliers We continue to maintain the values that guide our decisions and con- to understand the experience from a customer’s perspective in order Forced Labor: Suppliers must not force their employees to work in Turkcell requires all its suppliers to comply with general legal rules duct, and to extend our sphere of influence, based on our motto of to improve the system, the processes, and human resources; and, if any way, shape, or form. This obligation covers forced labor in pri- and with the Turkcell Common Values and Code of Conduct. Turkcell “Get More Out of Life With Turkcell”. Our values manifest themselves necessary, to make timely corrective adjustments to systems or proces- son, debt bondage with high interest rates, or other forms of com- selects its suppliers based on the principle of trust. Turkcell will take in our conduct, which will differentiate the current success of Turkcell ses related to that specific experience. Turkcell also regularly assesses pulsory labor. into consideration those suppliers that have quality management and Group: Our customers come first. We are an agile team. We believe in its services and its approach in all business channels to identify areas information security management certificates, are sensitive to the eco- open communication. We make a difference. We value people. of improvement and to make adjustments that simplify the lives of our Child Labor: Suppliers must not employ child labor. Unless a higher logical balance, and conduct social responsibility projects and assess customers and ensure their satisfaction. We aim to achieve operational age limit is not specified in the local laws, children who are under them accordingly, in addition to other supplier selection criteria. Today all our employees from each level and every team, along with perfection at every point where we provide service to our customers 15 years old and have not completed their compulsory education • Quality and Information Security Management the entire top management, support our human-focused culture, and to improve customer satisfaction through consistent evaluation (in the content of International Labor Organization Convention 138) • Environmental and Ecological Compliance based on our slogan of “There Is More for Me in Turkcell”. and dynamic actions. We design processes and service structure with cannot be employed. Employees who are under 18 years old should • Social Responsibility the customer in mind and craft strategies based not only on operational not work in risky jobs or in night jobs even if they want to work to Acting on our tenet of “People First in a Pioneering Turkcell”, we goals, but also on the results of our analyses on customer satisfaction meet their educational needs. 3.5 Social Responsibility always prioritize our employees’ satisfaction and motivation. We and the related emotional consequences. We assess the performance As Turkey’s Turkcell, we continue to support not only technology, but follow the technologies that impact our industry both locally and of our suppliers with mystery shoppers and satisfaction surveys; and Harassment: The suppliers’ employees must not be exposed to cor- also economic, environmental, and social development. globally, and strive to take the lead with exemplary applications. also encourage them to take corrective actions where necessary. poral punishment or physical, sexual, psychological, or verbal ha- rassment or abuse. We invest in the future of the next generations in the areas of edu- We continue to invest, adding value to the Company and creating a In parallel with ever-changing and improving global conditions, cation, sports, and employment, by developing or supporting sus- flexible, sensitive, and democratic work environment, which sup- Turkcell does not content itself only with providing superior high- Bribery: Suppliers must not offer bribes to any Turkcell employee tainable, long-lasting and measurable projects that promote youth ports changes that motivate our employees. We define our work en- quality service, but also plans and implements activities in line with under any circumstances or for any reason whatsoever. development.

88 Turkcell Annual Report 2010 89 Snowdrops displaying photographs taken during the shoots, toured cities across • 3,250 administrators and 6,500 teachers were appointed to ac- Contribution to employment We provide educational grants to 10,000 girls every year with the Turkey. company the students. At Turkcell, we also prioritize investing in employment. Turkcell Snowdrops project, which has grown from a drop into an avalanche. • bridge of Hearts teams were formed in 81 provinces, Group employs approximately 11,000 people. We established an In March 2010, the Snowdrops project was selected by the United • thousands of students saw for the first time: planes, sea, metro, eco-system of 50,000 people, including our dealers and business The “Snowdrops” project was initiated in 2000 in cooperation with Nations as an exemplary project and introduced to the world thro- and train, partners.

Corporate Governance Society for Supporting Modern Life and provided grants to 5000 girls ugh a series of activities. • hundreds of thousands of friendship were established. who are decisive and determined to study. Turkcell extended the In line with the importance we place on employment, we initiated project in 2007 to increase the number of grants given every year With this project growing from a drop into an avalanche, we now Runners to the Future an important project in partnership with İŞKUR (Turkish Employment to 10,000. provide educational grants to 10,000 girls every year. Since 2000, Developed in cooperation with the General Directorate of Youth and Agency). In 2010, we provided 1,600 unemployed young people with 20,000 girls have received scholarships; 9,634 students graduated Sports, the “Runners to the Future” project aims to support the tra- comprehensive training opportunities in retailing and call center sec- The Snowdrops project strives to provide equal educational opportu- from high school; 3,437 of them entered college; and 976 are col- ining of athletes aged 12-18 who can achieve success in individual tors. More than 1,000 of them were employed in our eco-system. We nities to girls who could not continue their education due to the eco- lege graduates. Until now, the Snowdrops project has garnered 16 sports. will continue this partnership with İŞKUR in 2011 and will provide nomic disadvantages of their families; and subsequently to develop national and international awards. training and job opportunities to more than 2,000 people. them into open-minded individuals with a profession. Included in the national plan of the United Nations’ project, Allian- Bridge of Hearts ce of Civilizations, the project selects young athletes based on their We also focus on employing physically challenged individuals. Turk- Finishing its first decade in 2010, Snowdrops is Turkey’s pioneering Initiated in 2008 in partnership with the Ministry of Education, the talent, and coaches them in sports, including weightlifting, skiing, cell Group employs 285 physically challenged individuals, while education project and Turkcell’s first comprehensive social respon- “Bridge of Hearts” project enables ten thousands of children from swimming, tennis, athletics, along with cycling of the visually- Turkcell Global Bilgi has 180 physically challenged employees. A sibility initiative. Snowdrops grew into an avalanche over years with around Turkey to visit different provinces and to establish new long- impaired, across Turkey; they are trained to become national athle- project developed with the Ministry of Transportation employs 7 public support and became one of Turkey’s most important social lasting friendships with other children, while also discovering the tes who will represent Turkey abroad successfully. physically challenged individuals, who are able to provide call cen- responsibility projects, providing educational opportunities to tens natural and cultural beauties of our country. ter service from their homes. of thousands girls. Within this project, Turkcell also sponsors Marsel İlhan, the first- Five-day tours are arranged as part of the Bridge of Hearts project, ranking tennis player in Turkey and 90th in the world ; as well as With our Turkcell Global Bilgi call center, we employ 7,500 people in A Mentorship Program was initiated in 2004 as a supporting process to support students’ personal and social development, as well as Çağla Büyükakçay, another national tennis player. 12 locations in total, including nine in Turkey (Istanbul, Izmir, Erzu- for the Snowdrops project, to further contribute to the development to increase their awareness of social issues, diversity, and volun- rum, Eskişehir, Diyarbakir, Ankara, and Karaman), two in Ukraine, of real-life skill sets for the “Snowdrops” continuing their education teering. Students visit historical and touristic sites, plant trees, and Turkcell is the main sponsor of the National Football and Basketball and one in Belarus. at the university level. Volunteers were chosen from among Turkcell participate in environmental activities during the first three days of Teams executives, leading female journalists and columnists in the media the tour, according to the plan of the Provincial Directorate of Edu- Turkcell establishes base stations to provide mobile communication world, and successful businesswomen to assume a “guiding” role; cation. The remaining two days are scheduled by the family hosting From its start as the Official Communication Sponsor in 2002, Turk- services which is Turkcell’s area of business. Safety tests are conduc- they then joined the program as informed mentors, following long each student. cell has continued its support for the National Football Team since ted by the manufacturer and Turkcell on the base stations built. Ne- and meticulous study and training. The Mentorship Program began 2005, as the main sponsor. vertheless, 168 lawsuits were opened between January 1, 2010 and with 46 mentors and grew each year, with 160 mentors in total Having reached 130,000 students in three years, the Bridge of He- December 31, 2010, claiming that base stations had adverse effects mentoring their Snowdrops until now. arts project continues to grow every year. In 2010, special day acti- Turkcell intends to continue its support to the national team, recog- on the environment and health, and violated neighborhood laws. A vities were included in the project. Students were taken to Anıtkabir nizing the importance of the achievements of the team for enhancing verdict was reached in 38 of the lawsuits in 2010 claiming violation The project recently opened up with different levels and gained in- on April 23 and to Samsun on May 19, to experience the enthusiasm national morale as well as our nation’s international reputation. of environmental and human health and neighborhood laws. Of the- ternational recognition. In 2008, the Snowdrops project was filmed of national holidays. International tours were also included to ex- se, 14 were decided for and 24 against the Company. by National Geographic. Prior to the documentary, a 11-person Na- pand students’ horizons. Turkcell also supports the National Basketball Team, encouraging tional Geographic team conducted interviews with Snowdrop girls and inspiring upcoming generations. Starting off as the Official Com- and their families, in Istanbul, Kars, Erzurum, and Mardin, from Within the Bridge of Hearts project; munication Sponsor in 2002, we became the main sponsor in 2006. September 2008 to April 2009. As a result, for the first time in Tur- • in 3 years, 130,000 students from 81 provinces visited provinces Turkcell was also the main sponsor of the World Basketball Champi- key, a social responsibility project was filmed as a documentary on they had never seen, and experienced new cultures, onship 2010, where our national team achieved great success with the National Geographic Channel. A Snowdrops photo exhibition, • more than 5 million kilometers were covered, a silver medal.

90 Turkcell Annual Report 2010 91 SECTION 4 4.3 Vision and Strategic Objectives of the Company The motive behind determining risks is not to suspend business ac- In addition, Regulations Strategy Department monitors regulatory BOARD OF DIRECTORS The vision and strategic targets of Turkcell are on the Company’s tivities that create these risks but to decrease the likelihood of the developments in the market as well as the developments in the com- website (www.turkcell.com.tr) under “About Turkcell” and in the risks occuring or to decrease their possible impacts. Here, the goal is petitive environment to mitigate potential risks that may be faced in 4.1 Structure and Creation of the Board of Directors and Indepen- Annual Report. to minimize unpleasent surprises, to enable Turkcell to run seamless these areas. dent Members operations, and to provide a reasonable level of assurance to the Corporate Governance Information on the Board of Directors is provided in the Investor 4.4 Risk Management and Internal Control Mechanisms management for Turkcell to achieve its goals. 4.5 Authority and Responsibilities of the Members of the Board of Relations section of Turkcell’s website (www.turkcell.com.tr). Corporate Risk Management Department coordinates Risk Manage- Directors and Executives ment, Internal Audit, Business Continuity Management, Information Every department in Turkcell defines the risks it faces on a regular The pertinent section of the Company’s Articles of Association is as On our Ordinary General Assembly dated April 29, 2010, the follo- Security Management, and Internal Fraud Management processes. By basis and classifies them on the basis of priority. Also, the Company follows: “The Board is fully authorized to carry out the affairs of the wing members were selected as Turkcell Board of Directors for a developing and applying a risk management methodology, the Com- prepares detailed action plans for critical risks and applies these Company and management of Company assets and the activities re- period of three years: pany strengthens its focus on corporate risk management practices. plans. These processes are coordinated by Risk Management and lating to the Company purpose and subject matter other than those are reported on a regular basis. that have to be solely carried out by the General Assembly”. Colin J. Williams Chairman (Independent Member) Turkcell Corporate Risk Management Department, in complian- Nazli Karamehmet Williams Member ce with the “principle of independence” and in line with CMB’s With this mechanism, Turkcell Corporate Risk Management Department In addition, within the context of enhancing the Company’s corpora- Mehmet Bulent Ergin Member Communiqué Series: X No.19 directly reports to the Chief Executive ensures the reliability and accuracy of the financial statements of Turkcell te governance practices, the responsibilities and duties of the Board Karin Eliasson Member Officer, the Chief Financial Officer, and the Audit Committee formed and its consolidated group companies that are in audit scope. In additi- of Directors are examined in the Corporate Governance Guidelines Tero Kivisaari Member by independent members of the Board of Directors. on, it monitors that Company’s operations are in compliance with rele- adopted by the Board, and published on the Company’s website Oleg Malis Member vant regulations and in order to increase the efficiency of the Company’s (www.turkcell.com.tr) in the Investor Relations section under Cor- Alexey Khudyakov Member Internal Control / Internal Audit Activities: Turkcell management is operations reviews processes, determines current and potential risks and porate Governance. responsible for ensuring the compliance with the provisions of Ar- coordinates actions either to mitigate or prevent these risks. All the members of the Board of Directors are non-executives. Colin ticle 404 of the Sarbanes Oxley Act, as promulgated by the United 4.6 Activities of the Board of Directors J. Williams, as the independent member of the Board of Directors, States Securities and Exchange Commission (the “SEC”). Thus, ma- Turkcell formulated its business continuity plans in 2000, involving The Board of Directors held 11 ordinary meetings in 2010. It also fulfills the criteria of the CMB Corporate Governance Principles as nagement is responsible for establishing and maintaining effective its technical operations. In 2004, the scope of the business continu- met off calendar. The primary activities of the Board of Directors are well as the SEC’s independence criteria. internal control structure in Turkcell and for the consolidated group ity plan has been broadened and positioned as business continuity contained in the Corporate Governance Guidelines adopted by the companies that are in audit scope. management. The business continuity plan covers several subjects, Board of Directors. An outline of them is published under “Corpo- 4.2 Qualifications of the Members of the Board of Directors including natural disasters, terrorist attacks, loss of critical staff or rate Governance Principles” on the Company’s website. In addition, The qualifications of the members of the Board of Directors are spe- Within this framework Turkcell Corporate Risk Management Depart- information, and its effects to our dealers and suppliers. a Corporate Governance Secretariat has been created to coordinate cified in the Corporate Governance Guidelines as adopted by the ment is responsible to provide support for the establishment of in- information flow between the members of the Board. No Board of Company’s Board of Directors. According to this, every year, the Cor- ternal control system both in Turkcell and consolidated group com- The Business Continuity Plan aims to mitigate risks against disasters Director member has weighted voting rights or the power of veto. porate Governance Committee, together with the Board of Directors, panies in audit scope and to evaluate and report on the effectiveness by means of geographical dispersion. By courtesy of our geograp- within the current structure of the Board, reviews the skills and spe- of the internal control system for ensuring the compliance with the hically widespread technical infrastructure, our plans to manage a 4.7 Prohibition on Carrying out Transactions with the Company and cialties required for its members. Each Board Member is required provisions of Article 404 of the Sarbanes Oxley Act. The deficiencies disaster from a remote center have been structured. We have the Prohibition on Competition to devote time to Board activities, to enhance his/her knowledge of and corrective actions taken by process owners that are taken or ability to keep additional capacity on main switchboards or support Permission contained in articles 334 and 335 of the Turkish Com- the global telecommunications industry and related industries and planned to be taken are reported to Audit Committee and manage- them with mobile switchboards. mercial Code pertaining to the prohibition on having dealings with to annually attend at least 75% of scheduled Board meetings. Each ment on a regular basis. the Company and on competing with it have been given to the Board Board Member is encouraged to limit the number of other public Base station maintenance teams are positioned on a regional basis of Director members at the Ordinary General Assembly dated April company boards on which he or she serves. This will ensure that Risk Management is responsible for the following tasks: defining the throughout the country. In case of emergency, teams have action 29, 2010. such other directorships and commitments do not materially inter- risks that affect Turkcell’s performance towards its goals, coordi- plans to back up each other. In cases when a damaged base station fere with his or her service as an effective and active member of the nating risk analysis tasks, sharing results with Corporate Executive cannot be operational within a certain time, a mobile base station is 4.8 Code of Ethics Company’s Board. In addition, the Corporate Governance Committee Team and the Risk Management Board, and reporting and following sent to maintain urgent coverage. The Turkcell Common Values are defined as common concepts and develops and supervises an orientation program for newly elected up on these results. values, which Turkcell employees are expected to observe in the- members of the Board of Directors.

92 Turkcell Annual Report 2010 93 ir work lives, to internalize and to integrate into their conduct. All Training programs and notifications are provided to employees thro- Turkcell offices

Turkcell employees and management are responsible for complian- ugh various channels during the year to increase their awareness Turkcell O ffice ce with these codes and regulations. and acknowledgement of the Common Values and Code of Ethics. Our Code of Ethics is outlined on the company’s website, in the In- Office Name Address Each new Turkcell employee is introduced to these codes in the ori- vestor Relations section under the Corporate Governance link. These

Corporate Governance entation program and signs a commitment letter stating his/her un- codes of ethics are complementary to other related policies, codes Tepebaşı Plaza Asmalı Mescit Mh. Meşrutiyet Caddesi No: 71 derstanding that they will be considered an integral part of his/her of conducts, and guides that are published or will be published by Asmalı Mescit Beyoğlu - İstanbul employment contract. The signature date of the commitment letter the Company. is specified on the letter. Any subsequent revisions in the Turkcell Maltepe Plaza Yeni Mh. Pamukkale Sk. No: 3, 34880 Soğanlık Common Values and Code of Ethics are published in the Turkcell 4.9 Number, Structure and Independence of the Committees Estab- mevkii - Kartal - İstanbul intranet. Employees are responsible for following these revisions. lished on the Board of Directors Within the Board of Directors, there is an Audit Committee and a Davutpaşa Plaza serçe Kale Sk. No: 2, Topkapı - İstanbul All related adjustments are determined by the Ethics Committee, as- Corporate Governance Committee. Each committee advises and kartal Plaza Topselvi Dipçik Sk. No: 31, signed by the Audit Committee operating within the Turkcell Board makes recommendations to the Board of Directors. Each commit- kartal - İstanbul of Directors. The Ethics Committee revises, updates, and improves tee also has charters specifying working principles. Both the Audit the Codes, checks them for inconsistencies and submits the final Committee’s and the Corporate Governance Committee’s members Şişli Plaza 19 Mayıs Cad. Dr. İsmet Öztürk Sokak Şişli Plaza version to the Audit Committee. The defined adjustments enter into consist of the non-executive members of the Board of Directors. In- ofis blokları E Blok B2 Şişli-İstanbul force after approval by the Audit Committee. formation about the committees formed on the Board of Directors is published on the Company’s website (www.turkcell.com.tr) in the Adana Plaza Turhan Cemal Berikel Bulv. No: 212, Each Turkcell employee is responsible for reporting, through exis- Investors Relations section under Corporate Governance. seyhan - Adana ting reporting channels, all cases and rumors which may be contrary to the codes and regulations specified in the Manual for Turkcell At the Board of Directors meeting on May 27, 2010, within the con- Ankara Plaza eskişehir Yolu 9. Km No: 264, Common Values and Code of Ethics or which may cause reasonable text of Turkcell’s Corporate Governance Principles and applicable söğütözü - Ankara doubt or concern that such a contrariness may arise. regulations, it was decided that Mr. Colin J. Williams and Mr. Alexey Khudyakov will continue their Audit Committee memberships and Antalya Plaza kızıltoprak Mah. 915 Sk. No: 3, Antalya While investigating such complaints/reports, the Audit and Ethics that Mr. Colin J. Williams will continue as Chairman of the Audit Committees may receive guidance from managers, employees, or Committee. At the same meeting, it was decided that Mr. Colin J Bursa Plaza organize San. Bölgesi Kırmızı Cad. No: 4, from external sources with expertise on the related issue, provided Williams, Ms. Karin B. Eliasson, Mr. Mehmet Bulent Ergin and Mr. Nilüfer - Bursa that the principle of confidentiality is observed. The Audit and Et- Oleg A. Malis are appointed as Corporate Governance Committee hics Committees are free to include the management team, inter- members of the Company and that Mr. Colin J. Williams will serve as Diyarbakır Plaza urfa Yolu 6. Km Diyarbakır nal audit team, independent auditors, consultants, or experts into Chairman of the Corporate Governance Committee. the investigation phase or analysis of the results, provided that new İzmir Plaza Ankara Asfaltı No: 64, Bornova - İzmir participants comply with the principle of confidentiality. After the 4.10 Financial Rights Provided to the Board of Directors investigation phase has been completed, the Audit and Ethics Com- Attendance fees are paid to the members of the Board of Directors. Samsun Plaza mimar Sinan Mah. 60. Sokak No: 18, PK 55200 mittees independently work to make decisions and settle the issue. No loans have been granted to any Members of the Company’s Bo- Atakum - Samsun If the complaint/report investigated by the Ethics Committee is a not ard of Directors or managers nor have any other guaranties such as critical case, action may be taken upon a decision by the chairman sureties been given. Erzurum Plaza 1. Organize sanayi bölgesi 1. cadde 4. sokak of the Ethics Committee. For critical cases, the majority of the Ethics NO:10 Aziziye-Erzurum Committee must agree on the decision. Trabzon Plaza mısırlı Mahallesi Hasan Turfanda Yolu No: 1, The committee imposes sanctions on the employee(s) involved in the Çukurçayır – Trabzon case, taking into consideration the ramifications and consequences of the case.

94 Turkcell Annual Report 2010 95 CONTENTS

PAGE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 101

CONSOLIDATED INCOME STATEMENTS 102

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 103

CONSOLIDATED STATEMENTS OF CHANGES AND EQUITY 104

CONSOLIDATED STATEMENT OF CASH FLOWS 105

TURKCELL İLETİŞİM HİZMETLERİ A.Ş. Notes To The Consolidated Financial Statements 106-203 AND ITS SUBSIDIARIES NOTE 1. Reporting entity 106 NOTE 2. Basis of preparation 107 NOTE 3. Significant accounting policies 111 NOTE 4. Determination of fair values 130 NOTE 5. Financial risk management 132 CONSOLIDATED FINANCIAL STATEMENT NOTE 6. Operating segments 134 NOTE 7. Revenue 139 NOTE 8. Other Expenses 139 AND INDEPENDENT AUDIT REPORT NOTE 9. Personnel expenses 140 NOTE 10. Finance income and costs 140 NOTE 11. Income tax expense 141 NOTE 12. Property, plant and equipment 143 NOTE 13. Intangible assets 145 NOTE 14. Equity accounted investees 150 NOTE 15. Other investments 151 NOTE 16. Other non-current assets 152 NOTE 17. Deferred tax assets and liabilities 153 NOTE 18. Trade receivables and accrued income 155 NOTE 19. Other current assets 155 NOTE 20. Cash and cash equivalents 156 NOTE 21. Capital and reserves 156 NOTE 22. Earnings per share 158 NOTE 23. Other non-current liabilities 159 NOTE 24. Loans and borrowings 159 NOTE 25. Employee benefits 162 NOTE 26. Deferred income 162 NOTE 27. Provisions 162 NOTE 28. Trade and other payables 164 NOTE 29. Financial instruments 165 NOTE 30. Operating leases 173 NOTE 31. Guarantees and purchase obligations 173 NOTE 32. Commitments and Contingencies 174 NOTE 33. Related parties 198 NOTE 34. Group entities 203 NOTE 35. Subsequent events

96 Turkcell Annual Report 2010 97 DRT Bağımsız Denetim ve DRT Bağımsız Denetim ve Serbest Muhasebeci Serbest Muhasebeci Mali Müşavirlik A.Ş. Mali Müşavirlik A.Ş. Sun Plaza, Bilim Sok. No:5 Sun Plaza, Bilim Sok. No:5 Maslak, Şişli 34398, İstanbul, Maslak, Şişli 34398, İstanbul, Türkiye Türkiye

Tel : (212) 336 60 00 Tel : (212) 336 60 00 Fax : (212) 336 60 10 Fax : (212) 336 60 10 web : www.deloitte.com.tr web : www.deloitte.com.tr

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of To the Board of Directors and Shareholders of Turkcell İletişim Hizmetleri A.Ş. Turkcell İletişim Hizmetleri A.Ş.

We have audited the accompanying consolidated statement of financial position of Turkcell İletişim Hizmetleri A.Ş (“the Company”) and its We have audited the internal control over financial reporting of Turkcell İletişim Hizmetleri A.Ş. and its subsidiaries (together “the Group”) as of subsidiaries (together “the Group”) as of December 31, 2010 and the related consolidated statement of income, consolidated statement of December 31, 2010 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year ended December of the Treadway Commission. The Group’s management is responsible for maintaining effective internal control over financial reporting and for its 31, 2010. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opini- assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report. Our responsibility on on these consolidated financial statements based on our audits. We did not audit the financial statements of Fintur Holdings B.V. (“Fintur”); is to express an opinion on the Group’s internal control over financial reporting based on our audit. a 41.45 percent owned equity accounted investee of the Group. The Group’s investment in Fintur as of December 31, 2010 was $304 million and its share in profit of Fintur was $153 million, for the year 2010. Those statements were audited by other auditors whose report has been We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards furnished to us, and our opinion, insofar as it relates to the amounts included for Fintur, is based solely on the report of the other auditors. require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those stan- a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and perfor- dards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material ming such other procedures as we considered necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinion. misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies respects, the financial position of the Group as of December 31, 2010 and the results of their operations and their cash flows for the year and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposi- ended December 31, 2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards tions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial Board. statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s in- detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. ternal control over financial reporting as of December 31, 2010 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 18, 2011 expressed an unqu- alified opinion on the effectiveness of Group’s internal control over financial reporting.

Istanbul, Turkey

April 18, 2011

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED

98 Turkcell Annual Report 2010 99 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Financial Position As at 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management over- Note 2010 2009 ride of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation Assets Property, plant and equipment 12 3,068,021 2,652,222 of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate Intangible assets 13 1,709,311 1,897,981 because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. GSM and other telecommunication operating licenses 955,703 1,058,098 Computer software 547,607 595,218 In our opinion, based on our audit, the Group maintained, in all material respects, effective internal control over financial reporting as of December Other intangible assets 206,001 244,665 Investments in equity accounted investees 14 399,622 383,490 31, 2010, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Other investments 15 33,849 34,755 Treadway Commission. Due from related parties 33 1,044 21,039 Other non-current assets 16 107,277 75,120 We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated finan- Trade receivables 18 35,024 - cial statements as of and for the year ended December 31, 2010 of the Group and our report dated April 18, 2011 expressed an unqualified opinion Deferred tax assets 17 2,876 2,058 Total non-current assets 5,357,024 5,066,665 on those financial statements based on our audit and the report of the other auditors. Inventories 24,386 28,205 Istanbul, Turkey Other investments 15 8,201 62,398 Due from related parties 33 88,897 108,843 Trade receivables and accrued income 18 816,151 783,752 April 18, 2011 Other current assets 19 197,740 175,417 Cash and cash equivalents 20 3,302,163 3,095,486 Total current assets 4,437,538 4,254,101

Total assets 9,794,562 9,320,766 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Equity Share capital 21 1,636,204 1,636,204 Share premium 21 434 434 Capital contributions 21 22,772 22,772 Reserves 21 (660,121) (512,095) Retained earnings 21 5,258,327 4,712,254 Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS 6,257,616 5,859,569

Non-controlling interests 21 (24,019) 36,632

Total equity 6,233,597 5,896,201

Liabilities Loans and borrowings 24 1,407,316 821,179 Employee benefits 25 29,742 27,776 Provisions 27 57,055 5,676 Other non-current liabilities 23 160,832 154,991 Deferred tax liabilities 17 93,105 118,432 Total non-current liabilities 1,748,050 1,128,054

Bank overdraft 20 5,896 5,244 Loans and borrowings 24 430,205 690,780 Income taxes payable 11 96,080 93,260 Trade and other payables 28 951,976 1,038,762 Due to related parties 33 10,760 14,780 Deferred income 26 164,186 248,518 Provisions 27 153,812 205,167 Total current liabilities 1,812,915 2,296,511

Total liabilities 3,560,965 3,424,565

Total equity and liabilities 9,794,562 9,320,766

100 Turkcell Annual Report 2010 101 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Income For the year ended 31 December 2010 Consolidated Statement Of Comprehensive Income For the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Note 2010 2009 2008 2010 2009 2008

Revenue 7 5,982,093 5,789,972 6,970,408 Profit for the year 1,126,961 1,104,804 1,755,062 Direct costs of revenue (3,349,035) (3,097,097) (3,409,013) Gross profit 2,633,058 2,692,875 3,561,395 Other comprehensive income/(expense): Other income 14,668 978 14,136 Foreign currency translation differences (184,352) 53,046 (1,458,709) Selling and marketing expenses (1,085,750) (1,085,081) (1,351,692) Net change in fair value of available-for-sale securities (1,318) 1,197 (6,385) Administrative expenses (347,290) (273,139) (309,349) Income tax on other comprehensive (expense)/income (754) (1,091) 1,368 Other expenses 8 (64,233) (111,220) (17,990) Results from operating activities 1,150,453 1,224,413 1,896,500 Other comprehensive income/(expense) for the year, net of income tax (186,424) 53,152 (1,463,726)

Finance income 10 277,130 329,550 442,099 Total comprehensive income for the year 940,537 1,157,956 291,336 Finance costs 10 (102,662) (187,514) (136,769) Net finance income 174,468 142,036 305,330 Total comprehensive income/(expense) attributable to: Share of profit of equity accounted investees 14 122,839 78,448 102,990 Owners of Turkcell Iletisim Hizmetleri AS 984,187 1,146,681 363,504 Profit before income tax 1,447,760 1,444,897 2,304,820 Non-controlling interest (43,650) 11,275 (72,168) Total comprehensive income for the year 940,537 1,157,956 291,336 Income tax expense 11 (320,799) (340,093) (549,758) Profit for the year 1,126,961 1,104,804 1,755,062

Profit attributable to: Owners of Turkcell Iletisim Hizmetleri AS 1,170,176 1,093,992 1,836,824 Non-controlling interest (43,215) 10,812 (81,762) Profit for the year 1,126,961 1,104,804 1,755,062

Basic and diluted earnings per share (in full USD) 22 0.53 0.50 0.83

102 Turkcell Annual Report 2010 103 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Changes In Equity For the year ended 31 December 2010 Consolidated Statement Of Cash Flows For the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) - - - 89 Total 4,570 1,197 Equity 36,088 18,202 46,795 53,152 51,955 (1,318) (1,676) (5,360) 291,336 940,537 (12,689) (185,106) (186,424) (744,380) (286,922) (556,973) (590,541) 1,126,961 5,896,201 1,157,956 5,443,643 1,104,804 1,755,062 5,931,205 5,896,201 5,443,643 6,233,597

(1,458,366) (1,463,726) Note 2010 2009 2008 Cash flows from operating activities Profit for the year 1,126,961 1,104,804 1,755,062

Adjustments for: ------89 463 463 Depreciation and impairment of fixed assets 12 515,515 384,257 433,942 Non- (435) (435) 9,594 9,594 36,632 11,275 46,795 58,116 10,812 36,632 58,116 (1,676) Interest 138,128 (24,019) (43,215) (31,083) (54,639) (81,762) (72,168) (17,090) (43,650) Amortization of intangible assets 13 241,839 206,421 245,985

