Annual Report 2011

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ANNUAL REPORT 2011

TABLE OF CONTENTS

PAGE

Our Vision / Our Values / Our Strategic Priorities 04

Turkcell Group in Numbers 05

Turkcell Group: A Leading Communication and Technology Company 06

Letter from the Chairman 08

Board Members 10

Letter from the CEO 12

Executive Officers 14

Introduction: It’s sharing that makes life beautiful... 18

Leader in Technology 20

Leader in Advantages 30 03

Leader in Services 40

Leader in Social Responsibility 50

Awards 58

Subsidiaries 60

Human Resources 66

Mobile Communication Industry 70

Investor Relations 76

2011 Corporate Governance Compliance Report 80

Turkcell Offices 91

Consolidated Financial Statement and Independent Audit Report 92 Independent Auditor’s Report Summary 220 TURKCELL ANNUAL REPORT 2011

To ease and enrich the lives of our customers with communication and technology solutions

We believe that customers come first We are an agile team We promote open communication We are passionate about making a difference We value people

As a leading communication and technology company:

Our strategic priorities are to grow in our core mobile communication business through increased use of voice and 04 data and to continue sustainable and profitable growth to provide our customers with a unique customer and user experience that will enhance brand loyalty to grow mobile Internet usage by promoting smart devices to offer relevant products and services to our customers by increasing our knowledge of their needs and leveraging our technological innovations to create value for our customers, country and company with continuous innovative practices

to grow profitably in the fixed broadband business by creating synergy among Turkcell Group companies through our fiber optic infrastructure

to grow our existing international subsidiaries with a focus on profitability

to grow in domestic and international markets through communications, technology and new business opportunities. TURKCELL GROUP IN NUMBERS

TRY 9.4 billion Revenue

TRY 2.9 billion * EBITDA 05

31.1% EBITDA Margin

64.8 million Group subscribers

* EBITDA is a non-GAAP financial measurement TURKCELL ANNUAL REPORT 2011

TURKCELL GROUP: LEADING COMMUNICATION AND TECHNOLOGY COMPANY

Belarus - life :) Subscriber Base (mn) 1.8 Market Share (%) 16 Revenues (million $) 48

Germany Turkcell Europe Subscriber Base (mn) 0.2 Started its operations in 1Q 2011

Ukraine - life :) 06 Subscriber Base (mn) 9.7 Market Share (%) 18 Revenues (million $) 369

Moldova - Moldcell Subscriber Base (mn) 1.1 Market Share (%) 35 Revenues (million $) 79

Turkey - TURKCELL Subscriber Base (mn) 34.5 Market Share (%) 53 Revenues (million TRY) 8,030 Georgia - Geocell Kazakhstan - Kcell Subscriber Base (mn) 2.1 Subscriber Base (mn) 10.8 Market Share (%) 42 Market Share (%) 48 Revenues (million $) 142 Revenues (million $) 1,211

Azerbaijan - Azercell Subscriber Base (mn) 4.2 Market Share (%) 54 Revenues (million $) 526

KKTC - KKTCell Subscriber Base (mn) 0.4 Market Share (%) 69 Revenues (million $) 70 TURKCELL ANNUAL REPORT 2011

LETTER FROM THE CHAIRMAN

“With our 2G, 3G and fiber investments which are aimed at creating value for our customers, we will continue to be one of the largest investors contributing to the development of the country, while providing the best quality service to our customers.”

