As Turkcell Grows
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AS TURKCELL GROWS... ANNUAL REPORT 2016 ...LIFE GROWS... Total Number of Customers (Million) 48.6 50.7 52.0 51.6 50.1 2012 2013 2014 2015 2016 TURKCELL GRUBU TURKCELL ...HAPPINESS GROWS... 205 AAİTRİMİ RMSA NTİM RMSA 1,861.9 Total Number of Fixed Customers (Thousand) 1,520.2 1,191.3 STR İNANSA İİR İNANSA STR 845.4 604.3 2012 2013 2014 2015 2016 TURKCELL GRUBU TURKCELL ...FUTURE GROWS… 205 AAİTRİMİ RMSA NTİM RMSA 359.7 Number of IP TV Subscribers (Thousand) 223.7 İİR İNANSA STR 60.1 2014 2015 2016 ABOUT TURKCELL Turkcell is a converged telecommunication and technology services provider, founded and headquartered in Turkey. It serves its customers with voice, data, TV and value-added consumer and enterprise services on mobile and fixed networks. Turkcell Group companies operate in 9 countries: Turkey, Ukraine, Belarus, Turkish Republic of Northern Cyprus, Germany, Azerbaijan, Kazakhstan, Georgia and Moldova. Turkcell Group reported a TRY 14.3 billion revenue in 2016 with total assets of TRY 31.6 billion as of December 31, 2016. Turkcell launched LTE services in its home country on April 1, 2016, employing LTE-Advanced and 3 carrier aggregation technologies in 81 cities. In 2G and 3G, Turkcell’s population coverage is at 99.67% and 96.04%, respectively, as of December 2016. It offers up to 1 Gbps fiber internet speed with its FTTH services. Turkcell 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 TURKCELL ANNUAL REPORT 2016 7 TABLE OF CONTENTS TURKCELL GROUP 10 2016 at a Glance 12 Chairman’s Message 14 Board of Directors 16 Message from the CEO 20 Executive Officers 22 Top Management of Subsidiaries 24 Financial Indicators 25 Operational Indicators 27 Sustainable Growth with Our Converged Business Model 28 Growth in Digital Services 30 Growth in Mobile Data and Fixed Data 32 Growth in International Operations 34 Growth in Financial Services 35 Our Vision, Targets and Strategies 2016 OPERATIONS 36 Turkcell: The Company Giving Direction to the Technology in the World TURKCELL 38 Our Superior Technology 42 Turkcell as a Converged Communication Company ANNUAL REPORT 2016 44 Our Consumer Business FORMATS 46 Our Corporate Business 50 Digital Services 55 Business Partners Ecosystem and Innovation 56 Turkcell Sales Channels 58 Customer Experience Focus 60 Social Responsibility WEB 68 Human Resources 70 Turkcell Academy 74 International Subsidiaries 76 Domestic Subsidiaries 79 Awards TABLET CORPORATE GOVERNANCE 82 Investor Relations 84 Credit Ratings 85 Important Developments after the Reporting Period 90 2016 Corporate Governance Principles Compliance Report HARD COPY 99 Conclusion of the Affiliation Report SECTORAL AND FINANCIAL INFORMATION 100 Telecommunications Sector in Turkey 101 Company Developments 104 Turkcell Group: 2016 Financial and Operational Performance 109 Forward Looking Statements 110 Review of Risk Assesment You can have access to the Digital 113 Independent Auditor’s Report and Consolidated Financial Statements Annual Report with the QR Code. 232 Our Offices 233 Glossary 8 TURKCELL ANNUAL REPORT 2016 TURKCELL GROUP Integrated communications and technology services group: UKRAINE - lifecell Mobile Customers (million) 12.4 TURKCELL BELARUS - life Revenues (TRY million) 571 Mobile Customers (million) 1.6 Revenues (TRY million) 150 AZERBAIJAN - Azercell GERMANY - TURKCELL Europe Mobile Customers (million) 0.3 KAZAKHSTAN - Kcell MOLDOVA - Moldcell GEORGIA - Geocell Turkcell TURKEY Mobile Customers (million) 33.0 Fixed Customers (million) 1.9 TRNC uze brs Turkcell Mobile Customers (million) 0.5 IP TV Customers(*) (thousand) 360 Revenues (TRY million) 136 Revenues (TRY million) 12,788 TRY 50.1 31.6 9 million billion Operating in 9 countries Total subscribers Total asset (*) Our OTT TV customers are 1.1 million as of 2016 and are included in our total TV customers. 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. The only exception is the use of figures in the Message from the CEO section, in which the figures are given exactly as they are in our annual report in Turkish. TURKCELL ANNUAL REPORT 2016 9 TURKCELL GROUP App Store Google Play App Store Google Play Turkcell TV+ Turkcell Academy BiP Digital Publishing fizy My Account Goals on Mobile lifebox 10 TURKCELL ANNUAL REPORT 2016 2016 AT A GLANCE 23 11.9% million 4.5G 62.3% growth subscribers increase Record high growth in data and Record high revenue Turkey’s fastest with 375 Mbps digital services revenue › All time high revenue and EBITDA › The widest spectrum › Smartphone penetration reached 64%. performance. › 2 times more data usage compared to › Share of mobile triple play customers › The growth in Turkcell Group Revenues 3G users grew to 42%. and EBITDA was 11.6% and 11.9%, › As of December 2016, 28% of the total › Share of fiber play with TV customers respectively; 32.3% EBITDA margin traffic is being carried through 4.5G achieved 36%. network. 