Controlling Net finance (income) 10 (237,628) (254,582) (393,671) Income tax expense 11 320,799 340,093 549,758 ------Share of profit of equity accounted investees (154,457) (115,240) (151,629) Total 4,570 1,197 36,088 18,202 52,689 51,492 (1,318) (5,360) (Gain)/loss on sale of property, plant and equipment 101 25,150 (6,931) 363,504 984,187 (12,689) (184,671) (185,989) (713,297) (286,922) (502,334) (573,451) 5,859,569 1,170,176 1,146,681 5,385,527 1,093,992 5,793,077 1,836,824 5,859,569 5,385,527 6,257,616 Gain on sale of subsidiary - - (4,727) (1,467,960) (1,473,320) Unrealized foreign exchange gain and loss on operating assets (5,847) 88,572 (228,033) ------Impairment losses on goodwill 23,499 61,835 - Provision for impairment of trade receivables 18 126,257 75,379 68,550 (50,652) Earnings Retained Deferred income 26 (77,854) (2,966) (3,293) (713,297) (105,512) (502,334) (121,945) (573,451) 4,712,254 1,170,176 1,093,992 4,437,071 1,093,992 1,836,824 3,224,526 1,836,824 1,170,176 4,712,254 4,437,071 5,258,327 1,879,185 1,913,723 2,265,013 ------Change in trade receivables 18 (204,403) (269,360) (214,220) 51,492 51,492 51,492 Change in due from related parties 33 28,752 (20,312) 2,124 Reserve 669,598 (746,870) (798,362) (931,080) (184,210) (184,210) (184,210) (746,870) (798,362) Translation

(1,467,960) (1,467,960) (1,467,960) Change in inventories 3,083 (8,662) (267) Change in other current assets 19 (29,389) (37,099) (27,208) ------Change in other non-current assets 16 (29,011) (21,272) (10,704)

(461) (461) (461) Change in due to related parties 33 (3,775) (6,290) (6,541) 36,088 (12,689) (250,834) (286,922) (263,984) (286,922 ) (250,834) Change in trade and other payables 32,541 180,469 66,690 (286,922) (286,922) Put Option Change in other current liabilities (96,118) (115,306) 206,537

Reserve for Non- Change in other non-current liabilities 23 (14,051) (82,893) 52,452 Controlling Interest Change in employee benefits 25 2,690 942 5,773 ------121 121 Change in provisions 27 (45,102) 123,644 29,704 1,318 1,197 1,197 1,197 5,481 1,318 (1,318) (1,318) (1,318) (5,360) (5,360) (5,360)

Reserve 1,524,402 1,657,584 2,369,353 Fair Value Interest paid (38,829) (29,497) (25,050)

------Income tax paid (322,754) (395,024) (687,292) Legal

50,652 Dividends received 99,759 83,543 89,235 Attributable to equity holders of the Company 484,291 105,512 378,779 121,945 256,834 484,291 378,779 534,943 Reserves Net cash generated by operating activities 1,262,578 1,316,606 1,746,246 Cash flows from investing activities ------434 434 434 434 434 434 Acquisition of property, plant and equipment (912,097) (1,044,165) (603,568) Share Acquisition of intangible assets 12 (132,827) (723,507) (193,219) Premium Proceeds from sale of property, plant and equipment 13 8,506 4,471 16,693 ------Proceeds from currency option contracts 12,147 10,549 14,655 Payment of currency option contracts premium (4,988) (1,150) (4,970) 4,570 Capital 22,772 18,202 18,202 22,772 18,202 22,772 Acquisition of available-for-sale securities (16,762) (83,951) (47,549)

Contribution Proceeds from sale of available-for-sale securities 70,528 32,015 78,542 Acquisition of subsidiary, net of cash acquired - - (309,967) Interest received 270,602 320,697 354,211 ------Net cash used in investing activities (704,891) (1,485,041) (695,172) Share Capital 1,636,204 1,636,204 1,636,204 1,636,204 1,636,204 1,636,204 Cash flows from financing activities Proceeds from issuance of loans and borrowings 1,071,777 1,692,866 601,000 Loan transaction costs (12,100) (14,357) - Repayment of borrowings (772,892) (944,133) (487,999) Change in non-controlling interest 89 - 72,199 Proceeds from capital contribution - 4,570 18,202 Dividends paid (590,541) (744,380) (556,973) Net cash used in financing activities (303,667) (5,434) (353,571)

Net decrease/(increase) in cash and cash equivalents 254,020 (173,869) 697,503

Cash and cash equivalents at 1 January 3,090,242 3,255,420 3,093,175 Effects of foreign exchange rate fluctuations on cash and cash equivalents (47,995) 8,691 (535,258)

Cash and cash equivalents at 31 December 20 3,296,267 3,090,242 3,255,420 Balance at 31 December 2009 Other comprehensive income/(expense) F oreign currency translation differences, net of tax Net change in fair value of available-for-sale securities, net of tax Total other comprehensive income/(expense) Total comprehensive income/(expense) C apital contribution granted Balance at 1 January 2010 Total comprehensive income P rofit for the year C hange in non-controlling interest C hange in reserve for non-controlling interest put option Dividends paid Balance at 31 December 2008 C hange in reserve for non-controlling interest put option C apital contribution granted Balance at 1 January 2009 Total other comprehensive income/(expense) Total comprehensive income/(expense) I ncrease in legal reserves C hange in non-controlling interest Total comprehensive income P rofit for the year Other comprehensive income/(expense) F oreign currency translation differences, net of tax Net change in fair value of available-for-sale securities, net of tax Dividends paid Balance at 1 January 2008 Other comprehensive income/(expense) F oreign currency translation differences, net of tax Net change in fair value of available-for-sale securities, net of tax Total other comprehensive income/(expense) Total comprehensive income/(expense) I ncrease in legal reserves Total comprehensive income P rofit for the year C hange in reserve for non-controlling interest put option Balance at 31 December 2010 C hange in non-controlling interest Dividends paid I ncrease in legal reserves

104 Turkcell Annual Report 2010 105 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

1. Reporting entity 2. Basis of preparation Turkcell Iletisim Hizmetleri Anonim Sirketi (the “Company”) was incorporated in Turkey on 5 October 1993 and commenced its operations in 1994. The address of the Company’s registered office is Turkcell Plaza, Mesrutiyet Caddesi No: 71, 34430 Tepebasi/Istanbul. It is engaged in (a) Statement of compliance establishing and operating a Global System for Mobile Communications (“GSM”) network in Turkey and regional states. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”). In April 1998, the Company signed a license agreement (the “2G License”) with the Ministry of Transportation and Communications of Turkey (the “Turkish Ministry”), under which it was granted a 25 year GSM license in exchange for a license fee of $500,000. The License permits the The Company selected the presentation form of “function of expense” for the statement of income in accordance with IAS 1 “Presentation of Company to operate as a stand-alone GSM operator and releases it from some of the operating constraints in the Revenue Sharing Agreement, Financial Statements”. which was in effect prior to the 2G License. Under the 2G License, the Company collects all of the revenue generated from the operations of its GSM network and pays the Undersecretariat of Treasury (the “Turkish Treasury”) a treasury share equal to 15% of its gross revenue from The Company reports cash flows from operating activities by using the indirect method in accordance with IAS 7 “Statement of Cash Flows”, Turkish GSM operations. The Company continues to build and operate its GSM network and is authorized to, among other things, set its own whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, issue invoices directly to subscri- receipts or payments, and items of income or expense associated with investing or financing cash flows. bers, collect payments and deal directly with subscribers. Following the 3G tender held by the Information Technologies and Communications Authority (“ICTA”) regarding the authorization for providing IMT-2000/UMTS services and infrastructure, the Company has been granted The consolidated financial statements as of and for the year ended 31 December 2010 were authorized for issue on 23 February 2011 by the the A-Type license (the “3G License”) providing the widest frequency band, at a consideration of EUR 358,000 (excluding Value Added Tax Board of Directors and updated by the management for any subsequent events up until 18 April 2011. (“VAT”)). Payment of the 3G license was made in cash, following the necessary approvals, on 30 April 2009. Authority for restatement and approval of consolidated financial statements belongs to the same Board. Consolidated financial statements are On 25 June 2005, the Turkish Government declared that GSM operators are required to pay 10% of their existing monthly treasury share to approved by the Board of Directors by the recommendation of Audit Committee of the Company. the Turkish Ministry as a universal service fund contribution in accordance with Law No: 5369. As a result, starting from 30 June 2005, the Company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish Ministry as universal service fund. (b) Basis of measurement The accompanying consolidated financial statements are based on the statutory records, with adjustments and reclassifications for the purpo- In July 2000, the Company completed an initial public offering with the listing of its ordinary shares on the Istanbul Stock Exchange and Ame- se of fair presentation in accordance with IFRSs as issued by the IASB. They are prepared on the historical cost basis adjusted for the effects rican Depositary Shares, or ADSs, on the New York Stock Exchange. of inflation during the hyperinflationary period lasted by 31 December 2005, except that the following assets and liabilities are stated at their fair value: put option liability, derivative financial instruments and financial instruments classified as available-for-sale. The methods used to measure fair value are further discussed in Note 4. As at 31 December 2010, two significant founding shareholders, Sonera Holding BV and Cukurova Group, directly and indirectly, own appro- ximately 37.1% and 13.8%, respectively of the Company’s share capital and are ultimate counterparties to a number of transactions that are (c) Functional and presentation currency discussed in the related parties footnote. On the basis of publicly available information, Alfa Group, which previously held, indirectly through The consolidated financial statements are presented in US Dollars (“USD” or “$”), rounded to the nearest thousand. Moreover, all financial Cukurova Telecom Holdings Limited and Turkcell Holding AS, 13.2% of the Company’s shares, has reduced its stake to 4.99% following information expressed in Turkish Lira (“TL”), Euro (“EUR”), Ukranian Hryvnia (“HRV”) and Swedish Krona (“SEK”) has been rounded to the litigation with Telenor ASA (“Telenor Group”). On the basis of publicly available information, it is understood that Alfa Group sold 62.2% of nearest thousand. The functional currency of the Company and its consolidated subsidiaries located in Turkey and Turkish Republic of Nort- its holdings in Alfa Telecom Turkey Limited (“ATTL”) to Visor Group affiliate Nadash International Holdings Inc. (“Nadash”) and Alexander hern Cyprus is TL. The functional currency of Euroasia Telecommunications Holding BV (“Euroasia”) and Financell BV (“Financell”) is USD. Mamut’s Henri Services Limited (“HSL”) and in July 2010, redeemed these shares. The functional currency of East Asian Consortium BV (“Eastasia”), Beltur BV, Surtur BV and Turkcell Europe is EUR. The functional currency of LLC Astelit (“Astelit”), LLC Global Bilgi (“Global LLC”) and UkrTower LLC (“UkrTower”) is HRV. The functional currency of Belarusian Telecom- The consolidated financial statements of the Company as at and for the year ended 31 December 2010 comprise the Company and its subsi- munications Network (“Belarusian Telecom”) and FLLC Global Bilgi (“Global FLLC”) is Belarusian Roubles (“BYR”). The functional currency of diaries (together referred to as the “Group”) and the Group’s interest in one associate and one joint venture. Subsidiaries of the Company, Azerinteltek QSC (“AzerInteltek”) is Azerbaijan Manat. their locations and their business are given in Note 34. The Company’s and each of its subsidiaries’, associate’s and joint venture’s financial statements are prepared as at and for the year ended 31 December 2010. (d) Use of estimates and judgments The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

106 Turkcell Annual Report 2010 107 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2. Basis of preparation (continued) 2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued) (d) Use of estimates and judgments (continued) Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most sig- nificant effect on the amounts recognized in the consolidated financial statements are described in Notes 4 and 32 and detailed analysis with Critical accounting judgments in applying the Group’s accounting policies (continued) respect to accounting estimates and critical judgments of allowance for doubtful receivables, useful lives or expected patterns of consumption of the future economic benefits embodied in depreciable assets, commission fees, revenue recognition and income taxes are provided below: Useful lives of assets (continued) Key sources of estimation uncertainty In accordance with IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”, the residual value and the useful life of an asset shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted for In Note 29, detailed analysis is provided for the foreign exchange exposure of the Group and risks in relation to foreign exchange movements. as a change in an accounting estimate in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. As part Critical accounting judgments in applying the Group’s accounting policies of yearly review of useful lives of assets, the Group made necessary evaluation by considering current technologic and economic conditions and recent business plans. Based on the evaluation performed, changes in the useful lives caused the following prospective impacts on dep- Certain critical accounting judgments in applying the Group’s accounting policies are described below: reciation and amortization charges;

Allowance for doubtful receivables Previous Current During the current year, the Group has changed its accounting estimates regarding the determination of allowance for doubtful receivables. accounting accounting Formerly, the allowance for doubtful receivables was based on management’s evaluation of the volume of the receivables outstanding, his- estimate estimate Impact torical collection trends and general economic conditions. With the new accounting estimate, the Group maintains an allowance for doubtful receivables for estimated losses resulting from the inability of the Group’s subscribers and customers to make required payments. The Group Depreciation and amortization charge for the year ended 31 765,280 757,354 7,926 bases the allowance on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection December 2010 trends and general economic conditions. The allowance is periodically reviewed. The allowance charged to expenses is determined in respect of receivable balances, calculated as a specified percentage of the outstanding balance in each aging group, with the percentage of the allo- Due to the impracticability, the Group has not disclosed the effect of the change for the future periods. wance increasing as the aging of the receivable becomes longer. Commission fees This change is accounted as a change in accounting estimates in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates Commission fees relate to services performed in relation to betting games where the Group acts as an agent in the transaction rather than as a and Errors”. Based on the evaluation performed, the change in the estimates regarding the determination of allowance for doubtful receivab- principal. In April 2009, the IASB issued amendments to the illustrative guidance in the appendix to IAS 18 “Revenue” in respect of identifying les caused the following impact on bad debt provision expense: an agent versus a principal in a revenue-generating transaction. Based on this guidance; management considered the following factors in distinguishing between an agent and a principal: Previous Current accounting accounting • The Group does not take the responsibility for fulfilment of the games. estimate estimate Impact • The Group does not collect the proceeds from the final customer and it does not bear the credit risk. • The Group earns a pre-determined percentage of the total turnover. Bad debt expense for the year ended 31 December 2010 127,921 126,257 1,664 Revenue recognition Due to the impracticability, the Group has not disclosed the effect of the change for the future periods. In arrangements which include multiple elements, the Group considers the elements to be separate units of accounting in the arrangement. Total arrangement consideration relating to the bundled contracts is allocated among the different units according the following criteria: Useful lives of assets The economic useful lives of the Group’s assets are determined by management at the time the asset is acquired and regularly reviewed for • the component has standalone value to the customer and appropriateness. The Group defines useful life of its assets in terms of the assets’ expected utility to the Group. This judgment is based on the • the fair value of the component can be measured reliably. experience of the Group with similar assets. In determining the useful life of an asset, the Group also follows technical and/or commercial obsolescence arising on changes or improvements from a change in the market. The useful lives of the licenses are based on the duration of The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. If a delivered the license agreements. element of a transaction is not a separately identifiable component, then it is accounted for as an integrated part of the remaining components of the transaction.

108 Turkcell Annual Report 2010 109 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2. Basis of preparation (continued) 2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued) (d) Use of estimates and judgments (continued)

Critical accounting judgments in applying the Group’s accounting policies (continued) Comparative information and revision of prior period financial statements (continued)

Income taxes The Company has for 2010 revised the manner in which it accounts for the impact of changes in foreign exchange rates in its statement of The calculation of income taxes involves a degree of estimation and judgment in respect of certain items whose tax treatment cannot be finally cash flows and has revised its presentation of prior periods, resulting in a change in the allocation of the impact of foreign exchange rate determined until resolution has been reached with the relevant tax authority or, as appropriate, through formal legal process. changes among “Operating activities”, “Effects of foreign exchange on statement of financial position items” and “Effect of foreign exchange rate changes on cash” in the statement of cash flows. The change relates to the impact of re-translation of the underlying functional currency As part of the process of preparing the consolidated financial statements, the Group is required to estimate the income taxes in each of the cash flows into the presentation currency, the US Dollar. The Company believes that changes to prior periods are immaterial. The change jurisdictions and countries in which they operate. This process involves estimating the actual current tax exposure together with assessing in the statement of cash flows will not impact the Company’s previously reported statement of income, statement of comprehensive income, temporary differences resulting from differing treatment of items, such as deferred revenue and reserves for tax and accounting purposes. statement of financial positions or “Cash and cash equivalents” at the end of any period. The effect of the change on the statement of cash The Group management assesses the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent flows is as follows: the recovery is not considered probable the deferred asset is adjusted accordingly. For the year ended 31 December 2009 The recognition of deferred tax assets is based upon whether it is probable that future taxable profits will be available, against which the As previously reported Revisions As Revised temporary differences can be utilized. Recognition, therefore, involves judgment regarding the future financial performance of the particular Net cash from operating activities 1,294,935 21,671 1,316,606 legal entity in which the deferred tax asset has been recognized. Effects of foreign exchange on statement of financial position items 30,938 (30,938) - Effects of foreign exchange rate changes on cash (576) 9,267 8,691 Changes in accounting policies Cash and cash equivalents 3,090,242 - 3,090,242 Changes to the accounting policies are applied retrospectively and the prior period’s financial statements are restated accordingly. The Group did not make any major changes to accounting policies during the current year. For the year ended 31 December 2008 Changes in accounting estimates As previously reported Revisions As Revised If the application of changes in the accounting estimates affects the financial results of a specific period, the changes in the accounting esti- Net cash from operating activities 1,674,385 71,861 1,746,246 mates are applied in that specific period, if they affect the financial results of current and following periods; the accounting estimate is applied Effects of foreign exchange on statement of financial position items (418,945) 418,945 - prospectively in the period in which such change is made. A change in the measurement basis applied is a change in an accounting policy, and Effects of foreign exchange rate changes on cash (44,452) (490,806) (535,258) is not a change in an accounting estimate. When it is difficult to distinguish a change in an accounting policy from a change in an accounting Cash and cash equivalents 3,255,420 - 3,255,420 estimate, the change is treated as a change in an accounting estimate. 3. Significant accounting policies The Group did not have any major changes in the accounting estimates during the current year except for the allowance for doubtful recei- The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and vables and the useful lives of property, plant and equipment and intangible assets. have been applied consistently by the Group entities.

Comparative information and revision of prior period financial statements (a) Basis of consolidation The consolidated financial statements of the Group have been prepared with the prior periods on a comparable basis in order to give consis- tent information about the financial position and performance. If the presentation or classification of the financial statements is changed, in (i) Subsidiaries order to maintain consistency, the financial statements of the prior periods are also reclassified in line with the related changes. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are changed as necessary to align them with the policies adopted by the Group.

(ii) Acquisition from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are excluded from the scope of IFRS 3 “Business Combinations”. In business combinations under common control, assets and liabilities subject to business combination are accounted for at their carrying value in consolidated financial statements. Statements of income are consolidated starting from the beginning of the financial year in which the business combination is realized. Financial statements of previous financial years are restated in the same manner in order to maintain consistency and comparability. Any positive or negative goodwill arising from

110 Turkcell Annual Report 2010 111 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

such business combinations is not recognized in the consolidated financial statements. Residual balance calculated by netting off investment 3. Significant accounting policies (continued) in subsidiary and the share acquired in subsidiary’s equity accounted for as equity transactions (i.e. transactions with owners in their capacity as owners). (b) Foreign currency (continued)

(iii) Associates and jointly controlled entities (equity accounted investees) (ii) oreign operations Associates are those entities in which the Group has significant influence, but not control, over the financial and operating decisions. Signifi- The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD cant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Joint ventures are from the functional currency of the foreign operation at foreign exchange rates ruling at the reporting date. The income and expenses of those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for foreign operations are translated to USD at monthly average exchange rates. strategic financial and operating decisions. Foreign currency differences arising on retranslation are recognized directly in the foreign currency translation reserve, as a separate com- Associates and jointly controlled entities (equity accounted investees) are accounted for using the equity method and are initially recognized at ponent of equity. Since 1 January 2005, the Group’s date of transition to IFRSs, such differences have been recognized in the foreign currency cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated finan- translation reserve. When a foreign operation is disposed of, partially or fully, the relevant amount in the foreign currency translation reserve cial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments is transferred to the statement of income. to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is amount of that interest (including any long-term investments) is reduced to nil and recognition of further losses is discontinued except to the neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized extent that the Group has an obligation or has made payments on behalf of the investee. The Group’s equity accounted investees as at 31 directly in equity in the foreign currency translation reserve. December 2010 are Fintur Holdings BV (“Fintur”) and A-Tel Pazarlama ve Servis Hizmetleri AS (“A-Tel”). (iii) Translation from functional to presentation currency (iv) Transactions eliminated on consolidation Items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the Intragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions are eliminated in prepa- entities operate, normally under their local currencies. ring the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but The consolidated financial statements are presented in USD, which is the presentation currency of the Group. The Group uses USD as the only to the extent that there is no evidence of impairment. presentation currency for the convenience of investor and analyst community.

(v) Non-controlling interests Assets and liabilities for each statement of financial position presented (including comparatives) are translated to USD at exchange rates at Where a put option is granted by the Group to the non-controlling interests shareholders in existing subsidiaries that provides for settlement the statement of financial position date. Income and expenses for each statement of income (including comparatives) are translated to USD at in cash or in another financial asset, the Group recognizes a liability for the present value of the estimated exercise price of the option. The monthly average exchange rates. interests of the non-controlling shareholders that hold such put options are derecognized when the financial liability is recognized. The cor- responding interests attributable to the holder of the puttable non-controlling interests are presented as attributable to the equity holders of Foreign currency differences arising on retranslation are recognized directly in a separate component of equity. the parent and not as attributable to those non-controlling interests’ shareholders. The difference between the put option liability recognized and the amount of non-controlling interests’ shareholders derecognized is recorded under equity. Subsequent changes in the fair value of the (iv) Net investment in foreign operations put options granted to the non-controlling shareholders in existing subsidiaries are also recognized in equity, except the imputed interest on Foreign currency differences arising from the translation of the net investment in foreign operations are recognized in the foreign currency the liability is recognized in the consolidated statement of income. translation reserve. They are transferred to the statement of income upon disposal of the foreign operations.

(b) Foreign currency

(i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences arising on translation of foreign currency transactions are recognized in the statement of income. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional cur- rency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in the statement of income, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized directly in equity.

112 Turkcell Annual Report 2010 113 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(c) Financial instruments (c) Financial instruments (continued)

(i) Non-derivative financial instruments (i) Non-derivative financial instruments (continued) Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equiva- lents, loans and borrowings, and trade and other payables. • Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in Non-derivative financial instruments which are not recognized or designated as financial instruments at fair value through profit or loss are any of the previous categories. recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured as described below: The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(h)(i)), and foreign exchange Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are gains and losses on available-for-sale monetary items (see note 3(b)(i)), are recognized directly in equity. When an investment is derecogni- repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents zed, the cumulative gain or loss in equity is transferred to the statement of income. for the purpose of the statement of cash flows. • Estimated exercise price of put options Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group Under the terms of certain agreements, the Group is committed to acquire the interests owned by non-controlling shareholders in consolida- has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. ted subsidiaries, if these non-controlling interests wish to sell their share of interests. Accounting for finance income and costs is discussed in Note 3(m). As the Group has unconditional obligations to fulfil its liabilities under these agreements, IAS 32 “Financial instruments: Disclosure and Pre- • Financial assets at fair value through profit or loss sentation”, requires the value of such put option to be presented as a financial liability on the statement of financial position for the present An instrument is classified as financial asset at fair value through profit or loss if it is held for trading or is designated as such upon initial value of the estimated option redemption amount. The Group accounts for such transactions under the anticipated acquisition method and recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes the interests of non-controlling shareholders that hold such put option are derecognized when the financial liability is recognized. The Group purchase and sale decisions based on their fair value in accordance with the Group’s risk management or investment strategy. Upon initial accounts for the difference between the amount recognized for the exercise price of the put option and the carrying amount of non-controlling recognition, attributable transaction costs are recognized in the statement of income when incurred. Financial instruments at fair value thro- interests in equity. ugh profit or loss are measured at fair value, and changes therein are recognized in the statement of income. • Other • Held-to-maturity financial assets Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses. If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. Held-to-maturity financial assets are held- (ii) Derivative financial instruments to-maturity investments that are measured at amortized cost using the effective interest method, less any impairment losses. The Group holds derivative financial instruments to hedge its foreign currency risk exposures arising from operational, financing and investing activities. In accordance with its treasury policy, the Group engages in forward and option contracts. However, these derivatives do not qualify Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in for hedge accounting and are accounted for as trading derivatives. the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years. Embedded derivatives are separated from the host contract and accounted for separately if a) the economic characteristics and risks of the host contract and the embedded derivative are not closely related, b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and c) the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognized initially at fair value; attributable transaction costs are recognized in the statement of income when incurred. Sub- sequent to initial recognition, derivatives are measured at fair value and changes therein are recognized in the statement of income.

114 Turkcell Annual Report 2010 115 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(d) Property, plant and equipment (d) Property, plant and equipment (continued)

(i) Recognition and measurement (iii) Depreciation (continued) Items of property, plant and equipment are stated at cost adjusted for the effects of inflation during the hyperinflationary period lasted by 31 Depreciation methods, useful lives and residual values are reviewed at least annually unless there is a triggering event. December 2005 less accumulated depreciation (see below) and accumulated impairment losses (see note 3(h)(ii)). (e) Intangible assets Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs (i) GSM and other telecommunication operating licenses of dismantling and removing the items and restoring the site on which they are located, if any. Borrowing costs related to the acquisition or GSM and other telecommunication operating licenses that are acquired by the Group are measured at cost adjusted for the effects of inflation constructions of qualifying assets are capitalized as part of the cost of that asset. during the hyperinflationary period lasted by 31 December 2005 less accumulated amortization (see below).

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Amortization Amortization is recognized in the statement of income on a straight line basis primarily by reference to the unexpired license period. The When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant useful lives for the GSM and other telecommunication operating licenses are as follows: and equipment. GSM and other telecommunications licenses 3 – 25 years Gains/losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within other income or other expenses in the statement of income. In accordance with the new legislation issued by ICTA, the infrastructure operator authorization right of the Company’s subsidiary, Superon- Changes in the obligation to dismantle, remove assets on sites and to restore sites on which they are located, other than changes deriving line Iletisim Hizmetleri AS (“Superonline”), has become infinite. As a result, Superonline revised the expected useful lives of its operating from the passing of time, are added or deducted from the cost of the assets in the period in which they occur. The amount deducted from the license and related fixed network equipment from 15 years to 25 years. cost of the asset shall not exceed the balance of the carrying amount on the date of change, and any excess balance is recognized immediately in the statement of income. (ii) Computer Software Costs associated with maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated (ii) Subsequent costs with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic be- The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that nefits exceeding costs beyond one year, are recognized as intangible assets. Costs include the software development employee costs and an the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of appropriate portion of relevant overheads. the replaced item is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of income as incurred. Amortization Amortization is recognized in the statement of income on a straight-line basis over the estimated useful lives from the date the software is (iii) Depreciation available for use. The useful lives for computer software are as follows: Depreciation is recognized in the statement of income on a straight-line basis over the estimated useful lives of each part of an item of pro- perty, plant and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in Computer software 3 – 8 years the asset. Leased assets are depreciated over the shorter of the lease term or their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. (iii) Other intangible assets Intangible assets that are acquired by the Group which have finite useful lives are measured at cost adjusted for the effects of inflation during The estimated useful lives for the current and comparative periods are as follows: the hyperinflationary period lasted by 31 December 2005 less accumulated amortization (see below) and accumulated impairment losses (see Buildings 21 – 50 years note 3(h)(ii)). Mobile network infrastructure 6 – 8 years Fixed network infrastructure 3 – 25 years Indefeasible Rights of Use (“IRU”) correspond to the right to use a portion of the capacity of an asset granted for a fixed period of time. IRUs Call center equipment 5 – 8 years are recognized as an intangible asset when the Group has specific indefeasible right to use an identified portion of the underlying asset and Equipment, fixtures and fittings 4 – 5 years the duration of the right is the major part of the underlying asset’s economic life. IRUs are amortized over the shorter of the expected period Motor vehicles 4 – 5 years of use and the life of the contract. Central betting terminals 10 years Leasehold improvements 5 years

116 Turkcell Annual Report 2010 117 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(e) Intangible assets (continued) (e) Intangible assets (continued)

(iii) Other intangible assets (continued) (iv) Internally generated intangible assets – research and development expenditure Expenditure on research activities is recognized as an expense in the period in which it is incurred. Subsequent expenditure Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset (that is purchased An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and from independent third parties) to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, only if, all of the following have been demonstrated: is recognized in the statement of income as incurred. Capitalized costs generally relate to the application of development stage; any other costs incurred during the pre and post-implementation stages, such as repair, maintenance or training, are expensed as incurred. • The technical feasibility of completing the intangible asset so that it will be available for use or sale; • The intention to complete the intangible asset and use or sell it; Amortization • The ability to use or sell the intangible asset; Amortization is recognized in the statement of income on a straight line basis over the estimated useful lives of intangible assets unless such • How the intangible asset will generate probable future economic benefits; useful lives are indefinite from the date that they are available for use. The estimated useful lives for the current and comparative periods are • The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and as follows: • The ability to measure reliably the expenditure attributable to the intangible asset during its development. • The amount initially recognized for internally generated intangible assets is the sum of expenditure incurred from the date when the Transmission lines 10 years intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, de Central betting system operating right 10 years velopment expenditure is charged to the statement of income in the period in which it is incurred. Customer base 2 – 8 years Brand name 10 years Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated Customs duty and VAT exemption right 4.4 years impairment losses, on the same basis as intangible assets acquired separately.

Amortization methods, useful lives and residual values are reviewed at least annually unless there is a triggering event. (f) Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial Goodwill recognition, the leased asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease pay- From 1 January 2010 the Group has applied IFRS 3 (2008) “Business Combinations” in accounting for business combinations. The change in ments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. accounting policy has been applied prospectively and had no effect as there is no business combination in the current period. Other leases are operating leases and the leased assets are not recognized on the Group’s statement of financial position.

For acquisitions on or after 1 January 2010, the Group measures goodwill as the fair value of the consideration transferred (including the fair (g) Inventories value of any previously-held equity interest in the acquiree) and the recognized amount of any non-controlling interests in the acquiree, less Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition of business, less selling expenses. The cost of inventory is determined using the weighted average method and includes expenditure incurred date. in acquiring the inventories and bringing them to their existing location and condition. As at 31 December 2010, inventories mainly consist of simcards, scratch cards, handsets and modems. When the excess is negative, a bargain purchase gain is recognized immediately in the statement of income. (h) Impairment Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill (i) Financial assets is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset including A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective goodwill, that forms part of the carrying amount of the equity accounted investees. evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recog- nition of the asset, and the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

118 Turkcell Annual Report 2010 119 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(h) Impairment (continued) (h) Impairment (continued)

(i) Financial assets (continued) (ii) Non-financial assets (continued) An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an determined, net of depreciation or amortization, if no impairment loss had been recognized. available-for-sale financial asset is calculated by reference to its fair value. Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, therefore, is not tested for Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collecti- impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is vely in groups that share similar credit risk characteristics. objective evidence that the investment in an associate may be impaired.

