Turkcell Annual Report 2010

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 technological 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 future 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

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