Annual Report 2012

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Annual Report 2012 ANNUAL REPORT 2012 01 FINANCIAL STATEMENTS Summary Consolidated Financial Statements Profit & Loss Statement (million TRY) 2011 2012 % Change Total Revenue 9,370.1 10,507.0 12.1% Direct cost of revenues1 (5,954.3) (6,487.3) 9.0% Depreciation and amortization (1,592.9) (1,411.7) (11.4%) Gross Margin 36.5% 38.3% 1.8pp Administrative expenses (410.9) (484.2) 17.8% Selling and marketing expenses (1,684.9) (1,705.7) 1.2% EBITDA2 2,912.9 3,241.5 11.3% EBITDA Margin 31.1% 30.9% (0.2pp) Net finance income / (expense) 17.3 467.5 2,602.3% Finance expense (528.3) (224.2) (57.6%) Finance income 545.6 691.7 26.8% Share of profit of associates 227.1 218.5 (3.8%) Other income / (expense) (218.5) (105.2) (51.9%) Monetary gains / (losses) 273.5 169.9 (37.9%) Non-controlling interests 43.3 21.0 (51.5%) Income tax expense (485.0) (522.5) 7.7% Net Income 1,177.7 2,079.0 76.5% (1) including depreciation and amortization expenses. (2) EBITDA is a non-GAAP financial measure. Consolidated Balance Sheet Data (year-end) (million TRY) 2011 2012 % Change Cash and Cash Equivalents 4,738.4 6,998.9 47.7% Total Assets 17,186.7 18,687.4 8.7% Long-term Debt 1,997.3 1,103.8 (44.7%) Total Debt 3,528.6 3,039.6 (13.9%) Total Liabilities 6,360.3 5,923.7 (6.9%) Total Shareholders’ Equity 10,826.4 12,763.7 17.9% *All financial results in this annual report are prepared in accordance with International Financial Reporting Standards (IFRS) and expressed in Turkish Liras (TRY) unless otherwise stated. TURKCELL GROUP: As the leading communication and technology company, we are the market leader in five of the nine countries in which we operate, giving us a total of 69.2 million customers Turkey - TURKCELL Subscriber Base (mn) 35.1 Market Share (%) 52 Revenue (million TRY) 8,724 Ukraine - life :) Subscriber Base (mn) 11.1 Market Share (%)* 17 Revenue (million $) 405.4 Belarus - life :) Subscriber Base (mn) 1.1 Market Share (%)* 8 Revenue (million $) 62.2 Germany - TURKCELL Europe Subscriber Base (mn) 0.3 Started its Operations in 1Q 2011 * data of Q3 2012 KKTC - KKTCell Subscriber Base(mn) 0.4 Market Share (%) 71 Revenue (million $) 70 Kazakhstan - Kcell* Subscriber Base (mn) 13.5 Revenue (million $) 1,221 Azerbaijan - Azercell* Subscriber Base (mn) 4.4 Revenue (million $) 579 Georgia - Geocell* Subscriber Base (mn) 2.1 Revenue (million $) 148 Moldova - Moldcell* Subscriber Base (mn) 1.3 Revenue (million $) 79 * Owned indirectly through our subsidiary Fintur, in which we hold a 41.45 % stake. TABLE OF CONTENTS Our Vision / Our Values / Our Major Subsidiaries 02 Strategic Priorities 50 Letter from Human Resources 04 the Chairman 54 Letter from Mobile Telecommunication 08 the CEO 58 Sector Investor and International Leader in Technology 16 64 Media Relations 2012 Corporate Leader in Advantages Governance Compliance 28 72 Report 2012 Consolidated Leader in Services Financial Statement and 34 82 Independent Audit Report Leader in Social Summary of Audit Report 40 Responsibility 225 01 OUR VISION To ease and enrich the lives of our customers with communication and technology solutions OUR VALUES We believe We are We that We are an We promote passionate open value customers agile team about making a people come first communication difference OUR STRATEGIC PRIORITIES As a Leading Communication and Technology Company To: • Deliver superior customer experience • Grow voice revenues • Grow mobile internet business • Drive adoption of mobile services • Drive operational excellence & productivity • Invest in future growth businesses 02 TURKCELL ANNUAL REPORT 2012 TURKCELL GROUP STRATEGY We continue to create value for our stakeholders thanks to our attention to customer experience and operational excellence OPERATIONAL SUPERIOR AND EXCELLENCE & DIFFERENTIATING PRODUCTIVITY CUSTOMER EXPERIENCE • Focus on the customer • Align the SUSTAINABLE company & PROFITABLE • Deliver the GROWTH best customer experience INNOVATION 03 LETTER FROM THE CHAIRMAN Slowing economic growth became one of the major topics among the developed nations in 2012. Nevertheless, Turkey continued Our sector is changing to attract international investor attention with its robust growth rapidly and Turkcell is potential and economic infrastructure. Reflecting its robust dynamics, Turkey’s credit rating was upgraded to Investment Grade, a driving force behind while the Istanbul Stock Exchange became the 2nd fastest growing bourse of the year, confirming Turkey’s strength. Turkcell believes the technological in Turkey’s potential and has therefore continued its investments, developments that despite global economic fragility. Our sector is changing rapidly and Turkcell is a driving force support industries in behind the technological developments that support industries in general. The cutting-edge services that have entered our lives general such as machine to machine, cloud computing, mobilization of