08 In an environment where the global economy is taken to boost smartphone penetration, enabling top-5 most transparent companies for the past slowing down and the European Union is facing our Turkish market customers to conveniently two years underlines the importance we attach financial difficulties, Turkey achieved stability as share information, we have increased the number to our strict corporate governance principles and a result of its consecutive growth over the past 10 of smartphones in our network by 100% to 3.8 respecting the recently introduced Corporate Go- quarters, strengthening our faith in our ongoing million in 2011. vernance Principles of the Capital Markets Board, investments and in Turkey. we will continue to safeguard the rights of our We have made investments of around TRY 20 shareholders. As Turkcell Turkey, we have preserved our billion since our foundation. Throughout the year, leadership in innovation and technology, enabling in accordance with our long term strategy focu- It is also our duty to create value for Turkcell’s us to achieve a strong growth momentum in 2011 sed on providing the best quality service, we pur- shareholders, and although we were unable to along with our widespread network, strong sales sued our investments in fiber optic infrastructure, distribute the recommended 75% dividend for channels and new mobile services. In consequen- as well as 2G and 3G networks. Having built up 2010, we will continue to support the Company’s ce, we increased our subscriber base by 1.1 milli- our business model on mobile internet and total long term profit goals through strategic plans and on, despite intense competition in the market. As telecom solutions, we continued to lead Turkey’s investments. Turkcell Group, we increased our subscriber base telecommunications market. We are proud to by 4.4 million to 64.8 million, despite the macroe- note that our outstanding network quality and The fact that Turkcell has ranked among “The conomic challenges in certain markets where our coverage have placed Turkey among the world’s Companies of the Decade” and been selected foreign subsidiaries operate. leading networks. “Turkey’s Most Admired Brand” for the past 5 consecutive years, clearly indicates that we are We are delighted to observe the successful As Turkcell, our long term success also rests on on the right track. And thus I feel particularly pro- 09 results of the investments and profit-oriented our awareness of social responsibility, and in light ud to be the Chairman of Turkcell, a formidable strategies implemented within our domestic and of this approach we continue to contribute to company contributing to society and economy foreign subsidiaries. Indeed, as a result of their Turkey’s development with the social responsibi- alike. I warmly thank all our hard working, inno- successful operations in 2011, the contribution lity projects that we lead. Our “Snowdrops” pro- vative and dedicated employees, who ensure that of our subsidiaries to Group revenues rose from ject, having completed its 10th year, was selected our service quality sets a global example, as well 10.2% to14.3%. In particular, our subsidiary in the best project in the world in the Contribution as our distributors, suppliers, investors, other bu- Ukraine improved its EBITDA margin from 19.0% to Society category at the “World Communicati- siness partners and our loyal customers who have to 25.5%, increasing its revenues by 9% in US$ on Awards 2011”. made Turkcell Turkey a leading mobile operator. terms. Meanwhile, our fixed broadband subsidiary Turkcell Superonline, with its widening fiber In 2011, through our social responsibility projects, network, improved its synergy within Turkcell we continued to enrich the social and cultural life Group, increasing its revenue by 37% and EBIT- of the country in the areas of education, sport, COLIN J. WILLIAMS DA margin to 17.7% on a year-on-year basis from culture and employment. More recently, in the 9.8%. aftermath of the earthquakes in Van, we took rapid action and dedicated ourselves to our “Turkey In the new communication era where the incre- Money-Bank for Van” project, primarily meeting asing number of smartphones together with 3G the needs of our teachers and students. and fiber optic networks stand out, we continued to create value both for our customers and for As the Board of Directors of the sole Turkish Turkey itself, strengthening our leadership in the company trading on both the New York and market. As a result of our mobile internet techno- Istanbul stock exchanges, our primary duty is to logy, setting a global example, together with the conduct our operations in accordance with the determined actions that we take, I am confident internationally accepted corporate governance that we will continue to increase our momentum principles that underpin long term success and in mobile internet technology in the coming peri- stability, and improve our corporate governance ods. In this respect, with the actions that we have practices. Indeed, our ranking among Europe’s TURKCELL ANNUAL REPORT 2011 BOARD MEMBERS

1 Colin J. Williams 2 Karin Eliasson Chairman Member Colin J. Williams was appointed as the Chairman of the Board of Directors Karin Eliasson was appointed as a member of the Board of Directors on on February 25, 2010 and re-appointed on April 29, 2010. He also serves April 29, 2010. Ms. Eliasson has been Senior Vice President, Head of Group as a Voting Member and Chairman of the Audit Committee of Turkcell’s Human Resources at TeliaSonera since 2008. Prior to joining TeliaSonera, Board of Directors. He is Chairman of Clondalkin and Chair of the Audit Ms. Eliasson was Senior Vice President of Human Resources at Svenska and Remuneration Committees of Clondalkin, a consumer and industrial Cellulosa Aktiebolaget, SCA. From 2000 until 2003 she served as the packaging company. From January 2001 to December 2004, Mr. Williams CEO of Novare Human Capital AB. Ms. Eliasson is a member of the Board served as President of SCA, North America, which is active in the packaging of Directors of Proffice AB and Insurance company PRI Pensionsgaranti sector, personal care and paper tissue products. He was a long term board mutual. She holds a Bachelor of Science in Human Resources from Mid member and Vice Chairman of ICCA, the International Corrugated Packaging Sweden University. Institution, the European Federation of Packaging and the Federation of Paper Producers (CEPI). Mr. Williams is the founding President of Propak 3 Oleg Malis Europe and was a board member of the Greater Philadelphia Chamber of Member Commerce between 2002 and 2004. From 1988 to 2001, Mr. Williams was Oleg Malis was appointed to the Board of Directors on May 22, 2006 and re- the President of SCA Packaging, prior to which he served as the Managing appointed on April 29, 2010. Senior Vice President of Altimo until January Director of Bowater, a corrugated packaging company, for four years. From 2011. He began working for Altimo in 2005. Between 2003 and 2005 he 1978 to 1984, he was first the Sales Director and then the General Manager was Senior Vice President and M&A Director at Golden Telecom. Prior of Chicopee in the Netherlands, a non woven fabrics company of Johnson to that, Mr. Malis founded Investelectrosvyaz and Corbina Telecom. Mr. & Johnson. Mr. Williams holds an MBA degree in finance from New York Malis holds a degree in Systems Engineering from Moscow State Aviation University, an M.Sc. degree in physical chemistry and an honorary doctorate Technological University. from Lund University in Sweden.