All impairment losses are recognized in the statement of income. Any cumulative loss in respect of an available-for-sale financial asset recog- (i) Employee benefits nized previously in equity is transferred to the statement of income. (i) Retirement pay liability An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For In accordance with existing labor law in Turkey, the Company and its subsidiaries in Turkey are required to make lump-sum payments to emp- financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the loyees who have completed one year of service and whose employment is terminated without cause or who retire, are called up for military statement of income. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in other comprehen- service or die. Such payments are calculated on the basis of 30 days’ pay maximum full TL 2,623 as at 31 December 2010 (equivalent to full sive income. $1,697 as at 31 December 2010), which is effective from 1 January 2011, per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the consolidated financial statements on a current basis. (ii) Non-financial assets The reserve has been calculated by estimating the present value of future probable obligation of the Company and its subsidiaries in Turkey The carrying amounts of the Group’s non-financial assets, other than inventories, and deferred tax assets are reviewed at each reporting date arising from the retirement of the employees. to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at the same time. (ii) Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from con- have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as tinuing use that are largely independent of the cash inflows of other assets or group of assets (the “cash-generating unit”). The recoverable an employee benefit expense in the statement of income when they are due. amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate adjusted for the effects of tax cash outflows The assets of the plan are held separately from the consolidated financial statements of the Group. The Company and other consolidated com- that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business panies that initiated defined contribution retirement plan are required to contribute a specified percentage of payroll costs to the retirement combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement plan is to make the specified contributions. the combination. (j) Provisions The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, recoverable amount is determined from the cash-generating unit to which corporate asset belongs. and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. risks specific to the liability. The unwinding of the discount is recognized as finance cost. Impairment losses are recognized in the statement of income. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the Onerous contracts unit (group of units) on a pro rata basis. Present obligations arising under onerous contracts are recognized and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are asses- expected to be received under it. The Group did not recognize any provision for onerous contracts as at 31 December 2010 (31 December sed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been 2009: nil). a change in the estimates used to determine the recoverable amount.

120 Turkcell Annual Report 2010 121 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(j) Provisions (continued) (k) Revenue (continued) Commission fees mainly comprised of net takings earned to a maximum of 1.4% of gross takings, as a head agent of fixed odds betting games Dismantling, removal and restoring sites obligation starting from 1 March 2009 (between 15 March 2007 and 1 March 2009, commission rate was 7% of gross takings and 4.3% commission The Group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets was recognized based on the para-mutual and fixed odds betting games operated on Central Betting System). were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. Commission revenues are recognized at the time all the services related with the games are fully rendered. Under the agreement signed with Spor Toto Teskilat Mudurlugu AS (“Spor Toto”), Inteltek Internet Teknoloji Yatirim ve Danismanlik AS (“Inteltek”) is obliged to undertake any Bonus excess payout, which is presented on net basis with the commission fees. Provision for bonus is provided when the bonus is a legal obligation, or past practice would make the bonus a constructive obligation and the Group makes a reliable estimate of the obligation. Simcard sales are recognized upfront upon delivery to distributors, net of returns, discounts and rebates. Simcard costs are also recognized upfront upon sale of the simcard to the distributors. (k) Revenue Revenues are recognized as the fair value of the consideration received or receivable, net of returns, trade discounts and rebates. Commu- Call center revenues are recognized at the time services are rendered. nication fees include postpaid revenues from incoming and outgoing calls, additional services, prepaid revenues, interconnect revenues and roaming revenues. Communication fees are recognized at the time the services are rendered. The revenue recognition policy for other revenues is to recognize revenue as services are provided.

With respect to prepaid revenues, the Group generally collects cash in advance by selling scratch cards to distributors. In such cases, the Volume rebates or discounts and other contractual changes in the prices of roaming and other services are anticipated, as both the payer Group does not recognize revenue until the subscribers use the telecommunications services. Deferred income is recorded under current and the recipient, if it is probable that they have been earned or will take effect. Thus, contractual rebates and discounts are anticipated, but liabilitiesThe Group offers free right of use to its subscribers, and recognizes any unused portion of these free granted right of use as at the discretionary rebates and discounts are not anticipated because the definitions of asset and liability would not be met. balance sheet date as deferred revenue. The Group does not have any other customer loyalty program in the scope of IFRIC 13 “Customer Loyalty Programmes”. (l) Lease payments Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease. Lease In connection with campaigns, both postpaid and prepaid services may be bundled with handset or other goods/services and these bundled incentives received are recognized as an integral part of the total lease expense, over the term of the lease. services and products involve consideration in the form of fixed fee or a fixed fee coupled with continuing payment stream. Loyalty programs for both postpaid and prepaid services may be bundled with other services. Total arrangement considerations relating to the bundled contract Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. are allocated among the different units according the following criteria: The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. • the component has standalone value to the customer and • the fair value of the component can be measured reliably. Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, If a delivered element of a transaction is not a separately identifiable component, then it is accounted for as an integral part of the remaining the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements components of the transactions. on the basis of their relative fair values.

Revenues allocated to handsets given in connection with campaigns, which is included in other revenue, is recognized when the significant (m) Finance income and costs risks and rewards of ownership have been transferred to the buyer, collection is probable, the associated costs and possible return of goods Finance income comprises interest income on funds invested (including available-for-sale financial assets), late payment interest income, can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured interest income on contracted receivables, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial reliably. assets at fair value through profit or loss and gains on derivative instruments that are recognized in the statement of income. Interest income is recognized as it accrues, using the effective interest method. Monthly fixed fees represent a fixed amount charged to postpaid subscribers on a monthly basis without regard to the level of usage. Fixed fees are recognized on a monthly basis when billed. Finance costs comprise interest expense on borrowings, litigation late payment interest expense, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or option premium expense.

Foreign currency gains and losses are reported on a net basis.

122 Turkcell Annual Report 2010 123 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(m) Finance income and costs (continued) (p) Earnings per share The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or Borrowing Costs loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take Diluted EPS is equal to basic EPS because the Group does not have any convertible notes or share options granted to employees. considerable time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substan- tially ready for their intended use or sale. Investment income earned by the temporary investment of the part of the borrowing not yet used is (q) Operating segment deducted against the borrowing costs eligible for capitalization. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating All other borrowing costs are recognized in the statement of income in the period in which they are incurred. results are regularly reviewed by the Group management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. (n) Transactions with related parties A related party is essentially any party that controls or can significantly influence the financial or operating decisions of the Group to the extent The Group identified Turkcell, Euroasia and Belarusian Telecom as operating segments. that the Group may be prevented from fully pursuing its own interests. For reporting purposes, investee companies and their shareholders, non-controlling shareholders at subsidiaries, key management personnel, shareholders of the Group and the companies that the sharehol- (r) Subscriber acquisition costs ders have a relationship with are considered to be related parties. The Group capitalizes directly attributable subscriber acquisition costs when the following conditions are met:

(o) Income taxes • the capitalized costs can be measured reliably; Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of income except to the extent that • there is a contract binding the customer for a specific period of time; and it relates to items recognized directly in equity or in other comprehensive income. • it is probable that the amount of the capitalized costs will be recovered through the revenues generated by the service contract, or, where the customer withdraws from the contract in advance, through the collection of the penalty. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Capitalized subscriber acquisition costs are amortized on a straight-line basis over the minimum period of the underlying contract. In all other cases, subscriber acquisition costs are expensed when incurred. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial (s) Government grants recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the Group will comply with all attached conditions. foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Government grants relating to costs are deferred and recognized in the statement of income over the period necessary to match them with the costs that they are intended to compensate. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. credited to the statement of income on a straight-line basis over the expected useful lives of the related assets.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which temporary diffe- (t) New standards and interpretations rence can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported the related tax benefit will be realized. and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no material impact on the financial statements are set out in this section. Interest and penalties assessed on income tax deficiencies are presented based on their nature.

124 Turkcell Annual Report 2010 125 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(t) New standards and interpretations (continued) (t) New standards and interpretations (continued)

a) New and Revised IFRSs do not affect presentation and disclosures (b) New and Revised IFRSs affecting the reported financial performance and / or financial position (continued)

Amendments to IFRS 5, Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2009) IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements (continued) The amendments to IFRS 5 clarify that the disclosure requirements in IFRSs other than IFRS 5 do not apply to non-current assets (or disposal The application of IAS 27 (2008) has resulted in changes in the Group’s accounting policies for changes in ownership interests in subsidiaries. groups) classified as held for sale or discontinued operations unless those IFRSs require Specifically, the revised Standard has brought clarification to the Group’s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. Under IAS 27 (2008), all such increases or decreases are dealt with in equity, with no impact (i) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations, or on goodwill or profit or loss. (ii) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requi- rement of IFRS 5 and the disclosures are not already provided in the consolidated financial statements. When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to derecognize all assets, liabilities and non-controlling interests at their carrying amount and to recognize the fair value of the consideration Since the Group does not have any assets in this context, disclosures in these consolidated financial statements have not been modified to received. Any retained interest in the former subsidiary is recognized at its fair value at the date control is lost. The resulting difference is reflect the above clarification. recognized as a gain or loss in profit or loss.

Amendments to IAS 7, Statement of Cash Flows (as part of Improvements to IFRSs issued in 2009) These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional pro- visions. The amendments to IAS 7 specify that only expenditures that result in a recognized asset in the statement of financial position can be classified as investing activities in the statement of cash flows. The application of the amendments to IAS 7 has resulted in a change in the presentation Since the non-controlling interests have a deficit balance, net loss amounting to $46,705 is accounted in non-controlling interests in accor- of cash outflows in respect of development costs that do not meet the criteria in IAS 38, “Intangible Assets” for capitalization as part of an dance with IAS 27 (revised) in the current period. There have been no transactions whereby an interest in an entity is retained after the loss internally generated intangible asset. This change has been applied retrospectively. of control of that entity; there have been no transactions with non-controlling interests.

Since, the development costs, which do not meet the criteria for capitalization, were included in cash flows from operating activities in the IAS 28 (revised in 2008), “Investments in Associates” consolidated statement of cash flows of the previous periods, this amendment does not affect the consolidated financial statements. The principle adopted under IAS 27 (2008) that a loss of control is recognized as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to IAS 28. Therefore, when significant influence over an associate is lost, the investor measu- New and Revised IFRSs affecting the reported financial performance and / or financial position res any investment retained in the former associate at fair value, with any consequential gain or loss recognized in profit or loss.

IFRS 3 (revised in 2008), Business Combinations and IAS 27 (revised in 2008), Consolidated and Separate Financial Statements As part of Improvements to IFRSs issued in 2010, IAS 28 (2008) has been amended to clarify that the amendments to IAS 28 regarding transac- tions where the investor loses significant influence over an associate should be applied prospectively. The Group has applied the amendments IFRS 3 (revised), “Business Combinations” and consequential amendments to IAS 27, “Consolidated and Separate Financial Statements”, IAS to IAS 28 (2008) as part of Improvements to IFRSs issued in 2010 in advance of their effective dates (annual periods beginning on or after 1 28, “Investments in Associates” and IAS 31, “Interests in Joint Ventures” are effective prospectively to business combinations for which the July 2010). acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The main impact of the adoption is as follows: There have been no transactions whereby an interest in an entity is retained after the loss of significant influence in that entity; there have been no transactions to acquire or dispose of shares in associates. (a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as “mi- nority interests”) either at fair value or at the non-controlling interests’ share of the fair value of the identifiable net assets of the acquiree, IFRIC 18, “Transfers of Assets from Customers”, is effective for transfer of assets received on or after 1 July 2009. This interpretation is applied (b) to change the recognition and subsequent accounting requirements for contingent consideration, by the Group for the revenue recognition of assets transferred to its customers. (c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs being recognized as an expense in the statement of income as incurred, (d) in step acquisitions, previously held interests are to be remeasured to fair value at the date of the subsequent acquisition with the value included in goodwill calculation. Gain or loss arising from the re-measurement shall be recognized as part of statement of income.

126 Turkcell Annual Report 2010 127 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 3. Significant accounting policies (continued)

(t) New standards and interpretations (continued) (t) New standards and interpretations (continued)

(c) New and Revised IFRSs applied with no material effect on the consolidated financial statements (d) New and Revised IFRSs in issue but not yet effective (continued) The following new and revised IFRSs have also been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future IFRS 7, “Financial Instruments: Disclosures” transactions or arrangements. In October 2010, IFRS 7, “Financial Instruments: Disclosures” is amended by IASB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets IFRIC 17, “Distributions of non-cash assets to owners”, is effective for annual periods beginning on or after 1 July 2009. This is not currently (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the applicable to the Group, as it has not made any non-cash distributions. assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The Group has not yet had “Additional exemptions for first-time adopters” (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied an opportunity to consider the potential impact of the adoption of this revised standard. for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer. IFRS 9, “Financial Instruments: Classification and Measurement” IFRS 2, “Share-based Payments - Group Cash-settled Share Payment Arrangements” is effective for annual periods beginning on or after 1 In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately January 2010. This is not currently applicable to the Group, as the Group does not have share-based payment plans. replace IAS 39, “Financial Instruments: Recognition and Measurement”. The standard requires an entity to classify its financial assets on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and Amendments to IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations” (as part of Improvements to IFRSs issued in 2008) subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan invol- beginning on or after 1 January 2013. The Group has not had an opportunity to consider the potential impact of the adoption of this standard. ving loss of control of that subsidiary, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale. IAS 24 (Revised 2009), “Related Party Disclosures” Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The improvements cover 12 main standards/ In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government related entities with a interpretations as follows: IFRS 2, “Share-based Payments”, IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations”, IFRS partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1 8, “Operating Segments”, IAS 1, “Presentation of Financial Statements”, IAS 7, “Statement of Cash Flows”, IAS 17, “Leases”, IAS 18, “Reve- January 2011. The Group does not expect any impact of the adoption of this amendment on the financial statements. nue”, IAS 36, “Impairment of Assets”, IAS 38, “Intangible Assets”, IAS 39, “Financial Instruments: Recognition and Measurement”, IFRIC 9, “Reassessment of Embedded IAS 32 (Amendments), “Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements” The amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or after 1 February 2010. The amendments address the Derivatives”, IFRIC 16, “Hedges of Net Investment in a Foreign Operation”. The effective dates vary standard by standard but most are effective accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. 1 January 2010. Previously, such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated. The Group has not (d) New and Revised IFRSs in issue but not yet effective yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard.

IFRS 1 (amendments), “First-time Adoption of IFRS - Additional Exemptions” IFRIC 14 (Amendments), “Pre-payment of a Minimum Funding Requirement” Amendments to IFRIC 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are requ- Amendments to IFRS 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to ired to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment present comparative IFRS 7 fair value disclosures. requires an asset to be recognized for any surplus arising from voluntary pre-payments made. The Group does not expect any impact of the adoption of this amendment on the financial statements. On 20 December, IFRS 1 is amended to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs and to provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time.

These amendments are not relevant to the Group, as it is an existing IFRS preparer.

128 Turkcell Annual Report 2010 129 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued) 4. Determination of fair values (continued)

(t) New standards and interpretations (continued) (ii) Intangible assets

(d) New and Revised IFRSs in issue but not yet effective (continued) The fair value of the brand acquired in the Superonline Uluslararası Elektronik Bilgilendirme Telekomunikasyon ve Haberlesme Hizmetleri AS business combination is based on the discounted estimated royalty payments that have been avoided as a result of the brand being owned. IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments” The fair value of customer base acquired in the Superonline business combination are valued using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. IFRIC 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or part, a financial liability. The Group has not yet had an opportunity to consider the potential The fair value of the custom duty and VAT exemption agreement in the Belarusian Telecom business combination is based on the incremental impact of the adoption of this amendment to the standard. cash flows method (cost saving approach) and this was used for the valuation analysis.

IAS 12, “Income Taxes” The fair value of mobile telephony licenses (GSM&UMTS) in the Belarusian Telecom business combination is based on the Greenfield (build- In December 2010, IAS 12 is amended. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the out) method, which is estimated to be appropriate and commonly used for the valuation of licenses, and this was used for the valuation entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery analysis. will be through use or through sale when the asset is measured using the fair value model in IAS 40, “Investment Property”. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the sale. The amendment will be effective for annual periods beginning on or after 1 January 2012. The Group has not yet had an opportunity to assets. consider the potential impact of the adoption of this revised standard. (iii) Investments in equity and debt securities Annual Improvements, May 2010 The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is Further to the above amendments and revised standards, the IASB has issued Annual Improvements to IFRSs in May 2010 that cover 7 main determined by reference to their quoted bid price or over the counter market price at the reporting date. The fair value of held-to-maturity standards/interpretations as follow: IFRS 1, “First-time Adoption of International Financial Reporting Standards”, IFRS 3, “Business Com- investments is determined for disclosure purposes only. binations,” IFRS 7, “Financial Instruments: Disclosures”, IAS 1, “Presentation of Financial Statements”, IAS 27, “Consolidated and Separate Financial Statements”, IAS 34, “Interim Financial Reporting” and IFRIC 13, “Customer Loyalty Programmes”. With the exception of amend- (iv) Trade and other receivables / due from related parties ments to IFRS 3 and IAS 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January 2011. Early The fair values of trade and other receivables and due from related parties are estimated as the present value of future cash flows, discounted adoption of these amendments is allowed. The Group has not yet had an opportunity to consider the potential impact of the adoption of these at the market rate of interest at the reporting date. amendments to the standards. (v) Derivatives 4. Determination of fair values The fair value of forward exchange contracts and option contracts are based on their listed market price, if available. If a listed market price is A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When for the residual maturity of the contract using a risk-free interest rate (based on government bonds) or option pricing models. applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or lia- bility. (vi) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, (i) Property, plant and equipment discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value similar lease agreements. of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, willingly. The market value (vii) Exercise price of financial liability related to non-controlling share put option of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items. The Group measures the estimated exercise price of the financial liability originating from put options granted to non-controlling interests as the present value of estimated option redemption amount. Present value of the estimated option redemption amount is based on the fair value of estimation for the company subject to the put option.

The Group has estimated a value based on multiple approaches in grant to share purchase agreement including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 August 2013, which is the exercise date of the put option, is then discounted back to 31 December 2010.

130 Turkcell Annual Report 2010 131 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5. Financial risk management 5. Financial risk management (continued) The Group has exposure to the following risks from its use of financial instruments: Credit risk (continued) • Credit risk Investments are preferred to be in liquid securities and mostly with counterparties that have a credit rating equal or better than the Group. • Liquidity risk Some of the collection banks have credit ratings that are lower than the Group’s, or they may not be rated at all, however, policies are in place • Market risk to review the paid-in capital and rating of counterparties periodically to ensure credit worthiness.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for Transactions involving derivatives are with counterparties with whom the Group has signed agreements and which have sound credit ratings. measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these con- At the reporting date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carr- solidated financial statements. ying amount of each financial asset in the statement of financial position.

Risk management framework The Group establishes an allowance for doubtful receivables that represents its estimate of incurred losses in respect of trade and other The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. receivables. This allowance includes the specific loss component that relates to individual subscribers exposures, and adjusted for a general provision which is determined based on the age of the balances and historical collection trends. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. At 31 December 2010, $1,324,604 guarantees were market conditions and the Group’s activities. outstanding (31 December 2009: $1,102,672).

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, Liquidity risk and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to manage its oversight role by Internal Audit. liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it The exchange rates were very volatile in 2009 but with a generally positive trend due to developments in the global markets as well as Turkish has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations. politics. The improved perception of global risk helped emerging market currencies appreciate in the second half of 2009. TL appreciated aga- inst USD by 0.4% and depreciated against EUR by 0.9%, HRV depreciated against USD by 3.7% and BYR depreciated against USD by 30.1% as Market risk at 31 December 2009 when compared to the exchange rates as at 31 December 2008. As at 31 December 2010, TL depreciated against USD by Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s 2.7% and appreciated against EUR by 5.1%, HRV appreciated against USD by 0.3% and BYR depreciated against USD by 4.8% when compa- income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk red to the exchange rates as at 31 December 2009. Please refer to Note 29 for additional information on the Group’s exposure to this turmoil. exposures within acceptable parameters, while optimising the return on risk.

Credit risk The Group buys and sells derivatives in order to manage market risks. All such transactions are carried at within the guidelines set by the Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obli- Group treasury management. gations, and arises principally from the Group’s receivables from customers and investment securities. Currency risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group may require collateral The Group is exposed to currency risk on certain revenues such as roaming revenues, purchases and certain operating costs such as roaming in respect of financial assets. Also, the Group may demand letters of guarantee from third parties related to certain projects or contracts. The expenses and network related costs and resulting receivables and payables, borrowings, deferred payments related to the acquisition of Be- Group may also demand certain pledges from counterparties if necessary in return for the credit support it gives related to certain financings. larusian Telecom and financial liability in relation to put option for the acquisition of non-controlling shares of Belarusian Telecom that are In monitoring customer credit risk, customers are grouped according to whether they are an individual or legal entity, aging profile, maturity denominated in a currency other than the respective functional currencies of Group entities, primarily TL for operations conducted in Turkey. and existence of previous financial difficulties. Trade receivables and accrued service income are mainly related to the Group’s subscribers. The currencies in which these transactions are primarily denominated are EUR, USD and SEK. The Group’s exposure to credit risk on trade receivables is influenced mainly by the individual payment characteristics of postpaid subscribers. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables.

132 Turkcell Annual Report 2010 133 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5. Financial risk management (continued) - 2009 2008 78,448 61,835 328,011 383,608 336,226 755,185 Market risk (continued) 102,990 (263,348) (596,802) (440,883) (681,258) 5,789,972 1,946,071 1,834,880 6,970,408 2,592,114 1,388,590

Currency risk (continued)

Derivative financial instruments such as forward contracts and options are used to hedge exposure to fluctuations in foreign exchange rates. Total 2009 Total 2010 78,448 61,835

The Group uses forward exchange contracts to hedge its currency risk. 23,499 328,011 383,608 406,401 317,146 122,839 (263,348) (596,802) 5,789,972 1,946,071 1,834,880 (173,213) (767,970) 5,982,093 1,996,640 1,111,683 The Group’s investments in its equity accounted investee Fintur and its subsidiaries in Ukraine, Republic of Belarus, Azerbaijan and Germany

are not hedged with respect to the currency risk arising from the net assets as those net investments are considered to be long-term in nature. - - 2008 2009 81,423 75,783 78,448 362,893 292,303 181,671 102,990 277,251 (76,006) (42,885) 246,466 304,118 144,989 291,020 (32,975) Interest rate risk (67,920) The Group’s exposure to interest rate risk is related to its financial assets and liabilities. The Group’s financial liabilities mostly consist of flo- ating interest rate borrowings. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which - - provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy. In this respect, the Group Other 2009 Other 2010 75,783 78,448

has not entered into any type of derivative instrument in order to hedge interest rate risk as at 31 December 2010. 60,213 246,466 304,118 144,989 291,020 (32,975) (67,920) 305,065 386,404 213,655 122,839 122,839 386,119 (66,143) (92,034)

6. Operating segments - - 2 - 76 380 The Group has three reportable segments, as described below, which are based on the dominant source and nature of the Group’s risk and 100 2008 2009 1,411 (5,827) (1,250) (8,922) 17,356 87,938 61,835

returns as well as the Group’s internal reporting structure. These strategic segments offer the same types of services, however they are ma- 550,926 (38,318) (12,513) naged separately because they operate in different geographical locations and are affected by different economical conditions. (52,749) - -

The Group comprises the following main operating segments: Turkcell, Euroasia and Belarusian Telecom, all of which are GSM operators in 76 63 753 2009 1,411 2010 17,356 87,938 their countries. 61,835 48,918 23,499 (38,318) (12,513) (52,749) 120,061 Belarusian Telecom (32,564) (28,527) (80,826)

Other operations mainly include companies operating in telecommunication and betting businesses and companies provide internet and Belarusian Telecom - - - broadband services, call center and value added services. - 2008 1,977 6,344 2009 32,330 1,033 2,093 436,716 155,762 20,150 350,045 216,445 (262,917) (100,986) (54,921) Information regarding the operations of each reportable segment is included below. Adjusted EBITDA is used to measure performance as (79,874) management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that - - - operate within these industries. Adjusted EBITDA definition includes revenue, direct cost of revenues excluding depreciation and amortization, - 763 2009 1,033 2,093 2010 5,252 20,150 Euroasia Euroasia 64,455 selling and marketing expenses and administrative expenses. Adjusted EBITDA is not a financial measure defined by IFRS as a measurement 66,727 350,045 216,445 (54,921) (79,874) 334,006 (43,974) of financial performance and may not be comparable to other similarly-titled indicators used by other companies. (120,407) - - - - 2009 The accounting policies of operating segments are the same as those described in the summary of significant accounting policies. 2008 22,784 41,944 304,321 667,318 404,651 (162,939) (396,259) (100,710) (528,465) 5,176,105 1,819,250 1,239,477 6,170,419 2,383,940 - - - - Turkcell 2010 2009 Turkcell 22,784 14,682 255,417 538,776 304,321 (34,569) (474,703) (162,939) (396,259) 5,294,104 1,751,094 5,176,105 1,819,250 1,239,477 Total external revenues I ntersegment revenue Reportable segment adjusted EB I TD A F inance income F inance costs Depreciation and amortization S hare of profit equity accounted investees C apital expenditure Other material non-cash items: I mpairment on goodwill Total external revenues I ntersegment revenue Reportable segment adjusted EB I TD A F inance income F inance cost Depreciation and amortization S hare of profit equity accounted investees C apital expenditure Other material non-cash items: I mpairment on goodwill Operating segments (continued)

134 Turkcell Annual Report 2010 135 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2009 Operating segments (continued) 383,490 1,695,670 5,724,088 Reconciliations of reportable segment revenues, adjusted EBITDA, assets and liabilities and other material items:

2010 2009 2008 Total 2010 Revenues 399,622 1,528,364 6,039,395 Total revenue for reportable segments 5,697,025 5,567,399 6,651,438 Other revenue 691,469 550,584 655,196 Elimination of inter-segment revenue (406,401) (328,011) (336,226) 2009 383,490 143,607 773,103 Consolidated revenue 5,982,093 5,789,972 6,970,408

2010 2009 2008 Other 2010 Adjusted EBITDA 399,622 198,780

1,045,535 Total adjusted EBITDA for reportable segments 1,782,985 1,801,082 2,410,443 Other adjusted EBITDA 213,655 144,989 181,671

- Elimination of inter-segment adjusted EBITDA (39,268) (20,738) (11,833)

2009 Consolidated adjusted EBITDA 1,957,372 1,925,333 2,580,281 56,982

517,718 Finance income 277,130 329,550 442,099 Finance costs (102,662) (187,514) (136,769) - Other income 14,668 978 14,136

2010 Other expense (64,233) (111,220) (17,990) 83,161 517,312

Belarusian Telecom Share of profit of equity accounted investees 122,839 78,448 102,990

As at 31 December 2010 and 2009 Depreciation and amortization (757,354) (590,678) (679,927) - Consolidated profit before income tax 1,447,760 1,444,897 2,304,820 2009 189,875 702,847 2010 2009 2008 Finance income

- Total finance income for reportable segments 256,933 307,825 673,762 2010 Euroasia Other finance income 60,213 75,783 81,423 153,927 616,375 Elimination of inter-segment finance income (40,016) (54,058) (313,086) Consolidated finance income 277,130 329,550 442,099 - 2009 1,305,206 3,730,420 - 2010 Turkcell 1,092,496 3,860,173 Reportable segment liabilities Reportable segment assets I nvestment in associates 6. Operating segments (continued)

136 Turkcell Annual Report 2010 137 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Operating segments (continued) 6. Operating Segments (continued)

2010 2009 2008 Geographical information Finance costs In presenting the information on the basis of geographical segments, segment revenue is based on the geographical location of operations Total finance costs for reportable segments 107,070 230,373 364,877 and segment assets are based on the geographical location of the assets. Other finance costs 66,143 32,975 76,006 Elimination of inter-segment finance costs (70,551) (75,834) (304,114) Revenues 2010 2009 2008 Consolidated finance costs 102,662 187,514 136,769 Turkey 5,522,387 5,348,500 6,456,165 Ukraine 334,006 350,045 436,716 2010 2009 2008 Belarus 48,918 17,356 380 Depreciation and amortization Turkish Republic of Northern Cyprus 76,782 74,071 77,147 Total depreciation and amortization for reportable segments 675,936 528,882 638,373 5,982,093 5,789,972 6,970,408 Other depreciation and amortization 92,034 67,920 42,885 Elimination of inter-segment depreciation and amortization (10,616) (6,124) (1,331) 2010 2009 Consolidated depreciation and amortization 757,354 590,678 679,927 Non-current assets Turkey 3,746,557 3,437,909 2010 2009 2008 Ukraine 607,704 634,068 Capital expenditure Belarus 497,798 507,729 Total capital expenditure for reportable segments 725,564 1,543,860 1,111,339 Turkish Republic of Northern Cyprus 65,222 66,656 Other capital expenditure 386,119 291,020 277,251 Unallocated non-current assets 439,743 420,303 Elimination of inter-segment capital expenditure (33,101) (65,606) (24,012) 5,357,024 5,066,665 Consolidated capital expenditure 1,078,582 1,769,274 1,364,578 7. Revenue 2010 2009 2008 Communication fees 5,670,215 5,557,335 6,576,857 2010 2009 Monthly fixed fees 75,420 42,493 65,081 Assets Commission fees on betting business 31,195 42,652 176,237 Total assets for reportable segments 4,993,860 4,950,985 Call center revenues 25,199 17,426 16,604 Other assets 1,045,535 773,103 Simcard sales 22,900 22,855 28,189 Investments in equity accounted investees 399,622 383,490 Other revenues 157,164 107,211 107,440 Other unallocated assets 3,355,545 3,213,188 5,982,093 5,789,972 6,970,408 Consolidated total assets 9,794,562 9,320,766 8. Other Expenses Other expenses amount to $64,233, $111,220 and $17,990 for the years ended 31 December 2010, 2009 and 2008, respectively. 2010 2009 Other expenses comprises impairment change recognized on goodwill arising from the acquisition of Belarusian Telecom amounting to Liabilities $23,499, penalty imposed as a result of investigation of ICTA on tariff plans, VAS service subscriptions and charging applications of the Com- Total liabilities for reportable segments 1,329,584 1,552,063 pany amounting to $13,987, $4,957 and $2,090, respectively, Special Communication Tax (“SCT”) and VAT calculated on roaming services that Other liabilities 198,780 143,607 had to be collected from subscribers as a result of tax settlement amounting to $12,900 and provision set for SCT on the discounts applied to Other unallocated liabilities 2,032,601 1,728,895 distributors for prepaid scratch card sales between January 2005 and January 2007 amounting to $5,825 based on the previous settlement Consolidated total liabilities 3,560,965 3,424,565 gains. Besides, provision set for the SCT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $14,539 as of 31 December 2009. However, it has been settled at $2,765 and the difference is reflected to “other expense” as income.

