Board of Directors
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SIRT KALINLIĞINA LÜTFEN DİKKAT EDELİM! ANNUAL REPORT 2015 ANNUAL REPORT TURKCELL Turkcell İletişim Hizmetleri A.Ş. Turkcell Küçükyalı Plaza, Aydınevler Mahallesi İnönü Caddesi No:20 Küçükyalı Ofispark B Blok - Maltepe / İstanbul Tel: +90 (212) 313 1000 Fax: +90 (216) 504 4058 ANNUAL Customer Services Tel: 532 or +90 (532) 532 0000 REPORT www.turkcell.com.tr Trade Registry Number: 304844 2015 CONTENTS TURKCELL GROUP FINANCIAL INDICATORS 7 MESSAGE FROM THE CHAIRMAN 8 MESSAGE FROM THE CEO 12 BOARD OF DIRECTORS 14 EXECUTIVE OFFICERS 16 2015 AT A GLANCE 20 OUR VISION, VALUES AND STRATEGY 22 ACTIVITIES IN 2015 ALWAYS FORWARD WITH OUR SUPERIOR TECHNOLOGY 26 SUSTAINABLE GROWTH THROUGH OUR CONVERGED STRUCTURE 34 HAND IN HAND TO IMPROVE LIVES 52 HUMAN RESOURCES 62 TURKCELL ACADEMY 64 ALWAYS FORWARD IN THE INTERNATIONAL ARENA 68 TOP MANAGEMENT OF SUBSIDIARIES 70 DOMESTIC SUBSIDIARIES 76 AWARDS 78 TURKCELL IN THE INTERNATIONAL MEDIA 81 TURKCELL’S 15TH YEAR AT BIST AND NYSE 82 CORPORATE GOVERNANCE INVESTOR RELATIONS 90 CREDIT RATING GRADES 93 IMPORTANT DEVELOPMENTS AFTER THE REPORTING PERIOD 94 CORPORATE GOVERNANCE COMPLIANCE REPORT 108 CONCLUSION OF AFFILIATION REPORT 119 SECTORAL AND FINANCIAL INFORMATION TELECOMMUNICATIONS SECTOR IN TURKEY 122 TURKCELL GROUP: 2015 FINANCIAL AND OPERATIONAL REVIEW 125 FORWARD LOOKING STATEMENTS 131 INDEPENDENT AUDITOR’S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 135 GLOSSARY 302 4 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 Chairman and the Message from the CEO sections, in which the figures are given exactly as they are in our annual report in Turkish. TURKCELL ANNUAL REPORT 5 2015 We serve in 1 3 TURKEY - TURKCELL KAZAKHSTAN – Kcell countries Mobile Subscribers (mn) 34.0 Mobile Subscribers (mn) 10.4 Fixed Subscribers (mn) 1.5 Revenue (USD million) 758 IPTV Subscribers (tho) 224 to Revenue (TRY million) 11,481 3 AZERBAIJAN – Azercell 9 Mobile Subscribers (mn) 4.1 2 UKRAINE – lifecell Revenue (USD million) 408 Mobile Subscribers (mn) 13.5 3 Revenue (TRY million) 564 GEORGIA – Geocell Mobile Subscribers (mn) 1.9 BELARUS - life :) Revenue (USD million) 95 Mobile Subscribers (mn) 1.5 3 68.9 Revenue (TRY million) 142 MOLDOVA – Moldcell Mobile Subscribers (mn) 0.9 TRNC - KKTCell Revenue (USD million) 64 million 5 Mobile Subscribers (mn) 0.5 Revenue (TRY million) 131 GERMANY - TURKCELL Europe4 subscribers Mobile Subscribers (mn) 0.3 1 The Group has aggregated its operations under two main reportable segments within the year of 2015 in accordance with its converged communication and technology services strategy as Turkcell Turkey and Turkcell International, which represent economic integrity. Turkcell Turkey's reportable segment includes the operations of Turkcell İletişim Hizmetleri A.Ş., Superonline İletişim Hizmetleri A.Ş., Turkcell Satış ve Dağıtım Hizmetleri A.Ş., the group call center operations of Global Bilgi Pazarlama Danışma ve Çağrı Servisi Hizmetleri A.Ş., Turktell Bilişim Servisleri A.Ş., Turkcell Teknoloji Araştırma ve Geliştirme A.Ş., Turkcell Interaktif Dijital Platform ve İçerik Hizmetleri A.Ş., Kule Hizmet ve İşletmecilik A.Ş., Rehberlik Hiz- metleri Servisi A.Ş., Turkcell Ödeme Hizmetleri A.Ş., and Turkcell Gayrimenkul Hizmetleri A.Ş.. The information in this report concerns Turkcell Turkey under this definition. Stand-alone information on Turkcell İletişim Hizmetleri A.Ş. is indicated. 2 “life:)” brand has been changed to “lifecell” on January 15, 2016 and the legal entity name has been changed to lifecell LLC on February 2, 2016. 3 Owned indirectly through our subsidiary Fintur, in which we hold a 41.45% stake. 4 The business model between our company’s subsidiary Turkcell Europe GmbH operating in Germany and Deutsche Telekom had been modified. Accordingly, as per the new model, the transfer of Turkcell Europe subscribers and operations to Deutsche Telekom’s subsidiary was completed on January 15, 2015. 5 Updated from our previously released Q415 results. Accordingly, total number of subscribers increased to 68.9 million from previously announced 68.8 million. 