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Turkcell The igital perator January 2019 1 STRATEGIC APPROACH DIGITAL SERVICES BUSINESS MODEL Q3 2018 RESULTS HEDGING APPENDIX 2 COMPANY OVERVIEW • THE DIGITAL OPERATOR • 7 COUNTRIES • 50.3 MILLION TURKCELL GROUP SUBSCRIBERS • 150 MILLION DIGITAL SERVICES DOWNLOADS • LISTED ON NYSE & BORSA ISTANBUL WITH A $5.1 BILLION MARKET CAP1 SUBSCRIBER BREAKDOWN (m, Q3 2018) Turkcell Turkey 37.8 Ukraine 10.1 Belarus 1.6 TR Northern Cyprus 0.5 2 lifecell Europe 0.2 1 As of December 31, 2018 3 2 lifecell Europe GmbH operates in Germany under a “marketing partnership” agreement with Deutsche Telekom (DT). Its subscribers are owned by DT and are also included in the Turkcell Group subscriber figure 3 STRATEGIC APPROACH 4 5 6 DIGITAL SERVICES IN THE CENTER OF THE GROWTH STORY EQUITY APPS CURATED APPS DIGITAL ENABLERS Service-Focused Tariffs Service-Focused Campaigns Data-Enabled Digital Company . 7 7 DELIVERING VALUE WITH DIGITAL SERVICES 150 million core app downloads 60 Min 20 Min 21 Min Watching Playing (BiP) Reading 41 16 Min Min 63.9% 48 Min Playing Playing triple play customers Listening (Playcell) (Tavla Go) 30 Min 8 Min Contest Interacting 36 30 Min Documents uploaded For VOIP users per person per day 32 Min 1.8 M Calling Searches per day Note: Data as of Q3 2018 except for the number of downloads which is as of December 2018 TRANSFORMING INTO THE DIGITAL OPERATOR Organizational State-of-the-art Sales Channel Shaping Techfin Convergence of OTT Transformation 4.5G Deployment Transformation in Turkey Services 2015 - 2018 8 88 DIGITAL SERVICES PLATFORM DIGITAL COMMUNICATION MESSAGING & DIGITAL PAYMENT MANAGEMENT SMART PLACES & & ADVERTISING MARKETPLACE MEDIA PLATFORM DASHBOARD BUSINESS APPLICATIONS DIGITAL PARTNERS & TURKCELL SECURE E-COMMERCE INNOVATION CURATED SERVICES 9 9 CREATING THE DIGITAL COMPANY Data Driven, Real Time and Transparent 2,500 Different KPIs, 24/7 Monitoring Dashboard for Functional Organizations & Multinationals Flexible Access Control 10 10 CONTINUOUSLY BEATING TARGETS • Digital transformation led to a record high growth with 3 pp higher EBITDA margin in 2017 • 2018 guidance revised upwards three times, last on Oct 24, 2018 REVENUE GROWTH RATE COMPARISON1 (2017) 23% TURKCELL GROUP 2018 - 2020 2018 14 Mar2 Last (24 Oct) REVENUE 13% 14% - 16% 20% - 22% GROWTH 8% 9% 6% 6% 7% 4% 5% 5% EBITDA MARGIN 37% - 40% 39% - 41% . OP. CAPEX / TelCo9 TelCo8 TelCo7 TelCo6 TelCo5 TelCo4 TelCo3 TelCo2 TelCo10 18% - 16% 18% - 19% SALES3 35% Group (1) Top 100 telecom operators in terms of market capitalization is taken into consideration. Turkcell 2017 revenue growth rate is compared to those which announced their financial results as of Feb 15, 2018. EBITDA 32% Source: Bloomberg Margin (2) 3 year guidance figures reflect the expected impacts of IFRS 9, IFRS 15 and IFRS 16 at the time. A positive 4-5pp impact is reflected in EBITDA margin guidance. 