138 Turkcell Annual Report 2010 139 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

9. Personnel expenses 11. Income tax expense 2010 2009 2008 2010 2009 2008 Wages and salaries (*) 485,214 400,880 501,327 Current tax expense Increase in employee benefits 10,879 7,884 8,083 Current period (336,914) (353,389) (567,169) (336,914) (353,389) (567,169) Contributions to defined contribution plans 5,243 3,694 4,182 Deferred tax benefit 501,336 412,458 513,592 Origination and reversal of temporary differences 13,321 9,574 14,893 (*) Wages and salaries include compulsory social security contributions and bonuses. Benefit of investment incentives recognized 1,187 1,892 2,518 Utilization of previously unrecognized tax losses 1,607 1,830 - 10. Finance income and costs 16,115 13,296 17,411 Total income tax expense (320,799) (340,093) (549,758) Recognized in the statement of income: 2010 2009 2008 Interest income on bank deposits 196,418 224,160 359,408 Income tax recognized directly in equity Tax (expense)/ Late payment interest income 42,064 49,037 43,479 2010 Before tax benefit Net of tax Interest income on contracted receivables 12,345 31,178 - Foreign currency translation differences (184,352) (754) (185,106) Premium income on option contracts 12,147 10,549 14,655 Interest income on available-for-sale financial assets 1,121 6,308 8,328 Net change in fair value of available-for-sale securities (1,318) - (1,318) Net gain on disposal of available-for-sale financial assets transferred 1,318 2,084 6,494 (185,670) (754) (186,424) from equity 2009 Discount interest income 886 1,052 5,053 Foreign currency translation differences 53,046 (1,091) 51,955 Other interest income 10,831 5,182 4,682 Finance income 277,130 329,550 442,099 Net change in fair value of available-for-sale securities 1,197 - 1,197 54,243 (1,091) 53,152 (258) (97,016) (30,501) 2008 Litigation late payment interest expense Foreign currency translation differences (1,458,709) 343 (1,458,366) Interest expense on financial liabilities measured at amortized cost (66,086) (76,763) (51,448) Option premium expense (4,988) (1,150) (4,970) Net change in fair value of available-for-sale securities (6,385) 1,025 (5,360) Net foreign exchange loss (13,778) (576) (44,452) (1,465,094) 1,368 (1,463,726) Other (17,552) (12,009) (5,398) Finance cost (102,662) (187,514) (136,769) Net finance income 174,468 142,036 305,330

Late payment interest income is interest received from subscribers who pay monthly invoices after the due date specified on the invoices.

Interest income on contracted receivables is recognized over the amount related to the handset campaigns throughout the contract period. Litigation late payment interest expense is recognized in relation to legal disputes. Litigation late payment interest expense comprises acc- rued interest amounting to $10,235 calculated over SCT and VAT from roaming services that had to be collected from subscribers as a result of tax settlement and accrued interest amounting to $8,428 calculated over SCT on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007 which is calculated based on the previous settlement gains. Besides, accrued interests calculated over SCT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $28,400 as of 31 December 2009. However, after settlement, it has been calculated as $5,671 and the difference is reflected to “litigation late payment interest expense” as income. Detailed explanations are given in Note 32.

Borrowings costs capitalized on fixed assets are $11,127, $1,602 and $11,375 for the year ended 31 December 2010, 2009 and 2008, respec- tively. Interest capitalization ratio is 17.6%, 5.6% and 26.1% for the year ended 31 December 2010, 2009 and 2008 respectively.

140 Turkcell Annual Report 2010 141 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

11. Income tax expense (continued) 2009 14,905 99,405 12,027 272,744 311,390 134,743 451,050 266,360 Reconciliation of effective tax rate 115,955 5,234,540 3,273,403 6,419,372 3,767,150 2,652,222 The reported income tax expense for the years ended 31 December 2010, 2009 and 2008 are different than the amounts computed by app- Balance at lying the statutory tax rate to profit before income tax of the Company, as shown in the following reconciliation: 31 December

2010 2009 2008 Profit for the year 1,126,961 1,104,804 1,755,062 8 713 490 587 507 (334) Total income tax expense 320,799 340,093 549,758 (724) 17,901 38,013 38,391 (6,342) Effect of (37,725) (76,116) Profit before income tax 1,447,760 1,444,897 2,304,820 (50,153) movements in Income tax using the Company’s domestic tax rate 20% (289,552) 20% (288,979) 20% (460,964) exchange rates Effect of tax rates in foreign jurisdictions (1)% 12,367 (1)% 10,041 (1)% 17,909 ------Tax exempt income - 676 - 1,041 - 6,178 - Non-deductible expenses 1% (19,300) 2% (29,444) 2% (42,206) 39,298 39,298 Tax incentives - 1,187 - 1,892 - 2,518 (39,298) Utilization of previously unrecognized tax losses - 1,607 - 1,830 - - Impairment ------Unrecognized deferred tax assets 3% (47,623) 3% (48,963) 4% (83,841) - 1,765 Difference in effective tax rate of equity accounted (2)% 22,893 (1)% 17,602 (1)% 22,937 1,138 31,637

investees 704,608 Transfers (739,148) Other - (3,054) - (5,113) 1% (12,289) - - Total income tax expense (320,799) (340,093) (549,758) - (9,777) (1,067) (3,745) (9,031) (1,029) (3,047) (29,242) Disposals (359,170) (329,928) (344,581) 11. Income tax expense (continued) (316,821) The income taxes payable of $96,080 and $93,260 as at 31 December 2010 and 2009, respectively, represents the amount of income taxes pa- yable in respect of related taxable profit for the years ended 31 December 2010 and 2009, respectively netted off with advance tax payments. 956 8,227 7,831 1,569 4,232 The Turkish entities within the Group are subject to corporate tax at the rate of 20%. In Turkey, there is no procedure for a final and definitive 2,191 16,518 15,243 219,664 804,244 310,051 344,959 agreement on tax assessments. Companies file their tax returns at the end of April following the close of the accounting year to which they 700,808 Additions 1,045,767 relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. Advance tax returns are filed on a quarterly basis. 2009 14,737 82,300 Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible 12,092 269,094 280,986 132,628 436,107 260,872 116,304 1 January 4,636,948 3,202,862 5,770,500 3,674,430 2,096,070 expenses, and by deducting tax exempt income. Balance at

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation.

If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes. Cost or deemed cost Network infrastructure ( A ll Operational) L and buildings Equipment, fixtures and fittings M otor vehicles L easehold improvements C onstruction in progress Total Accumulated depreciation Network infrastructure ( A ll Operational) L and buildings Equipment, fixtures and fittings M otor vehicles L easehold improvements Total Total property, plant and equipment 12. Property, plant and equipment

142 Turkcell Annual Report 2010 143 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

12. Property, plant and equipment (continued) 16,341 11,827 281,610 278,709 136,506 202,400 106,750 252,184 115,072 5,638,149 2,999,861 6,553,715 3,068,021 3,485,694 Balance at Leased assets The Group leases equipment under a number of finance lease agreements. At the end of each of the lease period, the Group has the option

31 December 2010 to purchase the equipment at a beneficial price. As at 31 December 2010, net carrying amount of fixed assets acquired under finance leases amounted to $82,944 (31 December 2009: $65,844). (426) (355) (6,845) (6,755) (3,436) (2,779) (3,068) Property, plant and equipment under construction (46,486) (10,083) (85,994) (10,742) (149,424) (102,938) (121,879) Construction in progress mainly consisted of capital expenditures in GSM network of the Company, Astelit, Kibris Mobile Telekomunikasyon

exchange rates Limited Sirketi (“Kibris Telekom”) and Belarusian Telecom and non-operational items as at 31 December 2010 and 2009.

Effect of movements in As at 31 December 2010, a mortgage is placed on Izmir building in favour of Yapı ve Kredi Bankası A.S., Interbank A.S. and Pamukbank T.A.S ------founded at 25 August 1992 amounting to $970 (31 December 2009: $996) and also on Davutpasa building in favour of Pamukbank T.A.S foun- ded at 11 December 1997 amounting to $323 (31 December 2009: $332) due to previous debts of BMC Sanayi ve Ticaret A.S. Those buildings 63,673 63,673 (1,174) (1,174) (64,847) were sold to the Company with their mortgages. Since the debts of BMC Sanayi ve Ticaret A.S. were paid and the Company has no liability to Impairment Savings Deposit Insurance Fund (“SDIF”) related to Interbank A.S. and Pamukbank T.A.S., the Company asked for the release of mortgage on Izmir building on 13 March 2006. However, the mortgage is still valid due to the outstanding debts of Cukurova Group to SDIF.

- 13. Intangible assets Transfers ------In April 1998, the Company signed the License with the Turkish Ministry, under which it was granted a GSM license, which is amortized over 1,308 18,229 986,357 (35,347) (16,921) (936,992) 14,018 12,710 25 years with a carrying amount of $364,349 as at 31 December 2010 (31 December 2009: $404,636). The amortization period of the license will end in 2023.

On 30 April 2009, the Company signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and infrastructure. The Company acquired the A type license providing the widest frequency band for a consideration of EUR 358,000 (excluding Disposals - - - - (8,607) (702,774) (694,167) (968) (721) (2,205) (1,901) (3,592) (1,709) (1,686) (694,108) (690,051) VAT). The license is effective for duration of 20 years starting from 30 April 2009. The carrying amount is $456,221 as at 31 December 2010 (31 December 2009: $493,982).

Impairment testing for long-lived assets 3,763 6,167 1,841 2,906 15,711 11,626 10,124 15,196 233,239 420,601 703,191 The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication 973,697 450,668 523,029 Additions of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Long-lived assets are tested for impairment as at 31 December 2010. As the recoverable amounts of the assets or cash-generating unit are greater than the value in use, no impairment is recognized. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets, cash generating units. As at 31 December 2010, impairment test for long-lived assets of Astelit and A-Tel, is made on the assumption 14,905 99,405 12,027 272,744 311,390 134,743 451,050 266,360 115,955 that Astelit and A-Tel are the cash generating unit. As the recoverable amounts based on the value in use of cash generating units is higher 5,234,540 3,273,403 6,419,372 3,767,150 2,652,222 Balance at than the carrying amount of cash-generating units of Astelit and A-Tel, no impairment is recognized. The assumptions used in value in use 1 January 2010 calculation of Astelit and A-Tel as at 31 December 2010 are:

Astelit: A 15.7% post-tax WACC rate and a 2.5% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. Independent appraisal is obtained for fair value to determine recoverable amounts for Astelit. The pre-tax rate for disclosure purposes is 18.9%

A-Tel: A 14.2% post-tax WACC rate and a 4.0% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. Independent appraisal is obtained for fair value to determine recoverable amounts for A-Tel. The pre-tax rate for disclosure purposes is 14.2%. Cost or deemed cost Network infrastructure ( A ll operational) Operational) L and buildings Equipment, fixtures and fittings M otor vehicles L easehold improvements Accumulated depreciation Network infrastructure ( A ll operational) C onstruction in progress Total L and buildings Equipment, fixtures and fittings M otor vehicles L easehold improvements Total Total property, plant and equipment 12. Property, plant and equipment (continued) recognized and losses impairment including respectively $433,942, and $384,257 $515,515, are 2008 and 2009 2010, December 31 ended years the for expenses Depreciation in direct cost of revenues. recognized and respectively $7,688, and $39,298 $64,847, are 2008 and 2009 2010, December 31 ended years the for equipment and plant property, on losses impairment The in depreciation expense.

144 Turkcell Annual Report 2010 145 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) 571 477 584 2009 5,722 4,554 6,231 2,782 2,626 4,116 1,543 1,024 2,581 1,996 4,016 5,562 2,298 6,398 4,676 5,527 32,615 22,531 49,987 27,007 25,462 15,553 26,040 51,325 33,189 141,257 465,732 407,800 184,356 1,421,435 2,019,716 1,472,109 3,709,456 2,000,145 1,709,311 Balance at 1,355,842 1,897,981 1,812,308 1,951,060 1,465,898 3,710,289 Balance at 31 December 31 December 2010 33 20 10 20 28 21 23 266 154 224 408 (482) 3,875 1,549 1,585 (9,786) (4,142) (17,117) (26,903) (21,495) (26,117) - - 20 (48) (28) (69) (858) (144) (122) (167) (928) (767) (110) (686) (1,338) in exchange rates (52,695) (65,980) (47,678) (47,792) (19,600) (12,915) (38,140) (118,675) Effects of movements exchange rates ------(61,835) (61,835) (61,835) Effects of movements in Impairment ------(23,499) (23,499) (23,499) Impairment 185,000 508,312 Transfers (693,312) ------2,815 ------79,617 (1,307) (1,307) (14,017) (12,710) (96,449) Transfers (379) (1,940) (2,319) (21,711) (22,090) (19,771) (19,771) Disposals ------84 28 639 458 170 Disposals 2,301 1,062 1,350 11,416 50,389 23,530 17,027 517,086 140,964 206,421 680,510 723,507 Additions - - - - 74 400 284 339 532 210 468 654 1,734 1,543 36,831 22,531 94,441 70,847 10,595 155,714 155,358 241,839 (86,481) Additions 360 116 2009 3,871 1,337 3,826 1,718 6,370 4,655 5,476 23,585 22,506 51,101 31,431 398,677 244,642 986,447 1 January 1,212,943 1,452,895 1,644,715 1,743,264 3,097,610 Balance at Balance at - - 584 477 5,527 4,676 6,398 2,298 5,562 4,016 1,996 33,189 51,325 26,040 15,553 184,356 407,800 1,465,898 1,951,060 1,355,842 3,710,289 1,812,308 1,897,981 Balance at Balance at 1 January 2010 Total intangible assets Total Other C ustoms duty and VA T exemption right C ustomer base Brand name C entral betting system operating right Transmission lines C omputer software Accumulated amortization GSM and other telecommunication operating licenses Total C onstruction in progress Other G oodwill C ustoms duty and VA T exemption right C ustomer base Brand name C entral betting system operating right Transmission lines C omputer software GSM and other telecommunication operating licenses Cost Cost GSM and other telecommunication operating licenses C omputer software Transmission lines C entral betting system operating right I ndefeasible right of usage Brand name C ustomer base C ustoms duty and VA T exemption right G oodwill Other C onstruction in progress Total Accumulated amortization GSM and other telecommunication operating licenses C omputer software Transmission lines C entral betting system operating right I ndefeasible right of usage Brand name C ustomer base C ustoms duty and VA T exemption right Total Other Total intangible assets 13. Intangible assets (continued) 13. Intangible assets (continued) mortization expenses on intangible assets other than goodwill for the years ended 31 December 2010, 2009 and 2008 are $241,839, $206,421 and $245,985 respectively including respectively $245,985 and $206,421 $241,839, are 2008 and 2009 2010, December 31 ended years the for goodwill than other assets intangible on expenses A mortization nil and $61,835 $23,499, are 2008 and 2009 2010, December 31 ended year the for goodwill on losses impairment The revenues. of cost direct in recognized and losses impairment respectively recognized in other expenses the consolidated statement of income. capitalized generated internally of amount The asset. intangible an of definition the meet that costs development software capitalized generated internally includes software C omputer costs is $29,142 for the year ended 31 December 2010 (31 2009: $24,987).

146 Turkcell Annual Report 2010 147 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

13. Intangible assets (continued) 13. Intangible assets (continued) Superonline, a wholly owned subsidiary of the Group, won the tender of BOTAS for indefeasible right to use the capacity of the fiber optic cables already installed by BOTAS for 15 years, including the right to install additional fiber optic cables and the right to use the capacity of Impairment testing for cash-generating unit containing goodwill (continued) these fiber optic cables for the same period. Superonline will pay EUR 20,900 to BOTAS for the right and this transaction has been considered Superonline as a finance lease as the lease term is for the major part of the remaining useful life of the fiber optic cables already installed by BOTAS and As at 31 December 2010, the aggregate carrying amount of goodwill allocated to Superonline is $21,145. As the recoverable values based on Superonline will make significant investment during the initial period of the lease agreement which is an indicator that the transaction is a the value in use of the cash generating units is estimated to be higher than carrying amount, no impairment was required for goodwill arising finance lease. The Group recognized indefeasible right of use amounting to $22,531 which is calculated as the present value of payments to from the acquisition of Superonline as at 31 December 2010. The calculation of the value in use was based on the following key assumptions: be made to BOTAS till the year 2024. Values assigned to EBITDA for the periods forecasted include the expected synergies to be achieved from operating as a part of the Group. Values assigned to this key assumption reflect past experience except for efficiency improvements and synergies. Management believes that Impairment testing for cash-generating unit containing goodwill any reasonably possible change in the key assumptions on which Superonline recoverable amount is based would not cause Superonline’s Goodwill allocated to cash generating units and carrying values of all cash generating units are annually tested for impairment. The recove- carrying amount to exceed its recoverable amount. rable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying discounted cash flow calculation. Independent appraisals were obtained for fair values to determine recoverable amounts for Belarusian The projection period for the purposes of goodwill impairment testing is taken as 8 years between 1 January 2011 and 31 December 2018. Telecom and Superonline as at 31 December 2010. Cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 2.5%. This growth rate does not exceed the long-term average growth rate for the market in which Superonline operates. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management’s expectations of growth in EBITDA, calculated as results from operating activities before depreciation and A post-tax discount rate WACC of 15.8% was applied in determining the recoverable amount of the unit. Discounting post-tax cash flows at amortization and other income/(expenses), timing and quantum of future capital expenditure, long term growth rates, and the selection of a post-tax discount rate and discounting pre tax cash flows at pre-tax discount rate give same results, since the pre-tax discount rate is the discount rates to reflect the risks involved. post-tax discount rate adjusted to reflect the specific amount and timing of the future tax cash flows. For disclosure purposes pre-tax discount rate is 18.3%. Belarusian Telecom As at 31 December 2010, the aggregate carrying amount of goodwill allocated to Belarusian Telecom is $120,112 and goodwill arising from After the acquisition of Superonline Uluslararasi Elektronik Bilgilendirme Telekomunikasyon ve Haberlesme Hizmetleri AS (“Superonline the acquisition of Belarusian Telecom was impaired by $23,499 following the adverse movements in the discount and growth rates and ad- Uluslararasi”) in 2008, management merged Superonline Uluslararasi’s operations with its wholly owned subsidiary, Tellcom Iletisim Hiz- verse performance against previous plans. The impairment loss was allocated fully to goodwill and is included in other expense. Value in use metleri AS (“Tellcom”) in May 2009. With the merger, Superonline Uluslararasi and Tellcom seized to be separate cash generating units and was determined by discounting the future cash flows generated from the continuing use of the unit. The calculation of the value in use was merged as one cash generating unit under the brand name of Superonline. Therefore, the business plans used for the purpose of the impa- based on the following key assumptions: irment testing represents the merged entities operations. The registered name of the entity was changed from Tellcom Iletisim Hizmetleri AS to Superonline Iletisim Hizmetleri AS with General Assembly Meeting note dated 20 December 2010. The projection period for the purposes of goodwill impairment testing is taken as 7 years between 1 January 2011 and 31 December 2017. Cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 3.0% which does not exceed the estimated average growth rate for the country.

A post-tax discount rate WACC of 14.4% was applied in determining the recoverable amount of the unit. The post-tax rate was adjusted considering the tax cash outflows and other future tax cash flows and discrepancies between the cost of the assets and their tax bases. The pre-tax rate for disclosure purposes is 17.2%.

148 Turkcell Annual Report 2010 149 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) Total 242,593 230,302 liabilities S ummary 14. Equity accounted investees (continued) 2,157,718 2,260,569 1,915,125 2,030,267 and equity The Company’s investment in Fintur and A-Tel amounts to $303,618 and $96,004 respectively as at 31 December 2010 (31 December 2009:

$285,597 and $97,893). Equity 651,453 454,875 196,578 681,246 489,238 192,008

to parent During 2009, Fintur distributed a total dividend of $200,000. The Group received its share of dividend in December 2009 at the amount of

attributable $82,900 and decreased its investment in Fintur by $82,900.

- - In 2010, Fintur has decided to distribute two dividends amounting to $70,000 and $190,000. The Company reduced the carrying value of its Non- interest 405,846 405,846 439,495 439,495 investments in Fintur by the cash collected dividend of $29,015 and $78,755 on 5 May 2010 and 7 December 2010, respectively. controlling In April 2008, the privatization of the Republic of Azerbaijan’s 35.7% ownership in Azercell Telecom B.M. (“Azercell”), a 51% owned consoli-

dated subsidiary of Fintur, was completed. The non-controlling shareholders in Azercell acquired the 35.7% shares of Republic of Azerbaijan 39,476 37,216 increasing their effective ownership in Azercell to 49%. One of the non-controlling shareholders was also granted a put option, giving the 843,747 804,271 848,965 811,749 liabilities shareholder the right to sell its 42.2% stake to Fintur at fair value in certain deadlock situations regarding significant decisions at the General Non-current Assembly. Fintur has initially accounted for the present value of the estimated option redemption amount as a provision and derecognized

the non-controlling interest. The difference between the present value of the estimated option redemption amount and the derecognized non- controlling interest amounting to $715,126 is accounted under equity, in accordance with the Group’s accounting policy. 6,539 1,078 Current 256,672 250,133 290,863 289,785 liabilities During April 2010 and December 2009 at the General Assembly meeting of A-Tel, it has been decided to distribute dividends and accordingly the Company reduced the carrying value of its investments in A-Tel by the dividends declared of TL 1,241 (equivalent to $803 as at 31 Decem- ber 2010) and TL 7,248 (equivalent to $4,688 as at 31 December 2010) as at 31 December 2010 and 2009, respectively. 1,888 2,923 Total (8,529) assets 310,945 302,416 364,545 366,433 369,516 372,439 242,593 230,302 Profit/Loss 15. Other investments 2,157,718 1,915,125 2,260,569 2,030,267 Non-current investments: 2010 2009

Country of Ownership Carrying Ownership Carrying incorporation (%) Amount (%) Amount assets at arose during acquisition of A -Tel. 196,524 181,414 Aks Televizyon Reklamcilik ve Filmcilik Turkey 6.24 21,905 6.24 22,492 1,687,895 1,491,371 1,760,083 1,578,669 Non-current (77,625) (83,128) (56,683) Sanayi ve Ticaret AS (665,749) (743,374) (739,410) (822,538) (692,757) (749,440) Direct cost

of revenues (“Aks TV”) T Medya Yatirim Sanayi ve Ticaret AS Turkey 4.52 11,944 10.03 12,263

assets (“T-Medya”)

46,069 48,888 Current 469,823 423,754 500,486 451,598 33,849 34,755 73,897 98,129 63,235 1,678,919 1,823,095 1,921,224 1,736,576 1,799,811 1,605,022 On 2 February 2010, SDIF notified that lien was laid on “priority right to purchase back” regarding the shares of Aks TV of which 6.24% were 41.45% 50.00% 41.45% 50.00% held by Turktell Bilişim Hizmetleri AS. In case that, those shares are sold to third parties other than Cukurova Group, SDIF has the right to Ownership Revenues exercise its priority right to purchase back and the purchase price will be determined within the context of the past agreements signed bet- ween previous owners and Cukurova Group.

On 19 July 2010, at T-Medya’s General Assembly Meeting, it has been decided to increase the share capital of T-Medya. However, the Group did not participate in the capital contribution, accordingly the ownership of the Group in T-Medya decreased to 4.52%.

There is no active market available for investments Aks TV and T Medya. The Company measured these investments at cost. Based on the impairment analysis performed by considering the lower end limits of fair value calculations performed by an independent valuation firm, no impairment has been identified. roup’s share of profit in its equity accounted investees for the years ended 31 December 2010, 2009 and 2008 are $122,839, $78,448 and $102,990, respectively. $102,990, and $78,448 $122,839, are 2008 and 2009 2010, December 31 ended years the for investees accounted equity its in profit of share G roup’s A -Tel 2008 F intur A -Tel 2010 F intur A -Tel 2009 F intur 31 December 2009 F intur (associate) A -Tel (joint venture)* 31 December 2010 F intur (associate) A -Tel (joint venture)* financial information for equity accounted investees adjusted for the accounting policy differences for the same events under similar circumstances and not percentage ownership held by the G roup is as follows: adjusted for the 14. Equity accounted investees The * F igures mentioned in the above table includes fair value adjustments th

150 Turkcell Annual Report 2010 151 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

15. Other investments (continued) 17. Deferred tax assets and liabilities (continued) Current investments: Unrecognized deferred tax assets (continued) 2010 2009 Available-for-sale financial assets As at 31 December 2010, expiration of tax losses is as follows: Government bonds, treasury bills - 62,398 Year Originated Amount Expiration Date Time deposits 2006 3,207 2011 2007 10,785 2012 Deposits maturing after 3 months or more 8,201 - 2008 78,819 2013 8,201 62,398 2009 35,784 2014 There are no government bonds as at 31 December 2010 (31 December 2009: $62,398). 2010 48,197 2015 thereafter As at 31 December 2010, BYR denominated time deposits maturing after 3 months or more amounting to $201 have stated interest rate of 176,792 10.5% and USD denominated time deposits maturing after 3 months or more amounting to $8,000 have stated interest rate of 7.0% As at 31 December 2010, tax losses which will be carried indefinitely are as follows: The Group’s exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 29. Year Originated Amount 2004 16. Other non-current assets 15,910 2005 38,621 2010 2009 2006 63,408 VAT receivable 62,167 37,628 2007 55,382 Prepaid expenses 29,717 22,406 2008 239,575 Deposits and guarantees given 9,560 9,597 2009 44,625 Advances given for fixed assets 4,654 - 2010 12,150 Prepayment for subscriber acquisition cost - 2,867 Others 1,179 2,622 Recognized deferred tax assets and liabilities 107,277 75,120 Deferred tax assets and liabilities as at 31 December 2010 and 2009 are attributable to the following: Subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum Assets Liabilities Net consideration. 2010 2009 2010 2009 2010 2009 Property, plant 17. Deferred tax assets and liabilities & equipment Unrecognized deferred tax liabilities and intangible At 31 December 2010, a deferred tax liability of $15,687 (31 December 2009: $18,669) for temporary differences of $78,433 (31 December assets 347 84 (152,193) (170,397) (151,846) (170,313) 2009: $93,345) related to investments in subsidiaries was not recognized because the Company controls whether the liability will be incurred Investment - - (15,096) (13,833) (15,096) (13,833) and it is satisfied that it will not be incurred in the foreseeable future. Provisions 28,423 27,474 - - 28,423 27,474 Trade and other payables 23,460 39,271 (16) (38) 23,444 39,233 Unrecognized deferred tax assets Other items 25,940 2,104 (1,094) (1,039) 24,846 1,065 Deferred tax assets have not been recognized in respect of the following items: Tax assets / 2010 2009 (liabilities) 78,170 68,933 (168,399) (185,307) (90,229) (116,374) Deductible temporary differences 67,086 39,186 Net off of tax (75,294) (66,875) 75,294 66,875 - - Net tax assets / Tax losses 152,776 140,493 (liabilities) 2,876 2,058 (93,105) (118,432) (90,229) (116,374) Total unrecognized deferred tax assets 219,862 179,679

The deductible temporary differences do not expire under current tax legislation. Turkish tax legislation does not allow companies to file tax returns on a consolidated basis. Therefore, deferred tax assets have not been recognized in respect of these items resulting from certain consolidated subsidiaries because it is not probable that future taxable profit will be available against which the Group can utilize the benefits therefrom.

152 Turkcell Annual Report 2010 153 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

18. Trade receivables and accrued income 2010 2009 Receivables from subscribers 414,606 392,328

- Accrued service income 348,135 318,526 Accounts and checks receivable 52,111 57,867 1,065 28,423 23,444 24,846 24,846 27,474 39,233 (90,229) (15,096) (13,833) Receivables from Turk Telekomunikasyon AS (“Turk Telekom”) 1,299 15,031 (116,374) (151,846) (170,313) Balance at Balance at 816,151 783,752 31 December 2010 31 December 2009 Trade receivables are shown net of allowance for doubtful debts amounting to $367,913 as at 31 December 2010 (31 December 2009:

- $268,157). The impairment loss recognized for the years ended 31 December 2010, 2009 and 2008 are $117,362, $75,379 and $65,678, 27 373 602 768 respectively. rates rates (740) (805) (380) (770) (122) 1,031 12,336 10,784 Effect of Effect of Letters of guarantee received with respect to the accounts and checks receivable are amounted to $181,366 and $164,958 as at 31 December movements movements in exchange in exchange 2010 and 2009, respectively. ------

(754) The accrued service income represents revenues accrued for subscriber calls (air-time) and contracted receivables related to handset cam- (754) (1,091) income income (1,091) paigns, which have not been billed and will be billed within one year. Due to the volume of subscribers, there are different billing cycles; ac- cordingly, an accrual is made at each period end to accrue revenues for rendered but not yet billed. Contracted receivables related to handset comprehensive comprehensive campaigns, which will be invoiced after one year is presented under non-current trade receivables amounting to $35,024. Recognized in other Recognized in other Receivables from Turk Telekom represent net amounts that are due from Turk Telekom under the Interconnection Agreement. The Intercon-

(6) nection Agreement provides that Turk Telekom will pay to the Company for Turk Telekom’s fixed-line subscribers’ calls to GSM subscribers. (882) (907) 6,131 1,689 4,793 The Group’s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 29. 24,161 16,802 16,115 13,296 (2,353) (5,033) (14,984) of income of income 19. Other current assets the statement the statement Recognized in Recognized in 2010 2009 6 Prepaid expenses 83,680 69,559

1,065 Receivables from ICTA 25,938 - 27,474 39,233 10,070 44,239 (4,759) (13,833) (10,267) (116,374) (129,347) (170,313) (168,636) VAT receivable 25,702 48,760 Balance at Balance at Receivables from Tax Office 15,736 - 1 January 2010 1 January 2009 Advances to suppliers 12,131 12,351 Interest income accruals 8,311 17,727

Restricted cash 6,150 - Receivables from personnel 3,262 2,767 Prepayment for subscriber acquisition cost 1,777 12,527 Other 15,053 11,726 197,740 175,417

Receivables from ICTA is related to the fine applied on tariffs above upper limits as a result of Court suspension of the execution decision. ICTA paid the related amount on 27 January 2011. In Note 32, under legal proceedings section, detailed explanations are given with respect to the receivable.