6 TURKCELL GROUP 12.8 9countries TRY billion Revenues 68.9 4.1 million total TRY billion EBITDA* subscribers 1.5million 2.1 fixed subscribers TRY billion Net Income 600thousand 26.2 TV subscribers** TRY billion Total Assets * EBITDA is a non-GAAP financial measure. ** Includes mobile TV, web TV and IPTV users as at February 18, 2016. TURKCELL ANNUAL REPORT 7 2015 FINANCIAL INDICATORS We concluded the year of 2015 having accomplished all of our targets with an improving performance every quarter. We recorded historic high revenue and EBITDA, as both Turkcell Turkey and Turkcell Group. TURKCELL GROUP TURKCELL TURKEY Revenue (TRY Million) YoY Growth (%) Revenue (TRY Million) YoY Growth (%) 6.0% 9.5% 5.6% 12,769 4.8% 12,044 11,481 10,480 2014 2015 2014 2015 EBITDA (TRY Million) EBITDA Margin (%) EBITDA (TRY Million) EBITDA Margin (%) 32.4% 31.2% 32.7% 4,141 31.7% 3,762 3,760 3,326 2014 2015 2014 2015 Net Income (TRY Million) Adjusted Net Income1 Net Income (TRY Million) Adjusted Net Income1 (TRY Million) (TRY Million) 2,590 2,484 2,190 2,406 2,256 2,068 1,913 1,865 2014 2015 2014 2015 1 We use “adjusted net income” as a means of presenting our income excluding net foreign currency gain / (loss) (including tax and minority impact), monetary gain (inflation impact), interest Income on time deposits of Turkcell İletişim Hizmetleri and items which we believe to be “one-off” or items that took place for the first time in the relevant year. The reconciliation of adjusted net income to income is included on page 129 of this report. Please note that this is a non-GAAP measure and that we may in future presentations change the scope of items that we deduct from net income to arrive at “adjusted net income.” 8 MESSAGE FROM THE CHAIRMAN Turkcell Group has concluded an important year of change, in which it registered successful results. With the great effort and determination of our employees, we trust that the actions implemented by Turkcell management on the basis of our Board of Directors’ decisions have created value for both our shareholders and our country. AHMET AKÇA Chairman of the Board of Directors TURKCELL ANNUAL REPORT 9 2015 2015 was quite a dynamic year for the region, our country and Turkcell latest technologies for our people. In doing so, we also aim to register a itself. Ongoing civil wars to the south of our border, calamitous double-digit top-line growth along with increasing profitability. developments in global markets and two general elections in our country have resulted in a predominantly political agenda. We view With the spectrum tender we participated and the strong political stability on the back of the last general election as received authorization in 2015, not only did a promising progress for our country, and believe wholeheartedly that the planned fundamental changes and structural reforms will further we secure being the fastest in 4.5G, but also carry Turkey forward from its current solid position. the opportunity to pioneer in 5G. With these 2015 was a year of change, progress and growth for Turkcell where investments in Turkey’s future, Turkcell will, the Company has revisited its vision for the next three years. While doing this, we have taken Turkey’s 2023 vision as a cornerstone for us. once again, be one of the biggest contributors to Having set off with the target of contributing our share to Turkey’s aim the economy. of ranking among the top ten economies in the world, we leave behind We secured the largest number of frequencies (172.4MHz in total) at this year of change with our focus of further progress and sustainable the most affordable price on a per subscriber basis, which will enable growth. us taking the speed of mobile internet to the next level in Turkey. The record results we registered almost every quarter in 2015 have Following the tender held by the Information and Communication indicated that we, as Turkcell Group, can set stronger goals while Technologies Authority on August 26, 2015, Turkcell will be the planning our future. Turkcell Group grew by 6.0% on an annual strongest contributor to our national economy in 4.5G with a total basis, reaching TRY 12,769 million in revenues. The EBITDA margin payment of EUR 1.9 billion including VAT to the Turkish Treasury. increased to 32.4%, rising by 1.2 percentage points. Turkcell Turkey, the flagship of the Group, generated TRY 11,481 million revenue, while Strategic collaborations; innovative actions our international business recorded TRY 856 million revenue. Group The next step toward our objectives, having succeeded at the net income rose to TRY 2,070 million with a 10.9% yearly increase. We spectrum tender, was strategic collaboration in the development of 5G continued to invest in our business in the amount of TRY 2,594 million technology. (excluding license fees) in 2015 only, which has helped us take our service quality further forward. Accordingly, we have signed a memorandum of understanding with Chinese technology giant Huawei for collaborative work, and research This strong performance, which has encouraged us for the upcoming and development of 5G technology. period, was the result of actions following the key decisions taken by the Board of Directors, the outstanding execution performance of the We also took a concrete step towards strengthening Turkey’s software Turkcell management team, our new organizational structure providing and hardware research and development capacity by signing a efficiency and simplicity in our business processes and, above all, the framework document with Aselsan.