2015 2017 (3) Excluding licence fees 11 11 DIGITAL SERVICES 12 PLATFORM OF PLATFORMS 13 13 DIGITAL SERVICES COLLABORATION Yaani recommends fizy & fizy & lifebox Paycell enables chat-like powers keyword search come «home» with TV+ money transfer in BiP in Dergilik 14 14 TELCO & DSS CROSS COLLABORATION Shake & Win Who wants 1 GB? Surprise Point 7 Mn Shakes/Week 4.6 Mn Followers 2.4 Mn Distinct Customers - 27 Mn Gifts 7 Mn Users 5.5 Mn Followers (in 3 Weeks) From Classic Campaigns To Phygital Experiences 15 15 BOOSTING THE SERVICES PLATFORM WITH TELCO CAPABILITIES Digital Campaigns use BiP App2Network Calls TechFin built on Turkcell location data & assign 2nd Number integration Credit Rating Data telco benefits 16 16 BiP – INSTANT MESSAGING Peer-to-peer money transfer BiP Global Download Trend 2nd number integration (Million) 2.7 2.2 2.2 HD voice & Group video calls 2.0 Q417 Q118 Q218 Q318 Downloads - Top 6 Countries Discover services & games BiP Web 17 17 fizy - MUSIC Radio channels Live concerts Worldwide music playlists Video clips 18 18 TV+ Live channels & VoD films also on mobile 24 hours timeshift 4K 4K broadcast Save & watch All screens + Apple TV 19 19 Dergilik- DIGITAL PUBLISHING 100 National & local newspapers 1000+ global & local magazines 4.7 Million monthly reading Reading in airplane mode 20 20 lifebox – PERSONAL CLOUD Auto back-up Free-up space Face & object recognition 5GB storage space free of charge 21 21 Yaani – SEARCH ENGINE Smart algorithms Location based search Service integration Search categories 22 22 PAYCELL: DIGITAL PAYMENT COMPANION 1.5Bn TL transaction PAYCELL 4.8Mn in Q3 2018* Mobile Payment Direct Carrier Billing users PAYCELL APP Mobile wallet Paycell top-ups 2.0Mn 1.9Mn Utility payments downloads Registered Money transfer credit cards QR code payment PAYCELL CARD 440K Paycell launch campaign users and Available at: counting 23 * Transactions include subsidiary revenues 23 SECURE E-COMMERCE WITH CREDENTIALS MANAGEMENT Traffic Management Credentials Content / Service Management Provider Fast & Secure Seamless Payment Log-in Experience Customer Service Turkcell Data Center Cyber Security Services 24 24 GAMING BUSINESS • Umbrella platform • Attractive gaming market* in Turkey • New interface • 2.1Mn 3-months active users in Q3 • 31Mn gamers • Safe zone for kids up to age 12 • USD774 Mn market • Available in web & mobile • Aim to create the largest gaming brand in Turkey • 7.1Mn 3-month active users in Q3 • Segmented approach • Coming soon for age 12+ • Value proposition for gaming • TavlaGO (Backgammon) • Multiplayer online game • Subscription based business model • 162K cumulative download • App used 41 minutes per day 25 * Source: Market Report, Newzoo, 2017 25 LIFECELL: FULLY DIGITAL WITH FREEDOM OF CHOICE SUBSCRIBERS (thousand) 55% of postpaid Lifecell acquisitions are 1,526 1.6Mn new customers as of Oct 18 2x 879 48.3 TL 2x ARPU 401 (1.3x of Turkcell consumer) 1.4% 195 8.6 GB av. data usage of a churn rate Lifecell user (~40% lower vs. Q417 Q118 Q218 Q318 Turkcell consumer) 26 Note: Average monthly churn during the related quarter. 