As at 31 December 2010, restricted cash represents amounts deposited at banks as guarantees in connection with the loan utilized by Aze- rinteltek and mature in 12 months. P roperty, plant & equipment and intangible assets I nvestment P rovisions Trade and other payables Other items Total P roperty, plant & equipment and intangible assets I nvestment P rovisions Trade and other payables Other items Tax credit carry forwards Total 17. Deferred tax assets and liabilities (continued) M ovement in temporary differences as at 31 December 2010 and 2009 Subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum consideration.

154 Turkcell Annual Report 2010 155 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

20. Cash and cash equivalents 21. Capital and reserves (continued) 2010 2009 Cash in hand 7,957 157 Capital contribution Cheques received 172 1,154 Capital contribution comprises the contributed assets and certain liabilities that the government settled on behalf of the Group that do not Banks 3,293,257 3,093,889 meet the definition of a government grant which the government is acting in its capacity as a shareholder. -Demand deposits 193,358 199,764 -Time deposits 3,099,899 2,894,125 Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign and do- Bonds and bills 777 286 mestic operations from their functional currencies to presentation currency of USD. Cash and cash equivalents 3,302,163 3,095,486 Bank overdrafts (5,896) (5,244) Fair value reserve Cash and cash equivalents in the statement of cash flows 3,296,267 3,090,242 The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or the asset is impaired. As at 31 December 2010, cash and cash equivalents deposited in banks that are owned and/or controlled by Cukurova Group, a significant shareholder of the Company is amounting to $90,000 (31 December 2009: nil). Legal reserve Under the Turkish Commercial Code, Turkish companies are required to set aside first and second level legal reserves out of their profits. As at 31 December 2010, average maturity of time deposits is 60 days (31 December 2009: 69 days) First level legal reserves are set aside 5% of the distributable income per statutory accounts each year. The ceiling on the first legal reserves is 20% of the paid-up capital. The reserve requirement ends when the 20% of paid-up capital level has been reached. Second legal reserves The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 29. correspond to 10% of profits actually distributed after the deduction of the first legal reserves and the minimum obligatory dividend pay-out (5% of the paid-up capital). There is no ceiling for second legal reserves and they are accumulated every year. 21. Capital and reserves

Reserve for non-controlling interest put option liability Share capital The reserve for non-controlling interest put option liability includes the difference between the put option liability granted to the non- As at 31 December 2010, common stock represented 2,200,000,000 (31 December 2009: 2,200,000,000) authorized, issued and fully paid controlling shareholders in existing subsidiaries recognized and the amount of non-controlling interest derecognized. Subsequent changes in shares with a par value of TL 1 each. In accordance with the Law No. 5083 with respect to TL, on 9 May 2005, par value of each share is the fair value of the put option liability are also recognized in this reserve. registered to be one TL.

Dividends In connection with the redenomination of the TL and as per the related amendments of Turkish Commercial Code, in order to increase the The Company has adopted a dividend policy, which is set out in its corporate governance guidance. As adopted, the Company’s general divi- nominal value of the shares to TL 1, 1,000 units of shares, each having a nominal value of TL 0.001 shall be merged and each unit of share dend policy is to pay dividends to shareholders with due regard to trends in the Company’s operating performance, financial condition and having a nominal value of TL 1 shall be issued to represent such shares. The Company is still in the process of merging 1,000 existing ordinary other factors. shares, each having a nominal value of TL 0.001 to one ordinary share having a nominal value of TL 1 each. After the share merger which appears as a provisional article in the Articles of Association to convert the value of each share with a nominal value of TL 0.001 to TL 1, all The Board of Directors intends to distribute cash dividends in an amount of not less than 50% of the Company’s lower of distributable profit shares will have a value of TL 1. Although the merger process has not been finalized, the practical application is to state each share having based on the financial statements prepared in accordance with the accounting principles accepted by the CMB or statutory records, for each a nominal value of TL 1 which is consented by Capital Markets Board of Turkey (“CMB”). Accordingly, number of shares data is adjusted for fiscal year starting with profits for fiscal year 2004. However, the payment of dividends will still be subject to cash flow requirements of the the effect of this merger. Company, compliance with Turkish law and the approval of and amendment by the Board of Directors and the General Assembly of Share- holders. The holders of shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company. As at 31 December 2010, total number of pledged shares hold by various institutions is 137,200 (31 December 2009: 137,200).

156 Turkcell Annual Report 2010 157 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

21. Capital and reserves (continued) 23. Other non-current liabilities

Dividends (continued) 2010 2009 On 10 March 2010, the Company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2009 amounting Consideration payable in relation to acquisition of BeST 78,402 75,319 to TL 859,259 (equivalent to $555,795 and $573,451 as at 31 December 2010 and 29 April 2010, respectively), which represented 50% of Financial liability in relation to put option 53,435 63,152 distributable income. This represents a net cash dividend of full TL 0.3905723 (equivalent to full $0.2526341 and $0.2606596 as at 31 Decem- Deposits and guarantees taken from agents 16,310 13,951 ber 2010 and 29 April 2010, respectively) per share. This dividend proposal was discussed and approved at the Ordinary General Assembly of Payables to other suppliers 7,391 - Shareholders held on 29 April 2010. Dividend distribution started on 17 May 2010 and completed as at 31 December 20 Other 5,294 2,569 160,832 154,991 2010 2009 2008 TL USD* TL USD* TL USD* Consideration payable in relation to acquisition of Belarusian Telecom represents the present value of long-term deferred payment to the seller. Payment of $100,000 is contingent on financial performance of Belarusian Telecom, and based on management’s estimations, expected Cash dividends 859,259 573,451 1,098,193 713,297 648,714 502,334 to be paid during the first quarter of 2016. The present value of the contingent consideration is $78,402 as at 31 December 2010 (31 December 2009: $75,319). * USD equivalents of dividends are computed by using the Central Bank of the Republic of Turkey’s TL/USD exchange rate on 29 April 2010, 8 May 2009 and 25 April 2008 which are the dates that the General Assembly of Shareholders approved the dividend distribution. Non-controlling shareholders in Belarusian Telecom were granted a put option, giving the shareholders the right to sell their entire stake to Beltel Telekomunikasyon Hizmetleri AS (“Beltel”) at fair value during a specified period. The Group accounted for the present value of In the Ordinary General Assembly of Shareholders Meeting of Inteltek held on 15 April 2010, it has been decided to distribute dividends amo- the estimated option redemption amount as a provision and derecognized the non-controlling interest. The Company has estimated a value unting to TL 55,980 (equivalent to $36,210 as at 31 December 2010). The dividend was paid on 29 April 2010. based on multiple approaches including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 August 2013, which is the exercise date of the put option, is then discounted to 31 December 2010. 22. Earnings per share The difference between the present value of the estimated option redemption and derecognized non-controlling interests amounting to The calculations of basic and diluted earnings per share as at 31 December 2010 were based on the profit attributable to ordinary sharehol- $32,382 has been presented as reserve for non-controlling interest put option under equity. ders for the years ended 31 December 2010, 2009 and 2008 of $1,170,176, $1,093,992 and $1,836,824 respectively and a weighted average number of shares outstanding during the years ended 31 December 2010, 2009 and 2008 of 2,200,000,000 calculated as follows: 24. Loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at 2010 2009 2008 amortized cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk and payment schedule Numerator: for interest bearing loans, see Note 29. Net profit for the period attributed to owners 1,170,176 1,093,992 1,836,824 2010 2009 Non-current liabilities Unsecured bank loans 1,366,207 793,210 Denominator: Secured bank loans 21,850 25,253 Finance lease liabilities 19,259 2,716 Weighted average number of shares 2,200,000,000 2,200,000,000 2,200,000,000 1,407,316 821,179

Current liabilities Basic and diluted earnings per share 0.53 0.50 0.83 Current portion of unsecured bank loans 357,637 226,463 Current portion of secured bank loans 4,378 - Unsecured bank facility 57,355 461,788 Secured bank facility 6,399 - Current portion of finance lease liabilities 4,436 2,529 430,205 690,780

158 Turkcell Annual Report 2010 159 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) ------5,245 2,085 62,162 25,253 26,236 24. Loans and borrowings (continued) 63,505 66,051 113,395 476,754 183,710 487,563 1,511,959 Finance lease liabilities are payable as follows: Carrying amount ------31 December 2010 31 December 2009 5,583 1,971 64,589 22,487 25,958 63,500 69,856 113,387 476,000 191,219 Present value of Present value of 491,000 1,525,550 Future minimum minimum lease Future minimum minimum lease Face value lease payments Interest payments lease payments Interest payments 2009 ------RR* 5.7% 1/2 2.80% 2.97% 2.80% 2.81% Less than one year 5,199 763 4,436 2,768 239 2,529 2.24% More than one year 24,107 4,848 19,259 2,815 99 2,716 RR*+2% 29,306 5,611 23,695 5,583 338 5,245 L ibor+%1.35 L ibor+2.0%-3.5% L ibor+2.3%-3.75% Superonline, a wholly owned subsidiary of the Group, acquired indefeasible right of use with BOTAS and will pay EUR 20,900 to BOTAS for Nominal interest rate - - the right. The Group recognized indefeasible right of use amounting to $22,531 which is calculated as the present value of payments to be - 316 189 made to BOTAS till the year 2024. As of 31 December 2010, the carrying amount of lease liability related to BOTAS agreement is $20,962. 744 2,733 6,210 9,985 20,962 48,672 17,754 13,627 26,228 24,602 57,581 96,998 86,464 144,078 159,406 178,603 188,730 264,674 488,965 1,837,521 Some of the Group’s borrowings are subject to covenant clauses, whereby the Group is required to meet certain key performance indicators.

As of 31 December 2010, the Group is in compliance with all borrowing covenants. Carrying amount - - - 250 150 744 2,819 6,150 9,811 26,487 50,236 17,505 13,280 21,389 24,500 59,654 95,193 86,442 148,726 159,200 184,044 188,500 263,250 491,000 1,849,330 Face value 2010 - - - 4.64% 3.35% 5.00% 2.97% 2.97% 2.81% 2.24% 2.37% 18.00% 18.00% RR*+2% 4.10%-8% L ibor+2.1% L ibor+%1.35 L ibor+1.75% %2.25-2.80% L ibor+3.465% L ibor+2.0%-3.5% L ibor+2.9%-3.0% L ibor+2.24%-2.45% L ibor+2.25%-3.75% Nominal interest rate - F ixed F ixed F ixed F ixed F ixed F ixed F ixed F ixed F ixed F ixed F ixed F ixed F ixed F loating F loating F loating F loating F loating F loating F loating F loating F loating F loating Interest rate type 2010 2010 2010 2011 2011 2011 2011 2013 2020 2011 2011 2013 2013 2015 2012 2010-2011 2011-2024 2011-2013 2010-2012 2009-2014 2010-2016 2009-2014 2011-2015 2011-2012 Year of maturity B Y R B Y R E U R E U R US D US D US D US D US D US D US D US D US D US D US D US D US D US D US D US D US D US D A ZN A ZN Currency F inance lease liabilities F inance lease liabilities U nsecured bank loans U nsecured bank loans U nsecured bank loans S ecured bank loans U nsecured bank loans U nsecured bank loans S ecured bank loans U nsecured bank loans S ecured bank loans** U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans U nsecured bank loans * Refinancing rate of the National Bank Republic Belarus. ** S ecured by Rebuplic of Belarus G overnment. 24. Loans and borrowings (continued) Terms and conditions of outstanding loans are as follows:

160 Turkcell Annual Report 2010 161 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

25. Employee benefits 27. Provisions (continued) International Accounting Standard No. 19 (“IAS 19”) “Employee Benefits” requires actuarial valuation methods to be developed to estimate Non-current provisions: (continued) the enterprise’s obligation under defined benefit plans. The liability for this retirement pay obligation is recorded in the accompanying con- solidated financial statements at its present value using a discount rate of 4.7%. Obligations for dismantling, removing Movement in the reserve for employee termination benefits as at 31 December 2010 and 2009 are as follows: Legal and site restoration Other Total Balance at 1 January 2010 95 5,114 467 5,676 2010 2009 Provision made/used during the year 627 50,473 223 51,323 Opening balance 27,776 26,717 Unwind of discount - 266 - 266 Provision set/reversed during the period 9,990 6,350 Effect of change in foreign exchange rate - (210) - (210) Payments made during the period (8,114) (5,410) Balance at 31 December 2010 722 55,643 690 57,055 Unwind of discount 889 1,534 Effect of change in foreign exchange rate (799) (1,415) Legal provisions are set for the probable cash outflows related to legal disputes. Closing balance 29,742 27,776 The Group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statement of income as incurred. rate that reflects current market assessments of the time value of money and the risks specific to the liability. The Group incurred $5,243, $3,694 and $4,182 in relation to defined contribution retirement plan for the years ended 31 December 2010, 2009 and 2008 respectively. The above mentioned additions to obligations for dismantling, removing and site restoration during the period are non-cash transactions recorded against property, plant and equipment. Total charge for the employee termination benefits is included in the statement of income.

Current provisions: The liability is not funded, as there is no funding requirement. Legal Bonus Total 26. Deferred income Balance at 1 January 2009 44,258 38,091 82,349 Deferred income primarily consists of right of use sold but not used by prepaid subscribers and it is classified as current as at 31 December Provision made during the year 158,580 36,784 195,364 2010. The amount of deferred income is $164,186 and $248,518 as at 31 December 2010 and 2009, respectively. Provisions used during the year (40,018) (37,996) (78,014) Unwind of discount - 235 235 27. Provisions Effect of change in foreign exchange rate 5,098 135 5,233 Non-current provisions: Balance at 31 December 2009 167,918 37,249 205,167

Legal Bonus Total Obligations for Balance at 1 January 2010 167,918 37,249 205,167 dismantling, removing Legal and site restoration Other Total Provision made/(reversed) during the year 59,303 45,617 104,920 Balance at 1 January 2009 - 4,490 - 4,490 Provisions used during the year (115,004) (39,056) (154,060) Provision made/used during the year 95 590 467 1,152 Unwind of discount 1,885 (53) 1,832 Effect of change in foreign exchange rate (2,949) (1,098) (4,047) Unwind of discount - - - - Balance at 31 December 2010 111,153 42,659 153,812 Effect of change in foreign exchange rate - 34 - 34 Balance at 31 December 2009 95 5,114 467 5,676 Legal provisions are set for the probable cash outflows related to legal disputes. In Note 32, under legal proceedings section, detailed expla- nations are given with respect to legal provisions.

The bonus provision totalling to $42,659 comprises mainly the provision for the year ended 31 December 2010 and is planned to be paid in March 2011.

162 Turkcell Annual Report 2010 163 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

28. Trade and other payables 28. Trade and other payables (continued) The breakdown of trade and other payables as at 31 December 2010 and 2009 is as follows: Selling and marketing expense accrual is mainly resulted from services received from third parties related to marketing activities of the Group which are not yet invoiced. 2010 2009 Payables to other suppliers 414,911 354,057 In accordance with the license agreement, Turkcell pays 90% of the treasury share, which equals 15% of its gross revenue, to the Turkish Treasury and 10% as universal service fund to the Turkish Ministry. Taxes and withholdings payable 221,872 215,375

Payables to Ericsson companies 98,415 115,980 Payables to interconnection suppliers arise from voice and SMS termination services rendered by other GSM operators. Selling and marketing expense accrual 61,209 62,783 Interconnection accrual represents net balance of uninvoiced call termination services received from other operators and interconnection License fee accrual 53,474 38,289 services rendered to other operators. Roaming expense accrual 21,032 61,783 ICTA share accrual 17,319 18,543 Consideration payable in relation to acquisition of Belarusian Telecom represents present value of short-term deferred payments to the seller. Deferred payment amounting to $100,000 was paid as of 31 December 2010. The remaining consideration is classified under other non- Interconnection payables 11,992 31,957 current liabilities section (Note 23). Interconnection accrual 4,415 5,343 Payables to KKTC Tax Office 789 1,046 The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 29. Consideration payable in relation to acquisition of Belarusian Telecom - 97,605 Other 46,548 36,001 29. Financial instruments 951,976 1,038,762 Credit risk Exposure to credit risk: Balances due to other suppliers are arising in the ordinary course of business. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was

Taxes and withholdings include VAT payable, special communications tax, frequency usage fees payable to ICTA and personnel income taxes. Note 2010 2009 Payables to Ericsson companies comprise due to Ericsson Turkey, Ericsson Sweden and Ericsson AB arising from fixed asset purchases, site preparation and other services. Due from related parties-non current 33 1,044 21,039 Other non-current assets* 16 15,258 11,996 Turkcell is one of parties of two different signed agreements with Ericsson Turkey, namely Supply and Maintenance and Support Service Agre- Available-for-sale financial assets 15 - 62,398 ements. In fact, hardware and software responsibility within the scope of Supply Agreement belongs to Ericsson AB. Since, Turkcell signed the Due from related parties-current 33 88,897 108,843 agreement with Ericsson Turkey, Ericsson Turkey transfer its supply responsibility to Ericsson AB with the signed protocol between Ericsson Trade receivables and accrued income 18 851,175 783,752 Turkey, Turkcell and Ericsson AB. Based on the Supply Agreement, Ericsson Turkey committed Turkcell to provide GSM network in operating Other current assets* 19 56,170 29,284 condition, spare part, installation, training and documentation. Besides, this agreement provides Turkcell to non-exclusive, untransferable Cash and cash equivalents** 20 3,294,206 3,095,329 and perpetual software license for GSM software. According to Maintenance and Support Service Agreement, Ericsson Turkey provides Turk- Time deposits maturing in 3 months or more 15 8,201 - cell problem report processing service, consultancy service and emergency state service. Based on these two agreements, Ericsson AB is the 4,314,951 4,112,641 guarantor for commitments of Ericsson Turkey to Turkcell. For agreements signed between Turkcell and Ericsson Turkey, of which Ericsson Sweden is the guarantor, parties signed a supplementary agreement on 1 January 2010 and extended the period of GSM service agreement * Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current until 31 December 2010. Tender process for the agreement of year 2011 has not been finalized yet. assets. ** Cash on hand is excluded from cash and cash equivalents. The maximum exposure to credit risk for trade receivables arising from sales transactions including those classified as due from related par- ties at the reporting date by type of customer is:

2010 2009 Receivable from subscribers 798,404 710,747 Receivables from distributors and other operators 71,044 85,949 Other 3,199 1,312 872,647 798,008

164 Turkcell Annual Report 2010 165 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) - - - - - Y ears (24,472) (20,671) (145,143) (100,000)

29. Financial instruments (continued) M ore than 5 - - - - (26) 2-5

Credit risk (continued) years (16,767) (75,155) (787,629) Exposure to credit risk: (continued) (695,681) -

The aging of trade receivables and due from related parties as at 31 December 2010 and 2009: - - - - 2010 2009 1-2 (5,420) (2,789) years (175,196) Not past due 738,697 746,545 (166,987) - - - - 1-30 days past due 74,665 38,406 - 1-3 months past due 56,004 47,031 6-12 (1,385) months (533,636) (432,251) 3-12 months past due 71,750 81,310 (100,000) - - - 1-5 years past due - 342 31 December 2009 941,116 913,634 (1,383) (5,244) or less (14,884) (267,683) (728,795) 6 months (1,017,989) Impairment losses The movement in the allowance for impairment in respect of trade receivables and due from related parties as at 31 December 2010 and (5,583) (5,244) (46,659) (14,884) (75,155) (728,795) 2009 is as follows: (200,000) cash flows C ontractual (2,659,593) (1,583,273)

2010 2009 5,245 5,244 25,253 14,780 63,152 Amount 723,222 172,924 Carrying 1,481,461 Opening balance 268,157 196,637 2,491,281 - - - Impairment loss recognized 126,257 75,379 - M ore years Write-off (9,976) (7,978) than 5 (17,887) (10,155) (16,622) (144,664) Effect of change in foreign exchange rate (7,630) 4,119 (100,000) - - - Closing balance 376,808 268,157 - 2-5 years (5,576) (13,852) (58,541) (960,660) stimated interest payments:

The impairment loss recognized of $126,257 for the period ended 31 December 2010 relates to its estimate of incurred losses in respect of (1,038,629) - - - - trade receivables and due from related parties. - e and other payables. 1-2 years (5,150) (1,909) (530,085) The allowance accounts in respect of trade receivables and due from related parties is used to record impairment losses unless the Group is (523,026) - - - - satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable and is written off against the -

trade receivables and due from related parties directly. 6-12 (9,165) (1,993) months (229,158) (218,000) - Liquidity risk - Current cash debt coverage ratio as at 31 December 2010 and 2009 is as follows: 31 December 2010 or less (2,273) (3,206) (5,896) (10,787) 6 months (912,194) (208,363) 2010 2009 (681,669)

Cash and cash equivalents 3,302,163 3,095,486 (5,896) (48,327) (29,306) (10,787) (58,541) (681,669) (100,000) cash flows C ontractual (2,854,730) Current liabilities 1,812,915 2,296,511 (1,920,204) Current cash debt coverage ratio 182% 135% 5,896 32,627 23,695 10,760 78,402 53,435 Amount 676,187 Carrying 1,781,199 2,662,201 Non-derivative financial Liabilities S ecured bank loans U nsecured bank loans F inance lease liabilities Trade and other payables* Bank overdraft Due to related parties C onsideration payable in relation to acquisition of Belarusian Telecom F inancial liability in relation to put option TOTAL 29. Financial instruments (continued) Liquidity risk (continued) The following are the contractual maturities of financial liabilities, including e * A dvances taken, taxes and withholding payable are excluded from trad

166 Turkcell Annual Report 2010 167 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

29. Financial instruments (continued) 29. Financial instruments (continued) Exposure to currency risk Exposure to currency risk (continued)

The Group’s exposure to foreign currency risk based on notional amounts is as follows: The following significant exchange rates are applied during the period: 31 December 2009 Average Rate Reporting Date Closing Rate USD EUR SEK 31 December 31 December 31 December 31 December Foreign currency denominated assets 2010 2009 2010 2009 Due from related parties-non current 20,605 - - Other non-current assets 1 - - TL/USD 1.5050 1.5495 1.5460 1.5057 Other investments - 201 - TL/EUR 1.9931 2.1527 2.0491 2.1603 Due from related parties-current 22,295 825 - TL/SEK 0.2074 0.2016 0.2262 0.2082 Trade receivables and accrued income 31,121 18,605 10 BYR/USD 2,978.8 2,780.9 3,000.0 2,863.0 Other current assets 2,372 71 - HRV/USD 7.9325 7.7975 7.9617 7.9850 Cash and cash equivalents 1,324,795 99,734 1 1,401,189 119,436 11 Sensitivity analysis Foreign currency denominated liabilities The basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate fore- Loans and borrowings-non current (830,434) - - ign exchange exposure is composed of all assets and liabilities denominated in foreign currencies. The analysis excludes net foreign currency Other non-current liabilities (189,105) - - investments. Loans and borrowings-current (514,439) - - Trade and other payables (366,279) (65,562) (722) 10% strengthening of the TL, HRV, BYR against the following currencies as at 31 December 2010 and 2009 would have increased/(decrea- Due to related parties (4,199) (1,194) - sed) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain (1,904,456) (66,756) (722) constant. Net exposure (503,267) 52,680 (711) Profit or loss 2010 2009 31 December 2010 USD EUR SEK USD 53,974 50,327 Foreign currency denominated assets EUR (119) (7,558) Due from related parties-non current - - - SEK - 10 Other non-current assets 1 - - Other investments 8,000 - - 10% weakening of the TL, HRV, BYR against the following currencies as at 31 December 2010 and 2009 would have increased/(decreased) Due from related parties-current 17,969 148 - profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain Trade receivables and accrued income 33,566 20,482 - constant. Other current assets 4,579 1,086 10 Profit or loss Cash and cash equivalents 1,494,743 52,842 1 2010 2009 1,558,858 74,558 11 Foreign currency denominated liabilities USD (53,974) (50,327) Loans and borrowings-non current (1,405,907) (28,132) - EUR 119 7,558 Other non-current liabilities (179,865) - - SEK - (10) Loans and borrowings-current (350,172) (1,872) - Trade and other payables (161,901) (42,849) - Due to related parties (754) (808) - (2,098,599) (73,661) - Net exposure (539,741) 897 11

168 Turkcell Annual Report 2010 169 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

29. Financial instruments (continued) 29. Financial instruments (continued) Interest rate risk Interest rate risk (continued) Sensitivity analysis (continued) As at 31 December 2010 and 2009 the interest rate profile of the Group’s interest-bearing financial instruments was: Cash flow sensitivity analysis for variable rate instruments: A change of 100 basis points in interest rates as at 31 December 2010 would have increased/(decreased) equity and profit or loss by the 31 December 2010 31 December 2009 amounts shown below. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis is Effective Effective performed on the same basis as at 31 December 2010 and 2009. Interest Carrying interest Carrying Note Rate Amount rate Amount Profit or loss Equity Fixed rate instruments 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease Time deposits 20 31 December 2010 USD 3.5% 1,469,797 3.6% 1,425,695 Variable rate instruments (9,262) 9,262 EUR 3.9% 68,640 2.3% 146,183 Cash flow sensitivity (net) (9,262) 9,262 TL 9.1% 1,561,282 10.1% 1,318,614 31 December 2009 Other 8.7% 180 17.6% 3,633 Variable rate instruments (4,912) 4,912 - - Available-for-sale securities 15 Cash flow sensitivity (net) (4,912) 4,912 - - Government bonds, treasury bills TL - - 14.8% 62,109 Fair values Time deposits maturing after 3 months 15 The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows: or more 31 December 2010 31 December 2009 USD 7.0% 8,000 - - Carrying Fair Carrying Fair BYR 10.5% 201 - - Note Amount Value Amount Value Finance lease obligations 24 Assets carried at fair value USD 4.6% (2,733) 5.7% (5,245) Available for sale securities 15 - - 62,398 62,398 EUR 3.4% (20,962) - - - - 62,398 62,398 Unsecured bank loans 24 Assets carried at amortized cost USD fixed rate loans 4.2% (591,463) 3.7% (452,897) Due from related parties-long term 33 1,044 1,044 21,039 21,039 Secured bank loans 24 Other non-current assets* 16 15,258 15,258 11,996 11,996 USD fixed rate loans 5.2% (6,210) - - Due from related parties-short term 33 88,897 88,897 108,843 108,843 AZN fixed rate loans 22.5% (189) - - Trade receivables and accrued income*** 18 851,175 851,175 783,752 783,752 Other current assets* 19 56,170 56,170 29,284 29,284 Variable rate instruments Cash and cash equivalents 20 3,302,163 3,302,163 3,095,486 3,095,486 Available-for-sale securities 15 Time deposits maturing after 3 months or more 15 8,201 8,201 - - Government bonds, treasury bills 4,322,908 4,322,908 4,050,400 4,050,400 EUR - - 5.1% 289 Liabilities carried at fair value Secured bank loans 24 Put option for Best acquisition 23 (53,435) (53,435) (63,152) (63,152) BYR floating rate loans 10.9% (26,228) 12.3% (25,253) (53,435) (53,435) (63,152) (63,152) Unsecured bank loans 24 Liabilities carried at amortized cost USD floating rate loans 3.6% (1,175,049) 3.8% (1,026,479) Loans and borrowings-long term 24 (1,407,316) (1,407,316) (821,179) (821,179) EUR floating rate loans 7.8% (13,627) - - Bank overdrafts 20 (5,896) (5,896) (5,244) (5,244) BYR floating rate loans - - 2.1% (2,085) Loans and borrowings-short term 24 (430,205) (430,205) (690,780) (690,780) AZN fixed rate loans 22.5% (316) - - Trade and other payables** 28 (676,187) (676,187) (723,222) (723,222) Due to related parties 33 (10,760) (10,760) (14,780) (14,780) Sensitivity analysis Deferred payments 23-28 (78,402) (78,402) (172,924) (172,924) Fair value sensitivity analysis for fixed rate instruments: (2,608,766) (2,608,766) (2,428,129) (2,428,129) A change of 1% in interest rates for available for sale financial assets would have increased/(decreased) equity by nil (31 December 2009: $186). * Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets. A change of 1% in interest rates for time deposits maturing after 3 months or more would have increased/(decreased) profit or loss by $65 ** Advances taken, taxes and withholdings payable are excluded from trade and other payables. (31 December 2009: nil). *** Includes non-current trade receivables amounting to $35,024. The methods used in determining the fair values of financial instruments are discussed in Note 4.

170 Turkcell Annual Report 2010 171 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

29. Financial instruments (continued) 29. Financial instruments (continued) Fair values (continued) Fair values (continued) Fair value hierarchy Fair value hierarchy (continued) The table below analyses financial instruments carried at fair value, by valuation method: Total gains or losses included in profit or loss for the period in the following table are presented in the statement of comprehensive income as follows: The different levels have been identified as follows: Available-for Financial liability sale financial in relation to put Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities. assets option Total Total gains or losses included in profit or loss for the period: Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets and liability, either directly or indirectly. Net financing costs - (5,447) (5,447)

Level 3: inputs for the asset or liability that are not based on observable market. Total gains or losses for the period included in profit or loss for asset and liabilities held at the end of the reporting period: Level 1 Level 2 Level 3 Total Net financing costs - (5,447) (5,447) 31 December 2010 Financial liability in relation to put option - - 53,435 53,435 30. Operating leases - - 53,435 53,435 The Company entered into various operating lease agreements. For the years ended 31 December 2010 2009 and 2008, total rent expenses for operating leases were $301,309, $287,259 and $263,805 respectively.

Level 1 Level 2 Level 3 Total The future minimum lease payments under non-cancellable leases are as follows: 31 December 2009 2010 2009 Available-for sale financial assets 62,109 - 289 62,398 Less than one year 18,024 5,804 62,109 - 289 62,398 Between one and five years 16,107 19,167 More than five years 7,221 8,453 Financial liability in relation to put option - - 63,152 63,152 41,352 33,424 - - 63,152 63,152 31. Guarantees and purchase obligations As at 31 December 2010, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and Available-for sale Financial liability in relation Total purchase of sponsorship and advertisement services amount to $594,910 (31 December 2009: $245,088). financial assets to put option Balance as at 1 January 2010 289 (63,152) (62,863) As at 31 December 2010, the Group is contingently liable in respect of bank letters of guarantee obtained from banks given to customs authori- Total gains or losses: ties, private companies and other public organizations and provided financial guarantees to subsidiaries totalling to TL 2,413,062 (equivalent in profit or loss - (5,447) (5,447) to $1,560,842 as at 31 December 2010) (31 December 2009: TL 1,986,052 equivalent to $1,319,023 as at 31 December 2009). in other comprehensive income (289) - (289) Total recognition in equity - 15,164 15,164 Balance as at 31 December 2010 - (53,435) (53,435)

The table above shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy.