2 3 4 1 4 Mehmet Bulent Ergin 6 Gulsun Nazli Karamehmet Williams Member Member Mehmet Bulent Ergin was first appointed as a member of the Turkcell Board Gulsun Nazli Karamehmet Williams was appointed to our Board of Directors of Directors on April 29, 2005 and was re-appointed on April 29, 2010. After on April 29, 2010. In November 2011 she was appointed to Board of Genel taking responsibility in Hochtief AG’s First Bosphorus project and Tekfen Energy plc, an independent oil exploration and production company. Since A.S.’s Iraq Turkey pipeline project, Mr. Ergin worked in various positions 2004, she has worked in different positions at Digiturk (Digital Platform at Cukurova Group companies. He held a managerial position at Cukurova Iletisim Hizmetleri A.S), where she currently holds the position of Chief Ithalat ve Ihracat T.A.S. and was a managing director at Maysan A.S. and Content Officer and Executive Member of the Board. Prior to Digiturk, she Baytur Trading S.A. Currently, Mr. Ergin is the Chairman of the Board of worked at BSKYB UK. She studied at Sarah Lawrence College (USA) and Directors of Genel Denizcilik Nakliyati A.S., Show TV and Aksam Gazetesi, Richmond University (UK) and has a B.A. in Communications. and he also holds the position of Board membership in Digiturk and Cukurova Holding. Mr. Ergin majored in Civil Engineering at Robert College, Turkey. 7 Alexey Khudyakov Member 5 Tero Erkki Kivisaari Alexey Khudyakov was appointed to the Board of Directors on May 22, Member 2006 and re-appointed on April 29, 2010. He is Vice President of Altimo, Tero Erkki Kivisaari was appointed to the Board of Directors on May 14, 2007 a leading investor in telecoms, and also serves as non-executive Chairman and was re-appointed on April 29, 2010. Mr. Kivisaari has been the President and Chair of the Audit Committees of High River Gold Mines, a gold mining of TeliaSonera in Eurasia since May 1, 2007. Previously, Mr. Kivisaari has served company. Prior to his appointment to Altimo, Mr. Khudyakov held a Vice as the Chief Financial Officer and Vice President of TeliaSonera in Eurasia. Mr. President position with Alfa Bank, managing the bank’s direct investments Kivisaari is a member of the Board of Directors of Azercell, Moldcell, A.S OJSC in the telecom sector. Before that, he was a management consultant with Megafon and Nurminen Logistics Plc; and the Chairman of Fintur Holdings BV McKinsey & Co. Mr. Khudyakov holds a Master of Business Administration board. He served as CFO of Fintur Holding B.V from 2003. Mr. Kivisaari has degree from INSEAD and a Master’s degree in Applied Mathematics and been the CFO of SmartTrust AB, a mobile software company owned by Carlyle Physics from the Moscow Institute of Physics and Technology. He is a non- Group, GE Capital, Eqvitec and Sonera Group. Prior to that, he had held the executive board member of Turkcell. He is also an Observer Member of position of Vice President of Sonera Group’s International Operations. Mr. the Audit Committee of Turkcell’s Board of Directors. Mr. Khudyakov was 11 Kivisaari served as an associate professor of finance at the Helsinki School of named the Audit Committee in reliance on Rule 10A 3(b)(1)(iv)(D) under Economics and holds an MBA in finance. the Securities Exchange Act of 1934.