26 BUSINESS MODEL HEDGING 27 THREE PILLARS OF OUR BUSINESS MODEL HEDGING INFLATIONARY PRICING FX & INTEREST RATE HEDGING LIQUIDITY • Key for sustaining growth & margins • Keeping all cash in hard currency • Strong cash flow for capex needs • Secure ROI of projects & investments • FX hedged for whole maturity, both • Additional committed lines on principal & interest of loans • Reflecting costs to the prices • 1.5Bn USD cash covers principal & • Converted variable to fixed interest interest payments until 2020-end • Proven track record Turkcell ARPU vs. CPI Trend (Q115=100) Details of Financial Debt Principal & Interest Payments* 164 (After Hedging) (Million USD) 147 142 139136 131129130 147 125 1,623 138 115 115 111110 128132 14% 17 106 123123 100 120 43% 114 57% 109110112 523 518 103103106 86% 427 1,606 100 4 6 170 167 213 519 512 215 165 5 162 5 Q116 Q215 Q315 Q415 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q115 Local Currency Fixed interest 2018 2019 2020 2021 2022 2023+ TCELL ARPU (exl. M2M) CPI FX Variable interest FX Local Currency 28 *Data of Turkcell Group companies, exluding TCF 28 Q3 2018 RESULTS PROVING OUR ROBUST BUSINESS MODEL TURKCELL STRENGTHS REFLECTION ON FINANCIALS • Mobile triple play at 63.9%, up 13.5pp yoy Ability to create revenue from new & adjacent products • Mobile ARPU growth at 18.0% • Growth momentum, 59% 2yr revenue increase Resilience at the operating profitability level • 41.3% EBITDA Margin, 97% 2yr EBITDA increase • Sector low monthly churn Strong customer loyalty driven by digital services • Enhanced offerings with digital services • Sector leader at NPS by far • Hedging instruments in place Prudent financial risk management • FX impact under control • Robust asset quality 29 29 MAJOR FUNDING & HEDGING DETAILS TYPE & AMOUNT MATURITY INTEREST PURPOSE OF FUNDING UTILIZATION HEDGING DETAILS DATE 3-month US$500Mn 2-year grace 80% hedged with PCCS Club Loan LIBOR/ CAPEX and inorganic Fully utilized period, 5-year (September 2015) EURIBOR growth opportunities in Jun 16 EUR445Mn maturity - + 2.00% Bond 5.75% CAPEX and inorganic US$500Mn 15/10/2025 - - (October 2015) (fixed rate) growth opportunities Fully utilized EUR500Mn Debt restructuring 100% hedged with PCCS China 3-year grace in Oct 15 Development period, 10-year EURIBOR Bank maturity + 2.20% ~EUR 120 Mn utilized (October 2015) CAPEX ~86% hedged with PCCS &CCS EUR750Mn as of September 18 Bond 5.80% Repayment of existing 11/04/2028 - (April 2018) US$500Mn (fixed rate) indebtedness - 30 30 SOLID BALANCE SHEET SUMMARY NET DEBT/ EBITDA TRY Mn Q1 2018 Q2 2018 Q3 2018 Total Cash 4,590 7,081 8,749 1.83x Total Assets 37,073 41,026 45,404 4,790 TCF loan porfolio 1.44x 1.49x Total Debt* 14,002 17,313 21,969 4,691 Lease 4,399 1,128 1,136 1,086 1.23x Obligations 0.80x 0.84x Total Equity 14,248 14,952 14,891 8,430 Net Debt** 5,541 Net Debt* 9,413 10,231 13,220 5,014 ** Net Debt 5,014 5,541 8,430 Q118 Q218 Q318 Net Debt/EBITDA* Net Debt/EBITDA** * Impact of IFRS 16 (capitalized lease obligations) are excluded 31 **Turkcell Consumer Finance Company’s (TCF) loan portfolio and capitalized lease obligations related to IFRS 16 are excluded 31 CONSUMER FINANCE BUSINESS TCF KEY FINANCIALS* TCF Loan Portfolio Details TRY MILLION • 4.7Mn loans outstanding Q3 2018 YoY % 9M 2018 YoY % • 1,580 TL average ticket size Revenues 252 52.1% 694 64.3% • 91 TL average monthly installment • Loan protection insurance on over 95% recently Net Income 145 234.8% 308 164.5% • Cost of risk remained stable at 2.2% in September 2018 Handset Financing New Financing Regulation