172 Turkcell Annual Report 2010 173 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies 32. Commitments and Contingencies (continued)

License Agreements License Agreements (continued)

Turkcell: Turkcell (continued): On 27 April 1998, the Company signed the License Agreement with the Turkish Ministry. In accordance with the License Agreement, the Com- pany was granted a 25 year GSM license for a license fee of $500,000. The License Agreement permits the Company to operate as a stand- The Company is entitled to any revenues collected during such period and the Licensee’s term will be extended by the period of any sus- alone GSM operator. Under the License, the Company collects all of the revenue generated from the operations of its GSM network and pays pension. The revised License may also be terminated upon a bankruptcy ruling against the Company or for other license violations, such as the Turkish Treasury and Turkish Ministry an treasury share and universal service fund, respectively, equal to 15% of its gross revenues from operating outside of its allocated frequency ranges, and the penalties for such violations can include fines, loss of frequency rights, revocation Turkish GSM operations. On 25 June 2005, the Turkish government declared that GSM operators are required to pay 10% of their existing of the license and confiscation of the network management centre, the gateway exchanges and central subscription system, including related monthly treasury share to the Turkish Ministry as a universal service fund contribution in accordance with Law No: 5369. As a result, starting technical equipment, immovables and installations essential for the operation of the network. from 30 June 2005, the Company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish Ministry as universal service fund. Moreover, the Company is obliged to pay 0.35% of its yearly gross revenue once a year as ICTA Fee. The Company is authorized to, Based on the enacted law on 3 July 2005 with respect to the regulation of privatization, gross revenue description based for the calculation among other things, set its own tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, of treasury share and universal service fund has been changed. According to this new regulation, interest charges for late collections, and issue invoices directly to subscribers, collect payments and deal directly with subscribers. indirect taxes such as VAT, and other expenses are excluded from the description of gross revenue. Calculation of gross revenue for treasury share and universal service fund according to the new regulation is effective after Council of State’s approval on 10 March 2006. In February 2002, the Company renewed its License with the ICTA, and became subject to a number of new requirements, including those regarding the build-out, operation, quality and coverage of the Company’s GSM network, prohibitions on anti-competitive behaviour and 3G License compliance with national and international GSM standards. Failure to meet any requirement in the renewed License, or the occurrence of On 30 April 2009, the Company signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and extraordinary unforeseen circumstances, can also result in revocation of the renewed License, including the surrender of the GSM network infrastructure. Turkcell acquired the A type license providing the widest frequency band for a consideration of EUR 358,000 (excluding VAT). without compensation, or limitation of the Company’s rights thereunder, or could otherwise adversely affect the Company’s regulatory status. The license is effective for duration of 20 years starting from 30 April 2009. According to the agreement, operators have provided IMT 2000/ Certain conditions of the renewed License Agreement include the following: UMTS services starting from 30 July 2009.

Coverage: The Company had to attain geographical coverage of 50% and 90% of the population of Turkey with certain exceptions within three In accordance with the 3G License Agreement, the Company had to cover 100% of the population within the borders of all metropolitan years and five years, respectively, of the License’s effective date. municipalities and borders of all cities and municipalities in three and six years, respectively. Moreover, the Company had to cover 100% of the population in all settlement areas with a population higher than 5,000 and 1,000 within eight and ten years, respectively following the Service offerings: The Company must provide certain services in addition to general GSM services, including free emergency calls and tech- effective date of the agreement. nical assistance for subscribers, free call forwarding to police and other public emergency services, receiver-optional short messages, video text access, fax capability, calling and connected number identification and restrictions, call forwarding, call waiting, call hold, multi-party Belarusian Telecom: and third-party conference calls, billing information and barring of a range of outgoing and incoming calls. Belarusian Telecom owns a license issued on 28 August 2008 for a period of 10 years and is valid till 28 August 2018. According to the Sale and Purchase Agreement signed, the State Property Committee of the Republic of Belarus committed to grant the license from the acquisition Service quality: In general, the Company must meet all the technical standards determined and updated by the European Telecommunications date of 26 August 2008 for a period of 10 years and such license shall be extended for an additional 10 years for an insignificant considera- Standards Institute and Secretariat of the GSM MoU. Service quality requirements include that call blockage cannot exceed 5% and unsuc- tion. State Property Committee of the Republic of Belarus has fulfilled its obligations stated in Sale and Purchase Agreement and submitted cessful calls cannot exceed 2%. the related official documents in December 2009. According to the current legislation of the Republic of Belarus, the license extension will be made upon the expiration of its validity period. Therefore, Belarusian Telecom shall apply for extension in August 2018. In the consolidated Tariffs: ICTA sets the initial maximum tariffs in TL and USD. Thereafter, the revised License provides that the ICTA will adjust the maximum financial statements, amortization charge is recorded on the assumption that the license will be extended. tariffs at most every nine months or, if necessary, more frequently. The Company is free to set its own tariffs up to the maximum tariffs. Under its license, Belarusian Telecom has several coverage requirements to increase its geographical coverage gradually starting from the date of the license until 2018. However, Belarusian Telecom’s period of execution in relation to coverage requirements are extended for three Rights of the ICTA, Suspension and Termination: years starting from the acquisition date. The revised License is not transferable without the approval of the ICTA. In addition, the License Agreement gives the ICTA certain monitoring rights and access to the Company’s technical and financial information and allows for inspection rights, and gives certain rights to suspend operations under certain circumstances. Also, the Company is obliged to submit financial statements, contracts and investment plans to the ICTA.

The ICTA may suspend the Company’s operations for a limited or an unlimited period if necessary for the purpose of public security and nati- onal defence. During period of suspension, the ICTA may operate the Company’s GSM network.

174 Turkcell Annual Report 2010 175 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

License Agreements (continued) License Agreements (continued)

Astelit: Kibris Telekom: Astelit owns two GSM activity licenses, one is for GSM–900, the other is for DCS–1800. As at 31 December 2010, Astelit owns twenty four On 27 April 2007, Kibris Telekom signed the License Agreement for Installation and Operation of a Digital, Cellular, Mobile Telecommunication GSM–900, DCS 1800, D-AMPS and microwave Radiorelay frequency licenses which are regional or national. In addition to the above GSM System (“Mobile Communication License Agreement”) with the Ministry of Communications and Works of the Turkish Republic of Northern licenses, Astelit owns three licenses for local fixed line phone connection with wireless access using D-AMPS standard, one license for inter- Cyprus which is effective from 1 August 2007, replacing the existing GSM-Mobile Telephony System Agreement dated 25 March 1999. In national and long distance calls and eight PSTN licenses for seven regions of Ukraine. Also, Astelit holds number range – two NDC codes for accordance with the Mobile Communication License Agreement, Kibris Telekom was granted an 18 year GSM 900, GSM 1800 and IMT 2000/ mobile network and local ranges for PSTN and D-AMPS licenses. UMTS license for GSM 900, GSM 1800 frequencies while the usage of IMT 2000/UMTS frequency bands is subject to the fulfilment of certain conditions. According to licenses, Astelit should adhere to state sanitary regulations to ensure that equipment used does not injure the population by means of harmful electro-magnetic emissions. Licenses require Astelit to inform authorities about start/end of operations in three months; On 14 March 2008, Kibris Telekom was awarded a 3G infrastructure license at a cost of $10,000 including VAT, which was paid at the end of about changes in incorporation address in 30 days. Also, Astelit must present all the required documents for inspection by Ukrainian Telecom- March 2008. Under the terms of the license, the system had to be operational by mid-October 2008. In 2010, Kibris Telekom has completed munications Authority at their request. The Ukrainian Telecommunications Authority may suspend the operations of Astelit for a limited or an the radio transmision (airlink) project providing direct international voice and data connection with mainland and started using it from the unlimited period if necessary because of the expiration of licenses, upon mutual consent, or in case of violation of terms of radio frequencies third quarter of 2010. The Project is the only direct connection in Turkish Republic of Northern Cyprus besides Telecommunication Authority. use. If such a violation is determined, Ukrainian Telecommunications Authority notifies Astelit of provisions violated and sets deadline for recovery. If the deadline is not met, licenses may be terminated. Under the Mobile Communication License Agreement, Kibris Telekom also pays the tax authorities of Turkish Republic of Northern Cyprus a treasury share on monthly basis equal to 15% of gross revenues excluding accrued interest charges for the late payments, indirect taxes and Inteltek: accrued revenues for reporting purposes, payments made to third parties for value added services, interconnection revenues, roaming income Inteltek signed a contract on 30 July 2002 which provides for the installation, support and operation of an on-line central betting system as from own subscribers after the related payment made to other operators. well as maintenance and support for the provision of sport betting games. The Central Betting System Contract was scheduled to expire on 30 March 2008. Superonline: Superonline was authorized to Fixed Telephony, Satellite Communication Service, Infrastructure, Wired and Wireless Internet Service Provider Inteltek signed another contract with General Directorate of Youth and Sports (“GDYS”) on 2 October 2003 which authorized Inteltek to es- and Mobile Virtual Network Operator. tablish and operate a risk management center and become head agent for fixed odds betting. The Fixed Odds Betting Contract was scheduled to expire in October 2011. However, in relation to the lawsuits related to the operations of Inteltek, GDYS ceased the implementation of the Authorization By-Law for Telecommunication Services and Infrastructure published in Official Gazette on dated 26 August 2004 has been Fixed Odds Betting Contract starting from March 2007. Following this annulment decision, Spor Toto and Inteltek signed a new Fixed Odds abrogated By-Law on Authorization for Electronic Communications Sector dated 28 May 2009. According to this abrogation, Superonline’s Betting Contract on 15 March 2007, with less-advantageous conditions compared to previous contract signed in 2003, which expired on 1 “License” on Fixed Authority Services, Infrastructure Operating Service, Internet Service Provision, Satellite Communication Service has been March 2008. changed to “Authority” on Fixed Authority Services, Infrastructure Operating Service, Internet Service Provision, Satellite Communication Ser- vice, Cable Broadcast Service and Superonline’s “License” on Long Distance Traffic Carrying Services License has been changed to “Authority” Inteltek signed a new Fixed Odds Betting Contract with Spor Toto, which took effect on 1 March 2008. At the same time, Inteltek signed a new relevant to the Fixed Telephony Services. Central Betting System Contract with Spor Toto, which took effect on 31 March 2008 as having the same conditions with the current contract and both contracts were to be valid for one year atmost until the operation started as a result of the new tender. In accordance with the new legislation issued by ICTA, the infrastructure operator authorization right of Superonline has become infinite. As a result, Superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years. On 12 August 2008, Spor Toto conducted a tender which allowed private companies to organize fixed odds and paramutual betting in sports games. Inteltek gave the best offer for the tender. On 29 August 2008, Inteltek signed a contract with Spor Toto, receiving the rights to run the Azerinteltek: sport betting business for the next ten years. New commission rate, which is 1.4% of gross takings (until 1 March 2009, commission rate was Azerinteltek, in which Inteltek’s shareholding is 51%, was established on 19 January 2010, and authorized to organize, operate, manage and 7% of gross takings), is applicable starting from March 2009. Under the terms of this contract, Inteltek guaranteed TRY 1,500,000 (equivalent develop the fixed-odds and para-mutual sports betting games by the Ministry of Youth and Sports of Azerbaijan for a period of 10 years. The to $970,246 as of 31 December 2010) turnover for the first year of the contract, and has given similar guarantees for future years. agreement signed with Azeridmanservis which is founded by the Ministry of Youth and Sports of Azerbaijan is renewed with the same terms and conditions in accordance with the new legislation enforced in Azerbaijan regarding the betting games based on sports on 30 September At 31 December 2010, the total amount of guarantee obtained from banks and provided to Spor Toto amounted to TRY 161,298 (equivalent to 2010. $63,353 as at 31 December 2010) (31 December 2009: TRY 159,752 equivalent to $106,098 as at 31 December 2009). The targeted payout is 50% of the turnover balance. The fact that the Company is obliged to pay the difference between the realized and the targeted payout balan- Azerinteltek officially commenced to conduct sports betting games on 18 January 2011. ces, whenever the pool balance falls negative, creates an excess payment risk.

176 Turkcell Annual Report 2010 177 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

License Agreements (continued) Interconnection Agreements (continued)

Interconnection Agreements There are no minimum payment obligations under the interconnection agreements; however, failure to carry the counterparty’s traffic may The Company has entered into interconnection agreements with a number of operators in Turkey and overseas including Turk Telekom, Tel- expose the Company to financial and other penalties or loss of interconnection privileges for its own traffic. On 10 February 2010, ICTA decre- sim Mobil Telekomunikasyon Hizmetleri AS (“Telsim”), Vodafone Telekomunikasyon AS (“Vodafone”), Avea Iletisim Hizmetleri AS (“Avea”), ased “Standard Interconnection Tariffs” for the Company from full TL 0.0655 (equivalent to $0.0424 as at 31 December 2010) to full TL 0.0313 Milleni.com GMbH and Globalstar Avrasya Uydu Ses ve Data Iletisim AS (“Globalstar”). (equivalent to $0.0202 as at 31 December 2010) for voice calls and left the tariff unchanged at full TL 0.0775 (equivalent to full $0.0501 as at 31 December 2010) for video calls, effective from 1 April 2010. The Company started to recognize interconnection revenues and cost in The Access and Interconnection Regulation (the “Regulation”) became effective when it was issued by the ICTA on 23 May 2003. accordance with “Standard Interconnection Reference Tariffs” starting from 1 April 2010. The Regulation is driven largely by a goal to improve the competitive environment. Under the Regulation, the ICTA may compel all telecommunications operators to accept another operator’s request for use of and access to its network. All telecommunications operators in As at 31 December 2010, the management believes that the Group is in compliance with the above mentioned license and interconnection Turkey may be required to provide access to other operators on the same terms and qualifications provided to their shareholders, subsidiaries agreements’ conditions and requirements in all material respects. and affiliates. Legal Proceedings In accordance with the Regulation, the telecommunications providers in Turkey (including Turk Telekom) were obliged to renew their inter- The Group is involved in various claims and legal actions arising in the ordinary course of business described below. connection agreements within two months following the issuance of the Regulation. As a result of intervention by the ICTA, the Company en- tered into supplemental agreements with Turk Telekom on 10 November 2003, Telsim on 21 November 2003, and Globalstar on 11 December Dispute with Turk Telekom with respect to call termination fees 2003, with amended tariffs and tariff adoption procedures. The interconnection agreement with Avea (formerly TT&TIM) was last renewed on Upon application of Turk Telekom, the ICTA has set temporary (and after final) call termination fees for calls to be applied between Turk Tele- 20 January 2006. On 24 May 2006, shares of Telsim were transferred to Vodafone and a new interconnection agreement was signed between kom and the Company starting from 10 August 2005. However, Turk Telekom did not apply these termination fees for the international calls. the Company and Vodafone at the end of July 2006. Therefore, on 22 December 2005, the Company filed a lawsuit against Turk Telekom to cease this practice and requested collection of its da- mages totalling to TL 11,970 (equivalent to $7,743 as at 31 December 2010) including principal, interest and penalty on late payment covering On 21 February 2005, Superonline and Milleni.com GMbH have signed an agreement to provide telecommunications services to each other the period from August 2005 until October 2005. Expert reports and supplementary expert reports which are obtained for the lawsuit, affirm whereby Milleni.com GMbH may convey calls to the Company’s switch and the Company may convey calls to Milleni.com GMbH’s switch, in justification of the Company. The lawsuit is still pending. both cases, for onward transmission to their destinations. On 19 December 2006, the Company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termi- In addition, the ICTA has required operators holding significant market power, as well as Turk Telekom, to share certain facilities with other nation tariffs for international calls set by ICTA for the period between November 2005 and October 2006 amounting to TL 23,726 (equivalent operators under certain conditions and to provide co-location on their premises for the equipment of other operators at a reasonable price. to $15,347 as at 31 December 2010) including principal, interest and penalty on late payment. The Court decided to consolidate this lawsuit The ICTA has also required telecommunications operators to provide number portability, which means allowing users to keep the same phone with the first lawsuit dated 22 December 2005. numbers even after they switch from one network to another starting from 9 November 2008. On 2 November 2007, the Company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termina- Under a typical interconnection agreement, each party agrees, among other things to permit the interconnection of its network with the tion tariffs for international calls set by ICTA for the period between November 2006 and 1 March 2007 amounting to TL 6,836 (equivalent to Company’s network to enable calls to be transmitted to, and received from, the GSM system operated by each party in accordance with tech- $4,422 as at 31 December 2010) including principal, interest and penalty on late payment. The Court also decided to consolidate this lawsuit nical specifications set out in the interconnection agreement. Typical interconnection agreements also establish understandings between the with the first lawsuit dated 22 December 2005. parties relating to a number of key operational areas, including call traffic management, quality and performance standards, interconnection interfaces and other technical, operational and procedural aspects of interconnection. Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). The Company’s interconnection agreements usually provide that each party will assume responsibility for the safe operation of its own net- work. Each party is also typically responsible for ensuring that its network does not endanger the safety or health of employees, contractors, agents or customers of the other party or damage interfere with or cause any deterioration in the operation of the other party’s network.

Interconnection agreements also specify the amount of the payments that each party will make to the other for traffic originated on one network but switched to the other. These payments vary by contract, and in some cases, may require the Company to pay the counterparty less, the same amount, or a greater amount per minute, for traffic originating on the Company’s network but switching to the counterparty’s network, than it receives for a similar call originating on another network and switched to the Company’s network.

178 Turkcell Annual Report 2010 179 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Dispute on Turk Telekom Transmission Lines Leases Legal Proceedings (continued) Effective from 1 July 2000, Turk Telekom annulled the discount of 60% that it provided to the Company based on its regular ratio, which had been provided for several years, and, at the same time, Turk Telekom started to provide a discount of 25% being subject to certain conditions. Dispute regarding the Fine Applied by the Competition Board regarding Mobile Marketing Activities The Company filed a lawsuit against Turk Telekom for the application of the agreed 60% discount. However, on 30 July 2001, the Company The Competition Board decided to initiate an investigation in order to identify whether the Company maintains exclusive activities on mobile had been notified that the court of appeal upheld the decision made by the commercial court allowing Turk Telekom to terminate the 60% marketing and their appropriateness with respect to competition rules. On 23 December 2009, Competition Board decided that the Company discount. Accordingly, the Company paid and continues to pay transmission fees to Turk Telekom based on the 25% discount. Although Turk violates competition rules in GSM and mobile marketing services and fined the Company amounting to TL 36,072 (equivalent to $23,332 as Telekom did not charge any interest on late payments at the time of such payments, the Company recorded an accrual amounting to a nominal at 31 December 2010). The payment was made within 1 month following the notification of the decision of the Competition Board. Therefore, amount of TL 3,023 (equivalent to $1,955 as at 31 December 2010) for possible interest charges as at 31 December 2000. On 9 May 2002, Turk 25% discount was applied and TL 27,054 (equivalent to $17,499 as at 31 December 2010) is paid as the monetary fine on 25 May 2010. The Telekom requested an interest amounting to a nominal amount of TL 30,068 (equivalent to $19,449 as at 31 December 2010). Company filed a legal case on 25 June 2010 for the suspension of execution and cancellation of the aforementioned decision. The Court rejec- ted the Company’s suspension of execution request. The Company objected to the decision. The lawsuit is still pending. The Company did not agree with Turk Telekom’s interest calculation and, accordingly, obtained an injunction from the commercial court to prevent Turk Telekom from collecting any amounts relating to this interest charge. Also, the Company initiated a lawsuit against Turk Telekom Avea, depending on the Competition Board decision, initiated a lawsuit against the Company claiming a compensation from the Company for on the legality of such interest. On 25 December 2008, the Court rejected the case. The Company appealed the decision. The Supreme Court its damages amounting to TL 1,000 (equivalent to $647 as at 31 December 2010), with reservation of further claims, on the ground that the rejected the appeal. The Company applied for the correction of the decision. The Supreme Court rejected the correction of the decision request Company violated the competition. The lawsuit is still pending. and the decision is finalised. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- Based on the management opinion, the Company accrued provision of TL 91,864 (equivalent to $59,420 as at 31 December 2010) and the tain, thus, no provision is recognised in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December Company netted off the whole amount from the receivables from Turk Telekom as at 31 December 2010. 2009: None).

Additionally, a lawsuit is commenced against Turk Telekom on 28 October 2010 to collect the receivable amounting to principal of TL 23,378 Dispute on National Roaming Agreement (equivalent to $15,122 as at 31 December 2010), overdue interest of TL 3,092 (equivalent to $2,000 as at 31 December 2010) and delay fee of The Company conducted roaming negotiations in 2001 with İs-Tim Telekomunikasyon Hizmetleri A.S. (“İs-Tim”) which is a GSM operator, TL 1,925 (equivalent to $1,245 as at 31 December 2010), with the contractual default interest until payment date on the ground that the above performing since March 2001. On 19 October 2001, upon unsuccessful negotiations, ICTA granted time for the Company until 15 November mentioned exercise is contrary to the term of the contract which is effective for the year 2000, Turk Telekom has already collected the whole 2005 to sign the roaming agreement with the determined conditions and requested parties to come to an agreement until 15 November 2001. amount which is subjected to the related court decision as of 31 October 2009 and Turk Telekom collected additional receivable. The Company initiated a lawsuit on the ground that ICTA has no power of intervention; its proposals are impossible from technical aspects and unacceptable from economic reasons. Council of State gave a decision on nonneccessity of a new decision on the ground that action which is Dispute regarding the Fine Applied by the Competition Board subjected to the lawsuit is cancelled by another state council decision. This decision appealed by ICTA. Council of State, Plenary Session of the The Competition Board commenced an investigation of business dealings between the Company and the mobile phone distributors in October Chamber for Administrative Divisions decided to uphold the court decision. 1999. The Competition Board decided that the Company disrupted the competitive environment through an abuse of a dominant position in the Turkish mobile market and infringements of certain provisions of the Law on the Protection of Competition. As a result, the Company was In a letter dated 14 March 2002, the ICTA subjected Is-Tim’s request for national roaming to the condition that it is reasonable, economically fined a nominal amount of approximately TL 6,973 (equivalent to $4,510 as at 31 December 2010) and was enjoined to cease these infringe- proportional and technically possible. Nevertheless, the ICTA declared that the Company is under an obligation to enter a national roaming ments. The Company initiated a lawsuit before Council of State for the injunction and cancellation of the decision. On 15 November 2005, the agreement with Is-Tim within a 30 day period. The Company initiated a lawsuit against ICTA. On 14 March 2006, Council of State decided to Court cancelled the Competition Board’s decision. cancel the process dated 14 March 2002 but rejected the Company’s request for cancellation of the regulation on procedures and policies with respect to national roaming. ICTA appealed the decision. Plenary Session of Administrative Law Divisions of the Council of State has decided After the cancellation of the Competition Board’s decision, the Competition Board has given the same decision again on 29 December 2005. to approve the decision of the Council of State. On 10 March 2006, the Company initiated a lawsuit before Council of State for the injunction and cancellation of the Competition Board’s decision dated 29 December 2005. On 13 May 2008, Council of State dismissed the lawsuit. The Company appealed the decision. Appeal process is still pending. The ICTA decided that the Company has not complied with its responsibility under Turkish regulations to provide national roaming and fined the Company by nominal amount of approximately TL 21,822 (equivalent to $14,115 as at 31 December 2010). On 7 April 2004, the Company Based on the decision of Competition Board, Ankara Tax Office requested the Company to pay TL 6,973 (equivalent to $4,510 as at 31 December made the related payment with its accrued interest. On 27 May 2004, the Company filed a lawsuit. On 3 January 2005, with respect to the 2010) through the payment order dated 4 August 2006. On 25 September 2006, the Company made the related payment and initiated a lawsuit for Council of State’s injunction, ICTA paid back nominal amount of TL 21,822 (equivalent to $14,115 as at 31 December 2010). the cancellation of this payment order. The court dismissed the lawsuit, and the Company appealed this decision. On 17 March 2009, Council of State reversed the judgement of the Local Court. Local Court decided in line with the decision of Council of State. On 18 December 2009, the Court rejected On 13 December 2005, Council of State decided the cancellation of the administrative fine but rejected the Company’s request for cancellation the case and the Company also appealed this decision. Council of State reversed the judgement of the Instance Court. The lawsuit is still pending. of the regulation on procedures and policies with respect to national roaming. ICTA appealed the decision. The appeal process is still pending. Plenary Session of Administrative Law Divisions of the Council of State has decided to approve the decision of the Council of State. On 22 July Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated 2010, the Company initiated a lawsuit against ICTA for the compensation of TL 7,111 (equivalent to $4,600 as at 31 December 2010), the total financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). amount of the damage of the Company accrued interest between the period when the Company made the payment and ICTA returned the same to the Company as the result of the stay of order decision.

180 Turkcell Annual Report 2010 181 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute on National Roaming Agreement (continued) Dispute on Deposits at Banks The Company has disputes in connection with some accounts at two banks which are deemed to be raised as a result of irregularities in such Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated banks and parties initiated lawsuits to each other regarding such disputes. It has been informed that a nominal of 3,814 TL (equivalent to financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). $2,467 as at 31 December 2010) was blocked as of 31 December 2001. The Company has recorded that amount as expense to its consolidated financial statements. The bank claims a nominal amount of 3,785 TL (equivalent to $2,448 as at 31 December 2010), excluding interest, in On 27 October 2006, Telecom Italia SPA and TIM International N.V. initiated a lawsuit against the Company claiming that the Company violated addition to the aforementioned amount. The Company initiated a lawsuit in the total of the above mentioned amounts against the other bank. competition law since demand of roaming has not been met. Telecom Italia SPA and TIM International N.V. requested $2,000 with respect to In the end of the jurisdiction, the Court, on 27 April 2004, decided the Company to pay $2,629 as principal and 40% of such amount as rejec- this claim. The Court rejected the case. Such decision has been appealed by Telecom Italia SPA and TIM International N.V. The appeal process tion of the execution compensation. Such decision became final on 11 October 2004. The Company made a payment of 7,615 TL (equivalent is still pending. to $4,926 as at 31 December 2010) on 10 December 2004 to 14th Execution Office of Istanbul.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- In the lawsuit initiated against the other bank, the Court decided in favour of the Company on 1 March 2005. The bank appealed the decision tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December and the Company replied the same. On 3 April 2006, Supreme Court of Appeals decided the reversal of the Court’s decision in favour of the 2009: None). defendant. The Court abided by the decision of the Supreme Court of Appeals. The lawsuit is pending. The Company has not reflected any amount in connection with this matter in its consolidated financial statements prepared as at and for the year ended 31 December 2010. Dispute regarding of the Fine Applied by ICTA on pricing applications of the Company On 7 April 2010, ICTA decided to impose administrative fine to the Company amounting to TL 4,008 (equivalent to $2,592 as at 31 Decem- Dispute on Special Communication Taxation Regarding Prepaid Card Sales ber 2010) for misinforming the Authority and TL 374 (equivalent to $242 as at 31 December 2010) for making some subscribers suffer. The Tax Office imposed tax penalty in the total amount of TL 47,130 (equivalent to $30,485 as at 31 December 2010) and TL 89,694 (equivalent to payment was made within 1 month following the notification of the decision of the ICTA. Therefore, 25% discount was applied and TL 3,287 $58,017 as at 31 December 2010) based on the ground that the Company had to pay special communication tax over the discounts applied (equivalent to $2,126 as at 31 December 2010) is paid in total as the administrative fine on 9 June 2010. The Company filed two lawsuits on to the distributors for the wholesales for the years 2003 and 2004, respectively. On 31 December 2008 and 18 December 2009, the Company 9 July 2010 for the suspension of execution and cancellation of the aforementioned decision. The Court rejected the Company’s suspension of initiated lawsuits before the court. The Company requested to await until the completion of settlement procedure in the lawsuit initiated on 31 execution requests and the Company objected to the decisions but the objections are rejected. The lawsuits are still pending. December 2008. Since the Company and the Ministry of Finance Settlement Commission have settled on the amounts subjected to the lawsuits as explained in the following paragraph, the Company has withdrawn from the lawsuits. Since it is not virtually certain that an inflow of economic benefits will arise, no contingent asset is recognized in the consolidated financial statements as at and for the year ended 31 December 2010. According to the settlement made with the Ministry of Finance Settlement Commission on 1 June 2010, special communication tax and penalty was settled at TL 1,489 (equivalent to $963 as at 31 December 2010) and TL 2,834 (equivalent to $1,833 as at 31 December 2010) for the Dispute regarding the Fine applied by ICTA on tariffs above upper limits years 2003 and 2004, respectively. In addition, late payment interest was settled at TL 3,570 (equivalent to $2,309 as at 31 December 2010) On 15 October 2009, ICTA decided to initiate an investigation stating that the Company applied tariffs above upper limits announced by ICTA. and TL 5,295 (equivalent to $3,425 as at 31 December 2010) for the years 2003 and 2004, respectively. The aforementioned amounts were On 21 December 2009, the Company initiated a lawsuit for the cancellation of ICTA’s decision. The case is still pending. paid on 27 July 2010.

On 21 April 2010, ICTA decided to impose administrative fine to the Company amounting to TL 53,467 (equivalent to $34,584 as at 31 De- Provision set for the above mentioned special communication taxes, penalty and late payment interest was TL 64,653 (equivalent to $41,820 cember 2010) by claiming that the Company applied tariffs above the upper limits of GSM-GSM in GSM Upper Limits Table approved by ICTA. as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2009 and the difference between The payment was made within 1 month following the notification of the decision of the ICTA. Therefore, 25% discount was applied and TL the provision amount and settled amount was recognized as income in the consolidated financial statements as at and for the year ended 31 40,100 (equivalent to $25,938 as at 31 December 2010) is paid as the administrative fine on 3 June 2010. The Company filed a lawsuit on 28 December 2010. June 2010, for the cancellation of the aforementioned decision. The Court overruled the suspension of execution claim, the Company objected to the decision and the Court accepted this objection and decided for the suspension of the execution. Accordingly, ICTA paid back TL 40,100 Tax Office imposed tax penalty, including actual tax and penalty for loss of tax, in the total amount of TL 133,617 (equivalent to $86,428 as at (equivalent to $25,938 as at 31 December 2010) on 27 January 2011. An income accrual of the same amount has been recognized in the 31 December 2010) and TL 139,101 (equivalent to $89,975 as at 31 December 2010) based on the ground that the Company had to pay special consolidated financial statements as of 31 December 2010 (31 December 2009: None). communication tax over the discounts applied to the distributors for the wholesales for the years 2005 and 2006, respectively. The Company initiated lawsuits for the cancellation of assessments and penalties mentioned above. Lawsuits are still pending. Amount to be reimbursed to the subscribers is calculated as TL 46,228 (equivalent to $29,902 as at 31 December 2010) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made Company management decided to set provision for the special communication tax for the discounts applied to distributors for the wholesales in January 2010. between January 2005 and January 2007 amounting to TL 9,087 (equivalent to $5,878 as at 31 December 2010) and accrued interest amo- unting to TL 12,655 (equivalent to $8,186 as at 31 December 2010) in the consolidated financial statements as at and for the year ended 31 December 2010 in line with the settlement gains with respect to same issue in June 2010.