32.3% 0.8 3 EBITDA Margin Net Debt/EBITDA credit rating We have achieved Turkcell’s “Investment Grade” our 2016 targets. Strong balance sheet structure credit rating has been confirmed. › We have achieved our targets, which we › In the last quarter, we reduced our › Turkcell is the only company in Turkey have disclosed for 2016 regarding Group foreign exchange position to USD 125 to maintain its 3 “Investment Grade” and Turkcell Turkey revenue growth, million(1) from USD 2 billion in 2015, credit ratings assigned by the major Group EBITDA margin, and the ratio of mitigating the foreign exchange risk. credit rating agencies. Group operational capital expenditures › We actively managed our balance sheet (excluding license payments) to sales. and risks. (1) Please note that this figure takes into account advance payments and the impact of hedging, and assumes utilizing the option of paying the last instalment of the 4.5G licence in TRY . TURKCELL ANNUAL REPORT 2016 11 TURKCELL GROUP TURKCELL 12 TURKCELL ANNUAL REPORT 2016 CHAIRMAN’S MESSAGE In 2016, the dynamism created by our innovative products and services was one of the driving forces behind our growth. By establishing the world’s fastest 4.5G infrastructure, we have strengthened our vision of being Turkey’s most powerful integrated telecom operator. Dear Stakeholders, 4.5G subscriber number to 23 million by the end of 2016. The number of users of our digital services such as Turkcell We have concluded another year in which our Board of TV+, BiP, fizy, lifebox, Goals on Mobile and Hello Hope has Directors and Senior Management team worked in great increased significantly due to the speed enabled by 4.5G Our Group, which harmony, underpinned by a unified team spirit. We had a technology. realized TRY 3.5 billion single goal behind all the work we realized throughout the of investment this year, year: To provide the maximum benefit to our shareholders We have opened Turkey’s largest data center in Gebze in order while strengthening its and investors, increasing the value of our Company and to provide our customers a secure and high quality service. leadership position in its strengthening our leadership position in our country and in With the Gebze Data Center, established in line with the latest area of operation on one our region. Additionally, we are operating in a sector vital for developments in communications technology, we aim to offer our country, not only from an economic perspective, but also technology and communications solutions to our customers in hand, has not compromised from a strategic one. This also increases our responsibility all areas of life. on its profitability and to our shareholders and investors, while fostering an even operational efficiency on greater sense of responsibility towards our country and the WE LAUNCHED A NEW ERA IN the other. wider region. FINANCIAL SERVICES. When we look back on 2016, we note that the effects of In August 2016, we launched Paycell to our customers as fragility experienced in the global economy were felt more one of our value-added services to leverage our powerful intensely in developing markets. Britain’s decision to exit infrastructure. With the Paycell service, we began to offer our the EU at a referendum, and the presidential election in the customers fast and easy payment methods in many new areas US were the developments, the effects of which were felt such as markets, restaurant chains, gas stations, parking lot regionally and globally. On the other hand, the July 15 coup payments, insurance premium payments and airport fast track attempt in our country was defeated by strong political will services. and our citizens’ efforts to protect their nation and democracy. The subsequent attempt to create an economic crunch also As a company whose activities are wholly realized on remained unsuccessful due to Government-Nation solidarity, the principle of unconditional customer satisfaction, we revealing Turkey’s true dynamism and strength, and rationality established Turkcell Finansman (Consumer Finance) Company of who continued to trust in Turkey. as of January 29, 2016, having received the necessary authorization from the BRSA. Accordingly, we started to Even in such a challenging environment shaped by tough provide effective financing facilities for the equipment and conditions, we have not relinquished our vision of leadership in hardware needs of the telecom sector via Consumer Finance investment in 2016. Our Group, which realized TRY 3.5 billion Company, which we established with our own equity, under of investment this year, while strengthening its leadership the Financell brand name. position in its area of operation on one hand, has not compromised on its profitability and operational efficiency on OUR EXPERTISE AND EXPERIENCE GIVE DIRECTION the other.