daily activities and rapid mobile data will generate the trends for 2013 and beyond. Turkcell’s vision, with its superior network operated by the highly skilled Turkcell family, already provides its customers with a privileged service that enables them to maximize the added value to their businesses and lives. Our rational and customer-oriented growth strategies continue to enlarge the Turkcell family. The Turkcell Group’s wide geographical coverage that accomodates 9 countries in Asia and Europe, supported the further increase in our consolidated subscriber base, by 4.4 million to 69.2 million by the year-end. Based on these strategies, group revenues in 2012 grew by 12% to TRY 10.5 billion and EBITDA by 11% to TRY 3.2 billion. The growth was driven by 6% growth in voice, 44% in mobile data, and 33% in domestic and international subsidiaries. I am also pleased to note that the share of our subsidiaries in total group revenues increased to 17%, while EBITDA contribution rose to 16%. Turkcell is highly ranked worldwide by independent institutions and opinion leaders for its outstanding network quality, fast mobile broadband that facilitates access to information, and its wide network coverage. Investing in future trends, our unique dual carrier network of 43.2 mbps mobile broadband speed and a fiber infrastructure with an internet speed of 1,000 mbps make us a key player in the global mobile industry. This recognition reflects the position of the company and the efforts of its employees. We at Turkcell, are excited about the future. Having positioned ourselves strongly with our superior network and pioneering R&D team, we confidently provide the best user experience and a wider range of services today and in the future. 04 TURKCELL ANNUAL REPORT 2012 In fulfilling our social responsibilities, we continue to focus our efforts on the following areas: education, sports, arts & culture, economic development and women’s empowerment. For the latter, Turkcell initiated the ‘Women Power to the Economy’ project enabling low-income women to set up or expand their businesses and also importantly this year, we launched the ‘Money-Box for Van’ project to ease the suffering of citizens, who endured the devastating Van earthquake of 2011. These projects have by extension contributed to the economy itself. Another outstanding contribution has been Turkcell’s investment in call center operations in the Eastern provinces of Turkey; showing how private sector investment can contribute to local economic development. As one of Turkey’s biggest success stories, Turkcell has a duty to turn its operational strengths into shareholder value and as the Chairman of Turkcell, I therefore wish for a swift resolution of the ongoing compliance process in accordance with the Principles of Corporate Governance. I believe that this challenging process will be resolved, with Turkcell emerging even stronger on the basis of its successful business model. I thank all our loyal customers, investors, dedicated employees, distributors, suppliers, business and solution provider partners for being the source underlying the great success of 2012. COLIN J. WILLIAMS 05 BOARD MEMBERS Colin J. Williams, Chairman Colin J. Williams was appointed as the Chairman of the Board of Directors on February 25, 2010 and re-appointed on April 29, 2010. He also serves as a Voting Member and Chairman of the Audit Committee of Turkcell’s Board of Directors. He is Chairman of Clondalkin and Chair of the Audit and Remuneration Committees of Clondalkin, a consumer and industrial packaging company. From January 2001 to December 2004, Mr. Williams served as President of SCA, North America, which is active in the packaging sector, personal care and paper tissue products. He was a long-term board member and Vice Chairman of ICCA, the International Corrugated Packaging Institution, the European Federation of Packaging and the Federation of Paper Producers (CEPI). Mr. Williams is the founding President of Propak Europe and was a board member of the Greater Philadelphia Chamber of Commerce between 2002 and 2004. From 1988 to 2001, Mr. Williams was the President of SCA Packaging, prior to which he served as the Managing Director of Bowater, a corrugated packaging company, for four years. From 1978 to 1984, he was first the Sales Director and then the General Manager of Chicopee in the Netherlands, a non-woven fabrics company of Johnson & Johnson. Mr. Williams holds an MBA degree in finance from New York University, an M.Sc. degree in physical chemistry and an honorary doctorate from Lund University in Sweden. Alexey Khudyakov, Member Alexey Khudyakov was appointed to the Board of Directors on May 22, 2006 and re-appointed on April 29, 2010. He is Vice President of Altimo, a leading investor in telecoms, and also serves as non-executive Chairman and Chair of the Audit Committees of High River Gold Mines, a gold mining company.
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