182 Turkcell Annual Report 2010 183 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute on Special Communication Taxation Regarding Prepaid Card Sales (continued) Dispute with Spor Toto On 9 November 2005, Spor Toto sent a notification letter to Inteltek claiming that Inteltek is obliged to pay nominal amount of TL 3,292 (equi- On 28 February 2011, Tax Amnesty Law has been approved by the President of Republic of Turkey and; if applied until 2 May 2011, Turkish valent to $2,129 as at 31 December 2010) due to the difference in the reconciliation methods. Spor Toto claims that the reconciliation periods companies gained an alternative method for the settlement of previous disputes with the Tax Authorities related to the years prior to 2009. should be six-month independent periods whereas Inteltek management believes that those periods should be cumulative as stated in the On 23 March 2011, Board of Directors of the Company convened and decided to authorize the management to apply to the Turkish Ministry of agreement. Inteltek did not pay the requested amount. Finance in order to restructure the special communication tax imposition pertaining years 2005-2006 and to pursue related negotiations. As of the date of this report, the Company has not applied to the Tax Authorities related to the Tax Amnesty Law. Spor Toto, on behalf of GDYS, initiated a declaratory lawsuit against Inteltek. On 22 February 2007, the Court rejected the case and decided that the collection risk is with GDYS and Inteltek is not responsible for the uncollected amount of TL 1,527 (equivalent to $988 as at 31 Decem- Carrying International Voice Traffic ber 2010) and also rejected the demand that the reconciliation period should be six-month independent periods. GDYS appealed the Court’s In May 2003, the Company was informed that the ICTA had initiated an investigation against the Company claiming that the Company has decision. Supreme Court rejected the appeal request of GDYS. Following the Supreme Court’s decision, GDYS applied for the correction of the violated Turkish laws by carrying some of its international voice traffic through an operator other than Turk Telekom. The Company is disputing decision. GDYS’s correction of decision request was rejected by the Court and the decision was finalized. whether Turk Telekom should be the sole carrier of international voice traffic. On 5 March 2004, ICTA fined the Company a nominal amount of approximately TL 31,731 (equivalent to $20,525 as at 31 December 2010). Based on the decision of Supreme Court, Inteltek reversed the previously accrued principal amount of TL 3,292 (equivalent to $2,129 as at 31 December 2010) and its overdue interest accrual amount of TL 1,894 (equivalent to $1,225 as at 31 December 2010). Furthermore, Inteltek The Company has initiated a lawsuit with the claim of annulment of the related processes and decisions of ICTA, however, paid the administ- reclaimed TL 2,345 (equivalent to $1,517 as at 31 December 2010) principal and TL 977 (equivalent to $632 as at 31 December 2010) accrued rative fine on 9 April 2004. On 5 November 2004, Council of State gave a decision, which is served to the Company, for stay of execution. With interest which was paid in the 1st and 3rd reconciliation periods. Inteltek has initiated a lawsuit on 21 February 2008 to collect this amount. respect to that decision, ICTA paid back TL 18,000 (equivalent to $11,643 as at 31 December 2010) on 26 January 2005 and deduct a sum of On 19 March 2009, the court decided in favour of Inteltek. Spor Toto appealed the decision. The Supreme Court ruled to reverse the judgement TL 13,731 (equivalent to $8,882 as at 31 December 2010) from the December frequency usage fee payment. On 26 December 2006, Council of of the local court. Inteltek applied for the correction of the decision. The correction of the decision process is still pending. State decided to accept the Company’s claim and annul the decision of and the fine imposed by the ICTA. ICTA appealed the decision. Appeal process is still pending. Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). Turk Telekom initiated a lawsuit against the Company with respect to the same issue requesting an amount of TL 450,931 (equivalent to $291,676 as at 31 December 2010) of which TL 219,149 (equivalent to $141,752 as at 31 December 2010) is principal and TL 231,782 (equi- Dispute on over assessment following the settlement on VAT fine pertaining to International Roaming Agreements valent to $149,924 as at 31 December 2010) is interest charged until 30 June 2005 and requesting a temporary injunction. On 9 February 2009, the Company initiated a lawsuit claiming cancellation of interest charges amounting TL 6,609 (equivalent to $4,275 as at 31 December 2010) which are erroneously calculated after settlement with the Tax Office regarding the VAT and tax penalties accrued due Considering the progresses at the court case, provision is set for the principal amounting to TL 51,942 (equivalent to $33,598 as at 31 De- to roaming agreement for years 2000, 2001 and 2002. The Court rejected the Company’s injunction request. The Company objected to the cember 2010) and accrued interest amounting to a nominal amount of TL 84,567 (equivalent to $54,701 as at 31 December 2010) in the decision. The Court rejected the objection of the Company. The lawsuit is pending. consolidated financial statements as at and for the year ended 31 December 2010. Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated In deciding upon the amount of the provision taking, the Company has taken the Turkish law into consideration, not the amounts requested by financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). Turk Telekom and reflected in the expert report. Specifically, under Turkish Law, a person who is alleging that he has suffered a loss cannot claim the whole of his possible revenues but only the damages may only be sought in respect of lost profit. For this reason, the provision set by the Company is calculated by taking Turk Telekom’s estimated loss of profit into consideration rather than the amounts requested by Turk Telekom and amounts reflected in the expert report. Moreover, the Company obtained an independent opinion dated 23 October 2007 which supports the management opinion from an expert who is not designated by the Court.

On 5 November 2009, the Court rejected the Turk Telekom’s request amounting to TL 171,704 (equivalent to $111,063 as at 31 December 2010) and accepted the request amounting to TL 279,227 (equivalent to $180,613 as at 31 December 2010). The Company appealed the de- cision. Also Turk Telekom appealed the decision. Appeal process is still pending.

184 Turkcell Annual Report 2010 185 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute on Iranian GSM tender process Dispute on Mobile Number Portability The Company has initiated an arbitration case against Islamic Republic of Iran for not abiding by the provisions of the Agreement on Recipro- On 29 March 2007, the Company initiated a lawsuit against the ICTA claiming stay of order for and the annulment of the Regulation on Mo- cal Promotion and Protection of Investments and demanded its sustained loss, on 11 January 2008 at the arbitration court which is established bile Number Portability issued by the ICTA on 1 February 2007 on the ground that vested rights of the Company arising out the concession pursuant to the UNCITRAL arbitration rules. The arbitration process is still pending. agreement were violated by the said regulation. On 1 June 2009, the Court rejected the case. The Company appealed the decision. The appeal process is still pending. Besides, related with GSM tender process, Eastasia one of the partners of the consortium established to participate the tender and a wholly owned subsidiary of the Company, initiated an arbitration process against IEDC, another partner of the consortium, on 29 April 2008 claiming Dispute on Turk Telekom Interconnection Costs that IEDC violated the shareholder’s agreement and seeking compensation for damages for the aforementioned breach. The arbitration pro- On 8 April 2009, Turk Telekom initiated a lawsuit for damages against the company claiming that the company is violating the legislation by cess is still pending. applying higher call termination fees to operators than the fees applied to the Company’s subscribers for on-net calls and requesting for the time being TL 10 (equivalent to $6 as at 31 December 2010) with its accrued interest starting from 2001 and TL 10 (equivalent to $6 as at 31 Dispute on Turk Telekom Transmission Tariffs December 2010) with its accrued interest starting from the lawsuit date for the sustained loss as a result of decreasing traffic volume of Turk On 19 January 2007, the Company initiated a lawsuit against Turk Telekom claiming that Turk Telekom charged transmission on erroneous Telekom and subscriber lost derived from this action. The case is still pending. tariffs between 1 June 2004 and 1 July 2005. The Company requested a nominal amount of TL 8,136 (equivalent to $5,263 as at 31 December 2010) including interest. The expert report given to Court is in favor of the Company. The court ruled to obtain supplementary expert report. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- The case is still pending. tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). Dispute on Avea Interconnection Costs On 4 November 2010, Avea initiated a lawsuit on the ground that on-net tariffs of the Company are under the interconnection fees notwith- Dispute on the decision of CMB regarding Audit Committee Member standing ICTA’s decision regarding, on-net tariffs of the Company cannot be under the interconnection fees which are applied by the Company On 21 July 2006, Alexey Khudyakov was appointed to the audit committee as an observer member. On 26 January 2007 the CMB informed to other operators and demanded TL 1,000 (equivalent to $647 as at 31 December 2010) material compensation by reserving its right for the Company that Alexey Khudyakov’s current status, as an observer member on the audit committee does not satisfy the requirements under surpluses. The lawsuit is pending. Article 25 “Committees Responsible for Auditing” of the CMB. The CMB has stated that steps must be taken urgently in order to comply with Article 25. On 21 March 2007, the Company commenced a lawsuit to suspend the execution and to annul the decision of the CMB. The Company has accrued provision amounting to TL 1,000 (equivalent to $647 as at 31 December 2010) which is the total amount of the legal case. On 18 January 2008, Ankara 14th Administrative Court rejected the case. The Company appealed the decision with an injunction request. However Council of State rejected the appeal request. The Company applied for the correction of the decision. The correction of the decision Dispute on Campaigns process is still pending. On 21 May 2008, ICTA decided that the Company damaged the subscribers’ financial interests related to the campaigns in which free minutes or counters are given and requested TL 32,088 (equivalent to $20,755 as at 31 December 2010). On 10 July 2008, the Company filed a lawsuit On 15 October 2008, the CMB decided on an administrative fine amounting to TL 12 (equivalent to $8 as at 31 December 2010) since the for the injunction and cancellation of the ICTA’s decision. The lawsuit is still pending. However, the Company benefited from the early payment Company did not fulfill the decision of CMB dated 26 January 2007 and required the Company to inform its shareholders at the next General option and deserved a 25% discount and paid TL 24,066 (equivalent to $15,567 as at 31 December 2010) on 1 August 2008. Assembly Meeting. The Company commenced a lawsuit before the Administrative Court. The Court rejected the Company’s suspension request Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated and the Company’s objection to this decision has been rejected. The case is still pending. financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).

186 Turkcell Annual Report 2010 187 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute on Payment Request of Savings Deposits Insurance Fund Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee (continued) On 26 July 2007, Savings Deposits Insurance Fund (“SDIF”) requested TL 15,149 (equivalent to $9,799 as at 31 December 2010) to be paid According to the 51st article which is headed “Applicable Law and Settlement of Disputes”, of the concession agreement of the Company, in one month period on the ground that the stated amount is recorded as receivable from the Company in the accounting records of Telsim, parties agreed on settling disputes by arbitration and three arbitrator which are selected within the scope of ICC. Pursuant to mentioned ar- which is taken over by SDIF. On 20 September 2007, the Company filed a lawsuit for the injunction and cancellation of the SDIF’s request. ticle, disputes on the scope, application or termination of the agreement, shall primarily resolved by negotiations at the License Coordination Council of State accepted the injunction request of the Company. On 19 January 2010, the Court accepted the Company’s claim and cancelled Commission; in case the dispute cannot be resolved within 30 days, one of the party shall notify other party regarding the arising dispute, the aforementioned request of SDIF. SDIF appealed the decision. Appeal process is still pending. structure and reasons of the dispute and intention for applying to the arbitration; if the dispute cannot be resolved within 15 days as from notification date, dispute shall be resolved by arbitration. SDIF issued payment orders for the above mentioned amount and, on 19 October 2007, the Company initiated a lawsuit for the cancellation of the payment request of SDIF. On 6 February 2008, the Court accepted the Company’s injunction request. On 29 March 2010, the Court decided The Company filed two lawsuits before ICC claiming that the Company is not obliged to pay treasury share and ICTA Fee in accordance with the on the cancellation of the payment order. SDIF appealed such decision. The appeal process is pending. 8th and 9th Articles of the concession agreement, respectively, on discounts granted to distributors. On the both lawsuits, ICC have decided in favour of the Company. As stated in both of the Final Awards, the Company is not under obligation of paying Treasury Share and the Contri- Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- bution to the expenses of Authority pursuant to Article of 8 and 9 of the Concession Agreement dated March 10, 2006. ICTA filed lawsuits for tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December cancellation of these Final Awards. Both cases are still pending. 2009: None). Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006 Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee Turkish Treasury, through a letter which is based on the Report of the Treasury Controller’s Board following the examinations covering the At the end of 2006, Tax Auditors of the Company claimed that gross revenue in the statutory accounts should include discounts granted to period between 1 June 2004 and 9 March 2006, requested additional treasury share payment regarding the mentioned period. The Company distributors although the Company recorded these discounts in a separate line item as sales discounts. initiated a lawsuit before ICC on 18 December 2009 in order to obtain a declaratory judgment on the Company is not obliged to pay TL 3,320 (equivalent to $2,147 as at 31 December 2010) of the requested amount and treasury share over the exchange differences arising from ro- Starting from 1 January 2007, the Company started to deduct discounts granted to distributors from gross revenue and present them on a aming revenue. The case is still pending. net basis. Accordingly, the Company decided that, it has paid excess treasury share and universal service fund for the year 2006 totalling TL 51,254 (equivalent to $33,153 as at 31 December 2010). ICTA, through a letter dated 14 May 2010 which is based on the Report of the Treasury Controller’s Board following the examinations covering the period between 1 June 2004 to 9 March 2006, requested additional treasury share payment of TL 4,909 (equivalent to $3,175 as at 31 Through the letter dated 23 February 2007, the Company requested treasury share amounting to TL 46,129 (equivalent to $29,838 as at 31 De- December 2010) together with the monetary fine of TL 12,171 (equivalent to $7,873 as at 31 December 2010) on the ground that the treasury cember 2010) and interest accrued amounting to TL 5,020 (equivalent to $3,247 as at 31 December 2010) from Turkish Treasury and universal share and treasury share over the exchange differences arising from roaming revenue are not paid entirely. On 26 May 2010, the Company, in service fund amounting to TL 5,125 (equivalent to $3,315 as at 31 December 2010) and interest accrued amounting to TL 558 (equivalent to order to provide the suspension of the payment, requested a preliminary injunction from the Civil Court of First Instance based on the grounds $361 as at 31 December 2010) from Turkish Ministry to be paid in 10 days. Since Turkish Treasury and Turkish Ministry have not made any that the payment of additional treasury share payment of TL 4,909 (equivalent to $3,175 as at 31 December 2010) together with the monetary payment, the Company started to deduct these amounts from ongoing monthly payments. As at 31 December 2007, the Company deducted TL fine of TL 12,171 (equivalent to $7,873 as at 31 December 2010) is a pending case before ICC Arbitration Court. The Civil Court of First Instance 51,254 (equivalent to $33,153 as at 31 December 2010) from monthly treasury share and universal service fund payments. accepted the Company’s request. ICTA raised an objection to the preliminary injunction and this objection has been rejected.ICTA, through a letter dated 19 October 2010 which is based on the Report of the Treasury Controller’s Board following the examinations covering the period Turkish Treasury sent a letter to the Company dated 17 July 2007 and objected the deduction of the discounts granted to the distributors from between 10 March 2010 and 31 December 2010, requested treasury share of TL 72,527 (equivalent to $46,913 as at 31 December 2010) and the treasury share payments. Accordingly, the Company is asked to return TL 2,960 (equivalent to $1,915 as at 31 December 2010) that is conventional penalty of TL 205,594 (equivalent to $132,984 as at 31 December 2010). The Company paid TL 1,535 (equivalent to $993 as at deducted from treasury share payment for May 2007. The Company has not made the related payment and continued to deduct such discounts 31 December 2010) of the aforementioned amount. treasury share and universal service fee amount related to discounts granted to distributors for the year 2006. On 13 December 2010, the Company, in order to provide the suspension of the payment, requested a preliminary injunction from the Civil Management believes that the Company has the legal right to make deductions with respect to this issue. Accordingly, the Company has not Court of First Instance based on the grounds that the payment of treasury share of TL 70,992 (equivalent to $45,920 as at 31 December 2010) recorded any provisions with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2010. and conventional penalty of TL 205,594 (equivalent to $132,984 as at 31 December 2010) is a pending case before ICC Arbitration Court. The Court accepted the Company’s request. ICTA’s objection against the decision has been rejected.

188 Turkcell Annual Report 2010 189 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006 (continued) Penalty of ICTA on Value Added Services Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- On 1 March 2010, ICTA decided to initiate an investigation against the Company upon administrative fine of 31,822 TL (equivalent to $20,583 tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December as at 31 December 2010) is revoked by The Ministry of Industry and Trade on the ground that the Company did not refund the subscribers who 2009: None). are unsubscribed in the period and did not demand content and this is contrary to the article 11/A of the law numbered 4077. The investiga- tion report has been sent to the Company and the Company has submitted its written defence to ICTA. The company filed a lawsuit before ICC on 12 January 2011 regarding the part of treasury share which is not covered in the lawsuits previously finalized in favor of the Company and the conventional penalty of TL 205,594 (equivalent to $132,984 as at 31 December 2010). The lawsuit On 13 January 2011, ICTA decided to apply administrative fine of TL 748 (equivalent to $484 as at 31 December 2010). Since the administrative is still pending fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and provision amounting to TL 555 (equivalent to $359 as at 31 December 2010) is set in the consolidated financial statements as at and for the year ended 31 December 2010. Dispute on treasury share amounts which are absorbed due to retrospective board decisions taken by ICTA In consequence of collection of treasury share from the Company without considering its payments to the other operators and some subs- Dispute of Astelit with its Distributor cribers due to the retrospective procedure amendments of ICTA on both interconnection fees and some tariffs; the Company commenced a Astelit and one of its distributors had an agreement for the sale of Astelit’s inventory to third parties. Under this agreement, the sale of pro- lawsuit on 5 August 2010 before ICC on the ground that treasury share which collected from diminishing returns are unlawful and deductions ducts had to be performed within 30 days after delivery and proceeds from such sale had to be transferred to Astelit excluding commissions committed by the Company between the years 2006 - 2010 from the treasury share are rightful and claimed payment of TL 1,600 (equivalent due to the distributor for performing the assignment. At a certain stage of the relationship under this agreement, the distributor began to to $1,035 as at 31 December 2010) and its interest to the overpayment amount which is paid under the name of treasury share, against ICTA violate its obligations for indebtedness for received, due but unpaid products. due to its administrative act leading to this case and against Turkish Treasury and Turkish Ministry due to making benefit from aforementioned amount. The lawsuit is still pending. Despite the distributor is factually a debtor under the agreement, the distributor filed a lawsuit against Astelit on recovery of HRV 106,443 (equivalent to $13,369 as at 31 December 2010), which is allegedly the sum of advance payment for undelivered goods. In the course of court Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated proceedings, Astelit made a counterclaim on recovery of indebtedness in the amount of HRV 35,292 (equivalent to $4,433 as at 31 December financial statements prepared as at and for the year ended 31 December 2010 (31 December 2009: None). 2010).

Dispute with the Ministry of Industry and Trade As a result of consideration of two claims, the Court of First Instance in Kiev dismissed the claim of the distributor and sustained the coun- Ministry of Industry and Trade notified the Company that the Company is not informing the subscribers properly before service subscriptions terclaim of Astelit. Subsequently, The Kiev Economic Court of Appeal repealed the decision of the Court of First Instance and dismissed the and content sales and charged administrative fine of TL 68,201 (equivalent to $44,114 as at 31 December 2010). On 24 August 2009, the claim of Astelit and sustained the claim of the distributor on recovery of HRV 106,443 (equivalent to $13,369 as at 31 December 2010). The Company initiated a lawsuit for the cancellation of the payment order and related decision of the Ministry of Industry and Trade. The Court resolution of The Higher Economic Court of Ukraine dated 20 October 2009 remained unaltered the appellate court’s ruling. Thereafter, Astelit rejected the Company’s injunction request. The Court cancelled the payment order on 8 June 2010. Ministry of Industry and Trade appealed management has filed a lawsuit against this conclusion in the Supreme Court of Ukraine, which is the supreme and final degree of jurisdiction the decision. Appeal process is still pending. against the resolution of the Higher Economic Court of Ukraine.

On 14 December 2009, the Company filed a lawsuit for the injunction and cancellation of the payment order of TL 68,201 (equivalent to In December 2009 the Supreme Court of Ukraine has revoked the previous court decisions and forwarded the court file to the Court of First $44,114 as at 31 December 2010) with respect to the decision of Ministry of Industry and Trade. The Court rejected the appeal request of Instance in Kiev to other judges for new legal proceedings. New legal proceedings have started in February 2010. It was decided by the court the Company. The Company objected to the decision and Istanbul Regional Administrative Court accepted the objection of the Company and to conduct judicial expertise by specially authorized Kiev research institute of judicial expertise in order to define real indebtedness. The ex- decided to suspend the order of payment. pertise was initiated in April 2010 and still is in process.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- Management believes that such conclusion of the courts has no proper legal basis and does not conform to the facts of the case and evidences. tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December Accordingly, the Company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the 2009: None). year ended 31 December 2010.

190 Turkcell Annual Report 2010 191 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute of Astelit related to Withholding Tax on Interest Expense Lawsuit initiated by Mep Iletisim AS Ukranian Tax Administration sent a tax notice to Astelit stating that witholding tax rate on interest expense for the loan agrrement with Euro- On 31 December 2008, Mep Iletisim AS, which is former distributor of the Company and whose agreement is no longer valid, initiated a asia should be 10% for the year 2009. According to Ukrainian legislation and Convention on avoiding double taxation, Astelit paid witholding lawsuit against the Company claiming that it has a loss of TL 64,000 (equivalent to $41,397 as at 31 December 2010) due to the applications tax at 2%. Astelit filed the suit to cancel tax notice, which imposed Astelit to pay additional HRV 11,651 (equivalent to $1,463 as at 31 Decem- of the Company and requested TL 1,000 (equivalent to $647 as at 31 December 2010) and remaining amount to be reserved. The case is still ber 2010). Administrative court of first instance decided in favour of Astelit on 30 November 2010. Tax Inspection appealed the case on 27 pending. December 2010. Based on the management opinion, provision amounting to $2,635 is set for the risks belonging to years 2009 and 2010 in the consolidated financial statements as at and for the year ended 31 December 2010. Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December Dispute on VAT and SCT on Roaming Services 2009: None). On 21 October 2009, based on the Tax Investigation Reports dated 2 October 2009, Presidency of Large Taxpayers Office, Audit Group Ma- nagement notified the Company that VAT and SCT should be calculated on charges paid to international GSM operators for the calls initiated Investigation of ICTA on the wrongful declarations of the Company and the Company’s refrain from signing the minutes by the Company’s subscribers abroad and collect from the subscribers and requested TL 255,298 (equivalent to $165,135 as at 31 December ICTA decided to initiate an investigation based on the reason that the information provided by the Company within the frame of another 2010) for the period from April 2005 to July 2009, and for an interest to be calculated until the payment date. The Company filed a lawsuit investigation of ICTA is inconsistent and wrong, the Company is not in a helpful approach regarding the conduction of the investigation and for the cancellation of the aforementioned request. Based on the settlement between the Company and Ministry of Finance, the Company has refraining from signing the minutes drafted by the Audit Committee of ICTA. Investigation report has been sent to the Company. The Company withdrawn from the lawsuits. submitted its defence within the due time. In accordance with the decision of ICTA dated 10 February 2011, no penalty has been charged for the Company. As a result of the settlement made with Ministry of Finance Settlement Commission on 1 June 2010, penalty fee has been settled at TL 20,163 (equivalent to $13,042 as at 31 December 2010) and late payment interest expense was settled at TL 15,998 (equivalent to $10,348 as at 31 Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncer- December 2010) and related payment was made on 27 July 2010. tain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). Dispute on VAT and SCT regarding Shell & Turcas Petrol A.S Campaign Turkcell and Shell&Turcas Petrol A.S. signed an agreement on 27 November 2007 where eligible subscribers can get free counters and mi- Decisions of ICTA on tariff plans nutes from the Company or free oil from Shell&Turcas Petrol AS. On 15 November 2009, ICTA notified that the Company has changed the conditions of a tariff plan after the launch and shall reimburse overc- harged amounts to the subscribers. On 1 February 2010, the Company initiated a lawsuit for the cancellation of the decision of ICTA. The Court As a result of the tax investigation, Tax Controllers notified that VAT and special communication tax are not calculated over the free counters rejected the Company’s stay of execution request. The case is still pending. and minutes and imposed special communication tax amounting to TL 1,214 (equivalent to $785 as at 31 December 2010) and tax penalty of TL 1,822 (equivalent to $1,179 as at 31 December 2010) and VAT amounting to TL 874 (equivalent to $565 as at 31 December 2010) and Amount to be reimbursed to the subscribers is calculated as TL 15,660 (equivalent to $10,129 as at 31 December 2010) and deducted from tax penalty of TL 1,315 (equivalent to $851 as at 31 December 2010). On 16 September 2009, the Company filed lawsuits for the cancellation revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made of the tax penalty. The court decided to accept the case. Tax Administration appealed the decisions. Based on the management opinion, the in January 2010. Company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2010. On 17 May 2010, ICTA decided to impose TL 802 (equivalent to $519 as at 31 December 2010) administrative fine against Turkcell on the ground that one of the tariff option of Turkcell contradicts the board decision which sets lower limit to the on-net tariffs. The payment was made within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and TL 601 (equivalent to $389 as at 31 December 2010) as fine on 21 June 2010. Besides, the Company filed a lawsuit on 21 July 2010 in request for the cancellation of fine. The Court overruled the suspension of execution request and the Company objected to this decision. The Court rejected the objection request of the Company. The lawsuit is still pending.

192 Turkcell Annual Report 2010 193 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Decisions of ICTA on tariff plans (continued) Investigation of ICTA based on the complaint of a subscriber On 8 March 2010, ICTA informed the Company that an investigation took place on another tariff plan. As a result of the investigation, ICTA de- ICTA decided to initiate an investigation through its decision dated 12 May 2010 based on the complaint of Ozalp Insaat Pazarlama Tic. Ltd. cided to apply administrative penalty amounted TL 26,483 (equivalent to $17,130 as at 31 December 2010) to the Company on 22 September Sti., and requested certain information and documents from the Company. The Company provided its response related to the matter to ICTA. 2010. Administrative fine was paid within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and Investigation report is notified to the Turkcell and Turkcell has submitted its defence statement to ICTA within the due date. TL 19,862 (equivalent to $12,847 as at 31 December 2010) is paid as a fine on 7 December 2010. The Company initiated a lawsuit to suspend the execution of administrative fine and cancellation, on 10 December 2010. The Court overruled the suspension of execution request and the On 13 January 2011, ICTA decided to impose administrative fine to the Company amounting to TL 8,020 (equivalent to $ 5,188 as at 31 De- Company objected to this decision. On 17 February 2011, the Court decided to suspend the execution. On 1 March 2011, the Court accepted cember 2010) for making some subscribers suffer and TL 2,005 (equivalent to $ 1,297 as at 31 December 2010) for misinforming the Autho- the Company’s request for full refund of the amount paid to ICTA. ICTA reimbursed the related amount on 30 March 2011. rity. Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and provision totalling to TL 7,430 (equivalent to $4,806 as at 31 December 2010) is set in the consolidated financial statements as at and for the Amount to be reimbursed to the subscribers is calculated as TL 13,432 (equivalent to $8,688 as at 31 December 2010) for the year 2010 and year ended 31 December 2010. The Company filed two lawsuits on 21 March 2011 for the suspension of execution and cancellation of the deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2010. Reimbursement to subs- administrative fine. cribers was made in February 2011. Investigation on breaching confidentiality of personal data and relevant legislation which is launched by ICTA Decision of ICTA regarding telephone directory and unknown numbers service ICTA decided to launch preliminary investigation on breaching confidentiality of personal data and relevant legislation, within the context of On 7 July 2010, ICTA decided to fine the Company by TL 401 (equivalent to $259 as at 31 December 2010) and transfer back all kinds of softwa- the news in the press regarding unlawful wiretapping. ICTA authorities made an on-site inspection in July 2010. On 22 September 2010, ICTA re, hardware, infrastructure and equipment which make available the telephone directory and unknown numbers service to the ownership of decided to launch an investigation against the Company for detailed examination of the matter. Information and documents demanded by the Company from its wholly owned subsidiary on the ground that ownership of the whole system related to telephone directory and unknown ICTA were submitted to the ICTA. In January 2011, investigation report was sent to the Company. The Company submitted its written defence number service is not pertain to the Company. Administrative fine was paid within 1 month following the notification of the decision of ICTA. within due date. Therefore, 25% discount was applied and TL 301 (equivalent to $195 as at 31 December 2010) as fine on 7 September 2010. Dispute on treasury share in accordance with the amended license agreement The Company filed a lawsuit on 22 September 2010 for the suspension and cancellation of the execution. The Court overruled the suspension Based on the law enacted on 3 July 2005 with respect to the regulation of privatization, gross revenue description used for the calculation of execution request of the Company and the Company objected to this decision however the court rejected the Company’s objection. The of treasury share has been changed. According to this new regulation, accrued interest charges for the late payments, taxes such as indirect lawsuit is still pending. taxes, and accrued revenues are excluded from the description of gross revenue. Calculation method of gross revenue for treasury share sti- pulated in the law according to the new regulation shall be valid as of the application date of the Company with the claim of amendment of its Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated license agreement in compliance with the said Law. In the meanwhile, the Company realized the payments including above-mentioned items financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). between 21 July 2005 and 10 March 2006, when the amendment in license agreement was effective.

Investigation of the Competition Board regarding applications to the distributors On 9 June 2008, the Company filed a lawsuit before Administrative Court for the difference between the aforementioned period amounting to On 11 November 2009, Competition Board decided to initiate an investigation against the Company on the ground that the Company, through TL 102,649 (equivalent to $66,397 as at 31 December 2010) and interest amounting to TL 68,276 (equivalent to $ 44,163 as at 31 December its applications to its distributors, violates the related clauses of the Competition Act numbered 4054. Within the context of the investigati- 2010) till to the date the case is filed. The Administrative Court rejected the case and the Company appealed the decision. The appeal process on, the Company submitted its statement of defence. The investigation took place as an on-site examination and inspection in March 2010. is still pending. The Competition Board decided to examine the claims of Vodafone regarding this investigation within the context of this file. Besides, the Company’s action concerning abuse of dominant position in the wholesale or retail market of sim card, unit card, digital unit, activation and Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated other subscriber services by obstructing the activity of Avea is examined in the context of this investigation and Avea is accepted as a comp- financial statements as at and for the year ended 31 December 2010 (31 December 2009: None) lainant. Investigation report is submitted to the Company in August 2010 and the Company submitted its defence statement to Competition Board. Additional Written Opinion is submitted to the Company in February 2011 and the Company will submit its written defence to Additi- onal Written Opinion within due date.

