Turkcell the Digital Operator

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Turkcell the Digital Operator Turkcell the Digital Operator Turkcell Annual Report 2018 About Turkcell Turkcell is a digital operator headquartered in Turkey, serving its customers with its unique portfolio of digital services along with voice, messaging, data and IPTV services on its mobile and fixed networks. Turkcell Group companies operate in 5 countries – Turkey, Ukraine, Belarus, Northern Cyprus, Germany. Turkcell launched LTE services in its home country on April 1st, 2016, employing LTE-Advanced and 3 carrier aggregation technologies in 81 cities. Turkcell offers up to 10 Gbps fiber internet speed with its FTTH services. Turkcell Group reported TRY 21.3 billion revenue in FY18 with total assets of TRY 42.8 billion as of December 31, 2018. It has been listed on the NYSE and the BIST since July 2000, and is the only NYSE-listed company in Turkey. Read more at www.turkcell.com.tr/english-support All financial results in this annual report are prepared in accordance with International Financial Reporting Standards (IFRS) and expressed in Turkish Lira (TRY or TL) unless otherwise stated. TABLE OF CONTENTS TRY Turkcell Group 16 Chairman’s Message 21.3 20 Board of Directors 22 Message from the CEO billion 26 Executive Officers 28 Top Management of Subsidiaries REVENUES 30 Turkcell Group 31 Our Vision, Target, Strategy and Approach 32 2018 at a Glance 34 2018 Highlights 36 The World’s 1st Digital Operator Brand: Lifecell 37 Turkcell’s Digital Services 2018 Operations 38 Exemplary Digital Operator 40 Our Superior Technology 41.3% 46 Our Consumer Business EBITDA 52 Our Corporate Business MARGIN 56 Turkcell on Communication 60 Our Digital Services 76 Turkcell Sales Channels 78 Carrier Relations and Wholesale 79 Customer Experience Focus 83 Successful Finance Management 84 Social Responsibility 94 Sponsorships 98 Human Resources 106 Turkcell Academy 112 Our Subsidiaries 49 118 Awards million Corporate Governance 123 Investor Relations GROUP 126 Credit Ratings SUBSCRIBERS 127 Important Developments after the Reporting Period 130 2018 Financial Year Corporate Governance Principles Compliance Report 142 Other Issues Regarding Corporate Governance 143 Conclusion of the Subsidiary Report Sectoral and Financial Information 144 Telecommunications Sector in Turkey 145 Developments in Our Companies 150 Turkcell Group: 2018 Financial & Operational Review 154 Forward Looking Statements 86 155 Review of Risk Assessment million 157 Independent Auditor’s Report and Consolidated Financial Statements 278 Our Offices DIGITAL 279 Glossary SUBSCRIBERS You can have access to the Digital Annual Report with the QR Code. This is what drives the technology we have developed over the last 25 years: #senyapdiye The world’s (for you to DO it) first digital operator The world’s first digital operator We have concluded a quarter century on our journey we embarked on by introducing Turkey to first mobile phone call. Through our investments and digital transformation strategy, we have transformed ourselves from a traditional telecom operator into the first Digital Operator in the world. Working passionately for 25 years and achieving many industry firsts, we offer globally innovative products and services that enable our customers to make the most of the communication and digital solutions of the modern era. TRY Record revenue with 49% two-year billion21.3 cumulative growth Strong mobile ARPU* growth 15% *Excluding M2M TRY Record EBITDA with 90% two-year billion8.8 cumulative growth Strong growth through digital transformation We became the world’s first digital operator thanks to our digital transformation strategy. We continued our strong growth and achieved record results, despite significant macroeconomic volatility. We inspired our global competitors with our digital services, which enrich the lives of our customers, and with our innovative approach. 6 TURKCELL ANNUAL REPORT 2018 TURKCELL ANNUAL REPORT 2018 7 The relationship of a telecom operator with its customers is limited to 31 minutes of inbound/outbound calls in a day… We, on the other hand, take important steps to be relevant to our customers at every one of 1440 minutes each day with our products and services. For example, currently, in addition to an average 31 minutes of inbound/outbound calls, we touch our customers’ lives each day for 81 minutes with TV+, 48 minutes with fizy, and 18 minutes with Dergilik. Adding value to every minute of life Average data consumption per 8 GB 4.5G user Digital million86 subscribers Digital exports to the entire world Number of countries where our digital 192 services are downloaded Downloads of our digital services 169million As a company innovation underscores what we are. We have begun to export our digital services and knowledge in this key area to the entire world with our lifecell Ventures subsidiary. Thus, we contribute to our country’s goal of ranking among the world’s 10 largest economies working towards the vision of developing Turkey into a globally respected technology producer. 