194 Turkcell Annual Report 2010 195 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

32. Commitments and Contingencies (continued) 32. Commitments and Contingencies (continued)

Legal Proceedings (continued) Legal Proceedings (continued)

Dispute on ongoing license fee in accordance with the amended license agreement (continued) Dispute with T-Medya Based on the 9th article of the license agreement dated 10 March 2006, the Company has been obliged to pay 0.35% of its yearly gross reve- Arbitration procedures regarding three real estates which are in the ownership of the Company in Izmir, Adana and Ankara, are commenced nue once a year as ICTA Fee. However, in the previous license agreement, the Company was obliged to pay 0.35% of its yearly gross revenue with the letter dated 13 August 2010 against T-Medya who is the lessee of the real estates and delinquent for the period between 2003-2010 after deducting treasury share, universal service fund and other indirect taxes from the calculation base whereas in the new agreement, these rental period, to collect the unpaid rentals and its accrued interest in the amount of TL 8,914 (equivalent to $5,766 as at 31 December 2010). aforementioned payments are not deducted from the base of the calculation. Therefore, on 12 April 2006, the Company has initiated a lawsuit The arbitration processes are still pending. for the cancellation of the 9th article of the new license agreement. On 10 March 2009, the Court rejected the case. The Company appealed the decision. Appeal process is still pending. A bad debt reserve for the receivable amount of 8,755 TL (equivalent to $5,663 as at 31 December 2010) for T-Medya has been recognized in the consolidated financial statements as at and for the year ended 31 December 2010 in accordance with the bad debt policy of the Company. Dispute on ICTA fee payment based on the amended license agreement On 21 June 2006, ICTA notified the Company that the ICTA fee for the year 2005 which had been already paid in April 2006 should have been Investigation initiated by ICTA upon complaint of subscriber on international roaming campaigns calculated according to the new license agreement dated 10 March 2006 instead of the previous license agreement which was effective in On 30 December 2010, ICTA decided to initiate an investigation against Turkcell upon a complaint of a consumer regarding the Company’s the year 2005. Therefore, ICTA requested the Company to pay additional TL 4,011 (equivalent to $2,594 as at 31 December 2010) and its billing and pricing applications in order to investigate the billing and pricing problems arising from the international roaming campaigns accrued interest. The Company made the payment and initiated a lawsuit for the injunction and cancellation of the aforesaid decision of ICTA within 2009 and 2010. ICTA requested some information about campaigns and the Company submitted its explanations on the issue to ICTA. on 28 August 2006. On 24 July 2009, the Court decided in favor of the Company and annulled additional payment request of ICTA. The ICTA appealed the decision. Appeal process is still pending. The Company received the related principal amount of TL 4,011 (equivalent to $2,594 Investigation initiated by ICTA regarding Number Portability as at 31 December 2010) on 8 February 2010 and recorded income in the consolidated financial statements as at and for the year ended 31 On 26 January 2011 ICTA decided to initiate an investigation against the Company regarding refusal of number portability requests and reason December 2009. On 17 March 2010, the Company initiated a lawsuit for the accrued interest amounting to TL 3,942 (equivalent to $2,550 as of such refusal. ICTA carried out an inspection in the Company between 28 February and 2 March 2011. at 31 December 2010). The case is still pending. Investigation initiated by ICTA upon complaint of subscriber of data tariffs’ charging Since it is not virtually certain that an inflow of economic benefits will arise concerning the accrued interests, no asset or related income is On 9 March 2011, ICTA decided to initiate an investigation against the Company upon a complaint of a consumer regarding the Company’s recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None). miss charging about data tariffs. An inspection was carried between 30 March and 1 April in the Company by ICTA. Penalty issued to Superonline regarding trenching activities Investigation initiated by ICTA regarding the Company’s compatibility to ICTA’s regulations and decisions On 13 January 2011 Ankara Municipality issued a penalty of TL 8,863 (equivalent to $5,733 as at 31 December 2010) to Superonline related to Superonline’s trenching activities. Based on the management opinion, the probability of an outflow of resources embodying economic On 26 January 2011, ICTA decided to initiate an investigation against the Company about its compatibility of “Terms and Conditions About benefits to settle the obligation is less than probable, thus, no provision is recognized in the consolidated financial statements as at and for Updating Subscribers Records and Subscription Processes of End Users” and ICTA’s decision about limitation of numbers of the subscriptions. the year ended 31 December 2010. On 23 March 2011, ICTA carried out an inspection in the Company.

Dispute with Avea on SMS interconnection termination fees Dispute with Turk Telekom with respect to numbers beginning with 444 On 22 December 2006, Avea initiated a lawsuit against the Company claiming that although there was an agreement between the Company The Company filed a lawsuit on 25 April 2008 against Türk Telekom to collect TL 1,777 (equivalent to $1,149 as at 31 December 2010) inc- and Avea stating that both parties would not charge any SMS interconnection termination fees, the Company has charged SMS interconnection luding principal, overdue interest and delay fee which has been collected by Turk Telekom within the period of March 2007-February 2008 fees for the messages terminating on its own network and also assumed liabilities for the SMS terminating on Avea’s network and made inter- by pricing the calls started from the Company’s network and terminated at the numbers in form of “444 XX XX” which are assigned to the connection payments to Avea after deducting the net balance of those SMS charges and accruals. Avea requested provisions of Interconnection Company’s subscribers in accordance with special service call termination tariff. The Court decided in favor of the Company on 23 March 2011. Agreement regarding SMS pricing to be applied and requested collection of its losses amounting to nominal amount of TL 6,480 (equivalent to The Court has not prepared the written decision yet. $4,191 as at 31 December 2010) for the period between January 2006 and August 2006 with its accrued interest till payment. On 25 November 2008, the Court decided in favor of Avea. The Company has appealed the decision. Appeal process is still pending. The Company has paid the Investigation of ICTA related with application of an article of the Regulation on Consumer Rights in the Electronic Communications Sector principal of TL 6,480 (equivalent to $4,191 as at 31 December 2010), late payment interest of TL 5,103 (equivalent to $3,301 as at 31 December The ICTA decided to initiate an investigation related with application of an article of the Regulation on Consumer Rights in the Electronic Com- 2010) and related fees of TL 524 (equivalent to $339 as at 31 December 2010) on 30 March 2009. munications Sector through its decision dated 22 February 2011 and prepared an investigation report. The decision and investigation report is notified to the Company and the Company will submit its defense statement to ICTA within the due date. In line with the court decision stating that charging SMS interconnection termination fees violates the agreement between the Company and Avea, neither SMS interconnection revenue nor SMS interconnection expense has been recognized from February 2005 to 23 March 2007. Moreover, the Company applied to ICTA for the determination SMS interconnection termination fees and starting from 23 March 2007, the Company has applied the SMS interconnection termination fees announced by ICTA until January 2009. ICTA determined new SMS termination rate in January 2009 upon the application of Avea.

Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2010 (31 December 2009: None).

196 Turkcell Annual Report 2010 197 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Related parties 33. Related parties (continued) Other related party transactions (continued) Transactions with key management personnel: Key management personnel comprise the Group’s directors and key management executive officers. 31 December 31 December Due to related parties – short term 2010 2009 As at 31 December 2010 and 2009, none of the Group’s directors and executive officers has outstanding personnel loans from the Group. Hobim Bilgi Islem Hizmetleri AS (“Hobim”) 2,766 7,069 In addition to their salaries, the Group also provides non-cash benefits to directors and executive officers and contributes to a post-employment Intralot SA (“Intralot”) 910 - defined plan on their behalf. The Group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to KVK Teknoloji Urunleri AS (“KVK Teknoloji”) 909 519 fund the benefits. Mapfre Genel Yasam Sigorta AS (“Mapfre”) 473 81 Kyisvstar GSM JSC (“Kyivstar”) 44 2,457 Total compensation provided to key management personnel is $11,395, $8,044 and $7,912 for the years ended 31 December 2010, 2009 and Other 5,658 4,654 2008, respectively. 10,760 14,780

The Company has agreements or protocols with several of its shareholders, consolidated subsidiaries and affiliates of the shareholders. Substantially, all of the significant due from related party balances is from Cukurova Group companies.

Other related party transactions Due from SCM, non-controlling shareholder of Euroasia, resulted from the loan that SCM utilized from Financell with maturity of 30 December 2011. Due from related parties – long term 31 December 31 December 2010 2009 Due from Digital Platform, a company whose majority shares are owned by Cukurova Group, mainly resulted from receivables from call center T-Medya 1,044 5,539 revenues, financial support for borrowing repayments and advances given for current and planned sponsorships. Digital Platform Iletisim Hizmetleri AS (“Digital Platform”) - 15,306 Due from A-Tel, a 50-50 joint venture of the Company and SDIF mainly, resulted from simcard and scratch card sales to this company. Other - 194

1,044 21,039 Due from KVK Teknoloji, a company whose majority shares are owned by Cukurova Group, mainly resulted from simcard and scratch card sales to this company. Receivables from T-Medya consists of receivables based on rent agreements, accrued interests for outstanding balance and unpaid building expenses. Due from related parties long term is shown net of allowance for doubtful debts amounting to $5,897 as at 31 December 2010 (31 Due from ADD, a company whose majority shares are owned by Cukurova Group, resulted from advances given for advertising and sponsors- December 2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $5,897 (31 December 2009 and 2008: nil). hip services.

Due from Kyivstar, whose shares are owned by one of the shareholders of the Company, mainly resulted from call termination and internati- 31 December 31 December onal traffic carriage services rendered to this company. Due from related parties – short term 2010 2009 System Capital Management (“SCM”) 38,202 63,311 Due to Hobim, a company whose majority shares are owned by Cukurova Group, resulted from the invoice printing services rendered by this Digital Platform 21,307 25,563 company. A-Tel 13,260 8,786 KVK Teknoloji Urunleri AS (“KVK Teknoloji”) 8,212 5,470 Due to Intralot, a company incorporated under the laws of Greece and is the shareholder of Inteltek, a subsidiary of the Group. The Group ADD Production Media AS. (“ADD”) 1,796 - purchases game software and maintenance services. Kyisvstar GSM JSC (“Kyivstar”) 1,225 226 Other 4,895 5,487 Due to KVK, a company whose majority shares are owned by Cukurova Group, resulted from the payables for sales commissions and terminal 88,897 108,843 purchases.

Due from related parties short term is shown net of allowance for doubtful debts amounting to $2,998 as at 31 December 2010 (31 December Due to Mapfre, a company owned by one of the shareholders of the Group, provides insurance services to the Group. 2009: nil). The impairment loss recognized for the years ended 31 December 2010 is $2,998 (31 December 2009 and 2008: nil). Due to Kyivstar, whose shares are owned by one of the shareholders of the Company, mainly resulted from call termination and international traffic carriage services received.

The Group’s exposure to currency and liquidity risk related to due from/(due to) related parties is disclosed in Note 29.

198 Turkcell Annual Report 2010 199 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Related parties (continued) 33. Related parties (continued) Transactions with related parties Transactions with related parties (continued) All intragroup transactions have been eliminated and are not presented as related party transactions in the following table: The significant agreements are as follows:

Income from related parties 2010 2009 2008 Agreements with KVK Teknoloji: Sales to KVK Teknoloji KVK Teknoloji, incorporated on 23 October 2002, one of the Company’s principal simcard distributors, is a Turkish company, which is affiliated Simcard and prepaid card sales 507,963 640,312 860,711 with some of the Company’s shareholders. In addition to sales of simcards and scratch cards, the Company has entered into several agree- Sales to Kyivstar ments with KVK Teknoloji, in the form of advertisement support protocols, each lasting for different periods pursuant to which KVK Teknoloji Telecommunications services 42,413 44,195 63,581 must place advertisements for the Company’s services in newspapers. The objective of these agreements is to promote and increase handset Sales to A-Tel sales with the Company’s prepaid and postpaid brand simcards, thereby supporting the protection of the Company’s market share in the Simcard and prepaid card sales 30,838 67,558 132,594 prevailing market conditions. The prices of the contracts were determined according to the cost of advertising for KVK Teknoloji and the total Sales to Digital Platform advertisement benefit received, reflected in the Company’s market share in new subscriber acquisitions. Distributors’ campaign projects and Call center revenues and interest charges 22,223 18,766 20,281 market share also contributed to the budget allocation. Finance income from SCM Interest income 14,863 5,213 - The amount of handset sales to the subscribers of the Company performed by KVK Teknoloji for the period ended 31 December 2010 is TL Sales to Teliasonera International 180,922 (equivalent to $117,026 as at 31 December 2010) which is paid to KVK Teknoloji in advance in accordance with certain commitment Telecommunications services 4,793 8,328 7,151 arrangements and collected from the subscribers throughout the campaign period. Sales to Millenicom Telekomunikasyon AS (“Millenicom”) Telecommunications services 2,979 5,497 12,996 Agreements with Kyivstar: Sales to CJSC Ukrainian Radiosystems 2,321 3,388 8,390 Alfa Group, a minor shareholder of the Company, holds the majority shares of Kyivstar. Astelit is receiving call termination and international Telecommunications services traffic carriage services from Kyivstar.

Agreements with A-Tel: A-Tel is involved in the marketing, selling and distributing the Company’s prepaid systems. A-Tel is a 50-50 joint venture of the Company and SDIF. A-Tel acts as the only dealer of the Company for Muhabbet Kart (a prepaid card), and receives dealer activation fees and simcard Related party expenses 2010 2009 2008 subsidies for the sale of Muhabbet Kart. In addition to the sales of simcards and scratch cards through an extensive network of newspaper ki- Charges from ADD osks located throughout Turkey, the Company has entered into several agreements with A-Tel for sales campaigns and subscriber activations. Advertisement and sponsorship services 65,957 127,014 165,250 Charges from Kyivstar Agreements with Digital Platform: Telecommunications services 36,039 53,466 63,799 Digital Platform, a direct-to-home digital television service company under the Digiturk brand name, is a subsidiary of one of the Company’s Charges from A-Tel (*) principal shareholders, Cukurova Group. Digital Platform acquired the broadcasting rights for Turkish Super Football League by the tender held Dealer activation fees and others 31,618 36,971 49,065 on 15 July 2004, until 31 May 2008 and the broadcasting rights were extended until 31 May 2010 with a new agreement dated 5 May 2005. Charges from KVK Teknoloji Dealer activation fees and others 27,706 41,360 103,386 On 23 December 2005, “Restructuring Framework Agreement” and supplemental sponsorship agreements was signed between Digital Plat- Charges from Hobim form and the Company. Within the framework of the agreement, Digital Platform will pay its liabilities to Company including interest accrued Invoicing and archieving services 19,446 21,985 20,865 partially in cash and partially by providing sponsorship services until 15 July 2011. On 4 June 2010, Digital Platform notified the Company to Charges from Teliasonera International annul Lig TV sponsorship agreement, one of the supplemental agreements within the framework of “Restructuring Framework Agreement” Telecommunications services 9,162 12,261 11,300 and declared that Digital Platform will pay its debt to the Company only in cash according to the payment schedule in “Restructuring Frame- Charges from Millenicom work Agreement”. With the protocol dated 31 January 2011, the agreement dated 23 December 2005 is cancelled with the mutual agreement Telecommunications services 3,194 5,171 8,501 of the parties. The remaining receivable balance from Digital Platform will be paid in 2 equal installments in February 2011 and March 2011. Charges from CJSC Ukrainian Radiosystems 33. Related parties (continued) Telecommunications services 2,211 4,208 6,491 Transactions with related parties (continued) * Charges from A-Tel have been eliminated to the extent of the Company’s interest in A-Tel for the years ended 31 December 2010, 2009 and Agreements with Digital Platform: (continued) 2008 amounting to $31,618, $36,971 and $49,065, respectively. The Company also has an agreement related to the corporate group SMS services that the Company offers to Digital Platform, and an agree- ment for call center services provided by the Company’s subsidiary Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri AS (“Global”).

200 Turkcell Annual Report 2010 201 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2010 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Agreements with SCM: 34. Group entities SCM, non-controlling shareholder of Euroasia, obtained loan from Financell. The Group’s ultimate parent company is Turkcell. Subsidiaries of the Company as at 31 December 2010 and 2009 are as follows: Subsidiaries Agreements with Teliasonera International: Effective Ownership Interest Teliasonera International is the mobile operator that provides telecommunication services in the Nordic and Baltic countries. Teliasonera International is rendering and receiving call termination and international traffic carriage services to and from the Astelit. Country of 31 December 31 December Name incorporation Business 2010 (%) 2009 (%) Turkish Republic of Agreements with Millenicom: Kibris Telekom Northern Cyprus Telecommunications 100 100 European Telecommunications Holding AG (“ETH”), a subsidiary of Cukurova Group, holds the majority shares of Millenicom. Millenicom is Global Turkey Customer relations management 100 100 Information technology, value added GSM rendering and receiving call termination and international traffic carriage services to and from the Company. Turktell Bilisim Servisleri AS Turkey services investments 100 100 Superonline Turkey Telecommunications 100 100 Agreements with CJSC Ukrainian Radiosystem: Turktell Uluslararasi Yatırım Holding AS Turkey Telecommunications investments 100 100 Turkcell Kurumsal Satıs ve Dagıtım Hizmetleri AS Turkey Telecommunications 100 100 CJSC Ukrainian Radiosystems owned by Vimpelcom provides mobile communications services is rendering and receiving call termination and Eastasia Netherlands Telecommunications investments 100 100 international traffic carriage services to and from the Astelit. Turkcell Teknoloji Arastirma ve Gelistirme AS Turkey Research and Development 100 100 Telecommunications infrastructure Kule Hizmet ve Isletmecilik AS* Turkey business 100 100 Agreements with ADD: Sans Oyunlari Yatirim Holding AS Turkey Betting business investments 100 100 ADD, a media planning and marketing company, is a Turkish company owned by one of the Company’s principal shareholders, Cukurova Gro- Financell Netherlands Financing business 100 100 up. The Company was operating a media purchasing agreement with ADD, which was revised on 1 September 2009 and was effective until 31 Rehberlik Hizmetleri AS Turkey Telecommunications 100 100 Beltur BV Netherlands Telecommunications investments 100 100 August 2010. The purpose of this agreement was to benefit from the expertise and bargaining power of ADD against third parties, regarding Surtur BV Netherlands Telecommunications investments 100 100 the formation of media purchasing strategies for both postpaid and prepaid brands. However, the agreement was annulled effective from 2 Beltel Turkey Telecommunications investments 100 100 August 2010 as a result of the notification dated 28 May 2010. Turkcell Gayrimenkul Hizmetleri AS Turkey Property investments 100 100 LLC Global Ukraine Customer relations management 100 100 FLLC Global Republic of Belarus Customer relations management 100 100 Agreements with Hobim: Telecommunications infrastructure Hobim, one of the leading data processing and application service provider companies in Turkey, is owned by Cukurova Group. The Company UkrTower Ukraine business 100 100 Talih Kusu Altyapi Hizmetleri AS Turkey Telecommunications investments 100 100 has entered into invoice printing and archiving agreements with Hobim under which Hobim provides the Company with scratch card printing Turkcell Europe GmbH Germany Telecommunications 100 - services, monthly invoice printing services, manages archiving of invoices and subscription documents for an indefinite period of time. Prices Corbuss Kurumsal Telekom Servis Hizmetleri AS Turkey GSM services 99 99 of the agreements are determined as per unit cost plus profit margin. Belarusian Telecom Republic of Belarus Telecommunications 80 80 Inteltek Turkey Betting business 55 55 Euroasia Netherlands Telecommunications 55 55 Astelit Ukraine Telecommunications 55 55 Azerinteltek Azerbaijan Betting Business 28 - *Brandname of Kule Hizmet ve Isletmecilik AS is Global Tower.

35. Subsequent events On 23 March 2011, the Company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2010 amounting to TL 1,328,697 (equivalent to $859,442 as at 31 December 2010, respectively), which represented 75% of distributable income. This rep- resents a net cash dividend of full TL 0.6039532 (equivalent to full $0.39 as at 31 December 2010) per share. This dividend proposal will be discussed at Ordinary General Assembly of Shareholders to be held on 21 April 2011.

In the Ordinary General Assembly of Shareholders Meeting of Inteltek held on 6 April 2011, it has been decided to distribute dividends amo- unting to TL 16,744 (equivalent to $10,831 as at 31 December 2010).

In March 2011, Fintur decided to distribute dividend amounting to $50,000. The Company has received its portion on 7 April 2011. In March 2011, A-Tel decided to distribute dividend amounting to TL 26,982 (equivalent to $17,453 as at 31 December 2010). The Company will receive its portion on 11 April 2011.

According to contract which was signed between Fizy Medya İnternet ve Bilişim Teknolojileri Limited Sirketi (“Fizy”) on 28 January 2011, the Company acquired 70% of the shares. Fizy’s operations consists of providing all kind of advertising and promotion services upon internet and e-trading, acquiring copyrights, broadcasting, music and video accessing as well as downloading from the internet. Fizy restarted its opera- tions on 1 April 2011 which was previously held in 2010.

202 Turkcell Annual Report 2010 203 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Dematerialization Of The Share Certificates Of The Companıes That Are Traded Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries On The Stock Exchange The Board’s Dividend Distribution Proposal

It was decided by the Capital Markets Board (“the Board”) as per article 10/A included in the Capital Markets Act (CMA) No. 2499 to commence In accordance with the Capital Markets Board (“CMB”) Communiqué Serial: IV, No: 27 on “Principles Regarding Distribution of Dividends the dematerialization system. and Interim Dividends To Be Followed by the Publicly Held Joint Stock Corporations Subject to Capital Market Law”, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our Company, pursuant to the Corporate Governance As per the Temporary Article 2 of the Board’s Communiqué Series: IV No.: 28 on the “Procedures and Principles of Keeping the Records of Principles by the Board of Directors resolution dated November 24, 2004 and numbered 366; the Board of Directors of our Company presents Dematerialized Capital Market Instruments”, it is set forth that all of the share certificates of the companies that are traded in ISE shall be col- the following dividend distribution proposal, to be evaluated and determined at the Ordinary General Assembly Meeting of our Company lectively dematerialized and the related procedures and principles are regulated in the said Communiqué. Legal and actual dematerialization which will be held on 21 April 2011. of the share certificates has commenced on November 28, 2005. 1- as a result of the activities of our Company, pertaining to the period between January 1, 2010 and December 31, 2010, our Company’s Beginning from November 28, 2005, it is prohibited for the companies listed in ISE to issue new share certificates as a result of capital inc- profit, calculated according to the consolidated financial statements, which were audited independently in accordance with the Capital reases. The new share certificates arising out of capital increases shall be transferred to the accounts of the rightful owners by registration Markets Board Communiqué Serial: XI numbered 29, named “Communiqué Regarding the Financial Reporting in Capital Markets” is TRY of securities. 2.256.966.571- and the commercial profit calculated according to the provisions of Turkish Commercial Code is TRY 2.540.278.988-,

It is obligatory for the share certificates that are not dematerialized and that are kept physically by their rightful owners to be delivered to our 2- TRY 1.771.595.963 - after tax profit calculated according to the consolidated financial statements shall be taken as the basis for dividend Company (“Issuer”) or an authorized broker for their registration with “Central Registry Agency” that is under supervision and control of the distribution in accordance with “Guide Of Preparation Dividend Distribution Table” which was published on 27 January 2010. Board until the end of December 31, 2007. 3- as the ceiling designated in the Turkish Commercial Code (TCC) for first legal reserve has been reached by our company; no first legal reserve set aside, In addition, as per the Temporary Article 6 of the Capital Markets Act the financial rights attached to the share certificates, which are not de- materialized until the end of 31 December 2007, shall be monitored in a dematerialized manner at the Central Registry Agency from that day 4- TRY 1.771.595.963- is the distributable dividend of the Company, pertaining to year 2010 and TRY 1.780.152.672- calculated by adding on and in case the share certificates are dematerialized, their financial rights shall be transferred to the accounts of the rightful owners. Any TRY 8.556.709- which is the aggregate amount of the donations made during the year, to the above mentioned amount shall be taken as financial rights related to management for the share certificates that are not dematerialized after December 31, 2007 shall be exercised by the first dividend basis, Central Registry Agency until the dematerialization process of existing shares completed. Implementation principles for the aforementioned article shall be found in the letter of the Central Registry Agency dated January 30, 2008 and numbered 294. 5- in accordance with the provisions declared in Capital Markets Board (“CMB”) Communiqué Serial: IV, No: 27 on “Principles Regarding Distribution of Dividends and Interim Dividends To Be Followed by the Publicly Held Joint Stock Corporations Subject to Capital Market The share certificate records of our Company shall be kept by Central Registry Agency and the issuer in electronic form, which is formed by Law”, clauses set in the article of association of our company and the dividend distribution policy that was adopted by our Company with the Central Registry Agency. the Board of Directors resolution dated November 24, 2004 and declared to public; TRY 356.030.534-, which is 20%, of the first divi- dend basis, amounting to TRY 1.780.152.672- shall be distributed as the first cash dividend and the secondary reserve amounting to TRY Accommodation Of The Share Capital Of The Company And Nominal Values Of The Share Certificates To The New Turkish Lira 121.869.697- shall be separated from the rest of the net distributable current year profit, As per article 6 titled “Share Capital” of the Articles of Association of the Company, the Code numbered 5083 Regarding the Currency Unit of Turkish Republic Government and the Code numbered 5274 Regarding the Amendment of Turkish Commercial Code, the share capital of the a. The total amount of TRY 1.328.696.972-, which shall be distributed in cash, shall be distributed from extraordinary reserves, Company has been made compatible with the New Turkish Lira and such resolution was approved at the Ordinary General Assembly Meeting on April 29, 2005. b. The withholding tax deductions shall be applicable on the amount to be distributed in cash, TRY 1.328.696.972- as mentioned hereinabove,

Provisions regarding making nominal values of the share certificates of the Company compatible with the New Turkish Lira are regulated in c. in this respect, gross amount of TRY 0,6039532- shall be paid in cash to our shareholders for each share, having a nominal value of TRY the temporary article of the Company’s Articles of Association and such article was approved at the Ordinary General Assembly Meeting on 1.- (One Turkish Lira), April 29,2005. The temporary article reads as follows: The aggregate gross amount of cash dividend payment shall be TRY 1.328.696.972-, “As per the Code numbered 5274 Regarding the Amendment of Turkish Commercial Code, in order to increase the nominal value of the shares to 1.- (One) New Turkish Liras, 1,000 (One thousand) units of shares, each having a nominal value of 1,000.- (One thousand) Turkish Liras 6- TRY 1.649.726.266- which is the remaining of the current year distributable profit after the cash dividend distribution shall be : shall be merged and 1.- (One) unit of share having a nominal value of 1.- (One) New Turkish Liras shall be issued to represent such shares. Fraction receipt shall be issued for the shares that could not be complemented up to TRY 1. In relation to such change, the shareholders’ rights a. Regarded as extraordinary reserves and set aside within the Company, arising out of their shares are reserved. Concerning such transaction, the 1st, 2nd, 3rd and 4th series of share certificates, which represent the existing share capital, shall be merged in the 5th series. In connection with the transactions of share change and merger of series, the b. The withholding tax deductions shall be applicable on the amount, which shall be transferred to 2011 financial year as extraordinary shareholders reserves, in case such amount shall be subject to redistribution

rights arising out of their shares are reserved. The transactions regarding the change in share certificates shall be commenced by the Board 7- cash dividend payment to our Company’s shareholders shall commence on 16 May 2011 and shall continue for 15 days in İstanbul Head Office, of Directors of the Company after the dematerialization of Capital Markets instruments is put into practice and within the framework of related Çiftehavuzlar, İzmir and Ankara branches of Finans Yatırım Menkul Değerler A.Ş. and also in Central Registry Agency located at Süzer Plaza regulations.” Askerocağı Cad. No: 15 K: 2 34367 Elmadağ - Şişli İstanbul and shall be made in exchange of the dividend share denominations for year 2008, provided that the physical shares held by the shareholders are registered by the Central Registry Agency and brokerage house authorized for keeping the shares.

204 Turkcell Annual Report 2010 205 Abstract Of Auditor’s Report To General Assembly Of Turkcell İletişim Hizmetleri A.Ş.

Name of the Company : TURKCELL İLETİŞİM HİZMETLERİ A.Ş.

Headquarters : İstanbul

Issued Share Capital : TRY 2,200,000,000

Names, surnames : İbrahim Alpay DEMİRTAŞ, Hamit Sedat ERATALAR term of duty of auditors : 1 (One) Year whether they are company shareholder : Neither is a company shareholder or employee and/or employees

Number of Board of Directors Meetings : Hamit Sedat Eratalar attended 10 ordinary Board of Attended, Board of Directors Meetings Directors meetings. Held Moreover, extraordinary Board of Directors meetings were held 17 times. Forward-Looking Statements İbrahim Alpay Demirtaş attended 3 ordinary Board of Directors meetings.

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section Board of Auditors meetings were held four times. 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this document, including, without limitation, The scope of the examination performed : The quarterly examinations performed on the certain statements regarding our operations, financial position and business strategy may constitute forward-looking state- on the partnership accounts, books and statutory books and records revealed that they records, the dates of such examination were kept and maintained in an orderly and accurate ments. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such and the conclusions drawn there from manner. as, among others, “will”, “expect”, “intend”, “estimate”, “believe” or “continue.”

The number of counts performed on the : The Treasury was counted four times and it was Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, Treasury as Required under Article noted that actual assets and the records were in it can give no assurance that such expectations will prove to be correct. All subsequent written and oral forward-looking 353.Paragraph 1, Sub clause 3 o The coherence. statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. Turkish Commercial Code and the results thereof For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Dates of examinations performed pursuant : The monthly examinations revealed that securities Form 20-F for 2009 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. to Article 353 Paragraph 1, Sub clause 4 of were complete and coherent with the books and the Turkish Commercial code and the results thereof records. We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Complaints filed in regards to irregularities : There were no complaints filed in regards to and proceedings undertaken in respect thereof. irregularities.

We have examined the accounts and transactions of Turkcell İletişim Hizmetleri A.Ş. for the period 01.01.2010 - 31.12.2010 pursuant to Tur- kish Commercial Code, the Company’s Articles of Association and other legislation and in accordance with the generally accepted Accounting principles and standards.

In our opinion the accompanying Balance Sheet as of December 31, 2010 reflects the actual financial position of Turkcell İletişim Hizmetleri A.Ş. where as the Income Statement for the 01.01.2010 - 31.12.2010 period fairly and accurately reflect operational results of the Company, and that the proposal for dividend distribution is in line with the pertinent law and the Company’s Articles of Association.

We respectfully submit the Balance Sheet and Income Statement for approval and the release of Board of Directors.

Sincerely, Auditor Auditor İBRAHİM ALPAY DEMİRTAŞ HAMİT SEDAT ERATALAR

206 Turkcell Annual Report 2010 207 TURKCELL Turkcell İletişim Hizmetleri A.Ş. Turkcell Plaza Meşrutiyet Cad. No: 71 Tepebaşı, 34430 İstanbul Tel: +90 (212) 313 1000 Fax: +90 (212) 313 0099 www.turkcell.com.tr