10 TURKCELL ANNUAL REPORT 2018 Our new generation payment platform, Paycell, has brought a breath of fresh air to payment systems. We deliver fast and easy payment services to over 3 thousand member-merchants and more than 5 million users. Facilitating the lives of our customers with innovative solutions such as Paycell card, mobile wallet and direct billing, Paycell continues to enjoy steady growth. Meanwhile, Financell, our other brand in techfin solutions, makes our customers’ lives easier enabling them to access all kinds of technology products by supporting them with the loans it provides. Paycell users +5million Financell loan TRY 4.2 billion portfolio Techfin solutions that make a difference TURKCELL ANNUAL REPORT 2018 11 Techfin solutions that make a difference 12 TURKCELL ANNUAL REPORT 2018 A major step in social responsibility with Turkcell Foundation TURKCELL ANNUAL REPORT 2018 13 Each year, we allocate 1% of our revenues to corporate social responsibility activities that invest in society. We established Turkcell Foundation to focus our efforts in this area under a single roof and enable our social responsibility projects to create stronger, more effective, efficient, transparent and higher social benefit. 14 TURKCELL ANNUAL REPORT 2018 We maintained our leadership of the Net Promoter Score thanks to our efforts focused on customer satisfaction. The quality of our 4.5G network played an important role in our high Net Promoter Score. In the report published by the Global Mobile Suppliers Association, we ranked among the best in the world with our 4.5G network. Leadership continues in Net Promoter Score Turkcell score points25 Over the next points13 best competitor Over the third points23 best competitor TURKCELL ANNUAL REPORT 2018 15 16 TURKCELL ANNUAL REPORT 2018 CHAIRMAN’S MESSAGE We continued to enrich our customers’ lives through our telecommunications and digital services, and to create value for them, through our investments during the year. Dear Shareholders, FOR TURKEY’S DATA TO REMAIN IN TURKEY… We concluded a year shaped by challenging As Turkcell, we have always embraced the macroeconomic developments on both global and responsibility of being Turkey’s first mobile operator, local fronts. In 2018, we witnessed conflicts between and a group that introduces customers living in our Atlantic and Pacific regions, acceleration in trade countries of operation to the advantages of the wars to an extent that raised concerns over the communication world. And so, over the past 24 years, future of global trade and capital outflows from the we have continued to introduce our customers to The high-quality emerging markets. While Turkey, as one of the world’s innovative products and services by deepening and standards we have 20 largest economies, had its share of this economic diversifying our expertise based upon the latest achieved and the firm and political volatility, which impacted global trade technologies. The high-quality standards we have steps we have taken in general, it also continued its struggle to eliminate achieved and the firm steps we have taken in line in line with our targets the regional terrorism threat triggered by external with our targets confirm that we have successfully confirm that we have interventions. These developments led to significant met the responsibility of “being the first” and “being a successfully met the economic fragility in the second half of 2018. With brand born of this country.” responsibility of “being sound and timely steps taken by the government, a the first” and “being new economic route has been established focused Today, we are entering a new era, named Industry a brand born of this on increasing savings and exports, and the fight 4.0, through digital transformation taking place on country.” against inflation. Thus, began the stabilization period a global scale. As Turkcell, we continuously work in the economy, with critical and positive results being to position ourselves in the best possible manner achieved towards the end of the year. during this transformation process, and to offer our customers a rich customer experience. In addition As Turkcell, we continued to work passionately to to traditional telecommunication services, today, serve our country and our shareholders to the best we offer digital services meeting customer needs in extent possible, leveraging our group synergy and almost all fields, from messaging to entertainment, investing great effort, without succumbing to difficult from music to publishing, from payment systems to conditions. We are proud to sustain our commitment search engine, and from e-commerce solutions to to creating value for our shareholders, a result of our online storage solutions, leveraging our strength in R&D successful operations in 2018. and our innovative vision. Most importantly, we keep the data of all these services in Turkey in line with Through our investments in 2018, we supported the our goal of ensuring that “Turkey’s data remains in journey of Turkey and the countries in which we operate Turkey.” As may be recalled, we previously established towards embracing the future with technology.
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