5 6 7 TURKCELL ANNUAL REPORT 2011

Letter from the ceo

“In the new communication era, where concepts of “mobility, In 2011, Turkey, with its successful economic model and stable policies, was the second fastest growing internet, smartphone and applications” stand out, by pursuing economy with 8.5% GDP growth despite the slow- our leadership and introducing global firsts, we will continue down in the global economy and the deepest economic crisis faced by the European Union. to serve our country and people.” In such a positive environment, in 2011, as Turkey’s Turkcell, we have done our best to meet our responsibilities, represent our country in the international arena in the best way and keep customer satisfaction at the highest level.

As Turkcell Group, in 2011, we achieved consolidated revenues of TRY 9.4 billion with a 4.1% growth and EBITDA margin of 31% and EBITDA of TRY 2.9 billion, despite prevailing macroeconomic difficulties faced in the home countries of our international subsidiaries and aggressive competition in the telecom markets that we operate in. We registered a net income of TRY1.2 billion in 2011. Excluding currency devaluation 12 in Belarus and one-off items, Group net income would have been TRY1.9 billion.

We are very pleased with the improving performance of our subsidiaries and their increasing contribution in 2011. The contribution of our subsidiaries to consolidated revenues rose by 32%, while the contribution to consolidated EBITDA grew by 49% year on year. Our fixed broadband subsidiary Turk- cell Superonline registered positive EBIT for the first time, while almost doubling its EBITDA margin and also growing its revenue by 37% year on year. Me- anwhile, as a result of our profit oriented strategy, our Ukrainian subsidiary Astelit continued to improve its EBITDA margin, while raising its revenues by 9% in US$ terms in 2011. In April 2011, commencing our operations in Germany with Turkcell Europe, we started to serve a population of 242 million in 9 countries.

In recent years, the telecommunications market has witnessed significant regulatory changes. Yet despite changing market conditions in parallel to these regulatory developments, we grew our subscriber base by 1.1 million through our particular emphasis on customer satisfaction and “leader brand” perception. In consequence, we increased our subscriber base to 34.5 million, strengthening our leadership 2011 and placed Turkey among the top five countries gether and with our minds, knowledge, experience, position in the mobile market. in the world. and the love for our people all combined in a spirit of compassion, we initiated a campaign to support the Mobility, internet, smartphones and applications We believe that one of our core missions is to ensure education in Van, thus bringing to life the “Turkey were the key drivers in our sector in 2011. New initi- equal opportunity for access to information in our Money-box for Van”. atives and movements in parallel to mobile internet country by increasing smartphone penetration. In that took off in sectors like media, finance and health this context, with our T series smartphones, we con- From past to present, “creating employment” has are continuing at the same pace. With this in mind, in tinued to provide our subscribers the best internet been a vital social responsibility area for us. We pur- 2011 we continued to reap the benefits of our lea- experience at affordable prices in the smartphone sued our call center investments in various regions ding strategy of extending our 3G and fiber optic inf- market, thereby expanding mobile internet usage in of Turkey in 2011; we opened our centers in Karaman rastructure, increasing our smartphone penetration Turkey, while strengthening our leadership. Turkcell and Artvin. Our call center in Van Ercis started ope- and developing new mobile services tailored to our T20 became the best-selling NFC* supporting and- rations in March 2012. subscribers’ needs. roid phone in 2011. With the difference we created in the market, we increased smartphone penetration Consequently, 2011 was a good year, where we With our consolidated investment in the amount by 2 times and mobile internet usage by 2.5 times, accomplished important projects making both Turk- of TRY1.6 billion in 2011, we again became one of increasing our mobile internet revenues by 60%. cell and Turkey proud. Entry into the German market the largest investors creating value for Turkey. In with Turkcell Europe, our celebration of our 10th an- accordance with our long term strategy focused on Throughout 2011, we continued to differentiate niversary on the NYSE with Turkey’s and Turkcell’s providing the best quality service, we pursued our and ease the lives of our customers with the new flags waving on NYSE building, our Anatolia tour investments in fiber optic infrastructure, as well as technologies developed by our R&D and innovation with the objective of telling our technological trans- 2G and 3G networks, which enable us to differenti- company, Turkcell Teknoloji. With our Cep-T Wallet formation vision, namely “Turkcell MobileCompany” 13 ate ourselves from our competitors. Along with this technology marking a global first, Turkcell subscri- and having been selected as “Turkey’s Most Admired strategic focus, in a study conducted by INSEAD bers were able to make contactless payments by lo- Brand” for the fifth consecutive year were the unfor- University and the World Economic Forum among ading debit and credit cards to their mobile phones, gettable moments throughout 2011. 138 countries, Turkey was ranked number one in while we also won the “Best Near Field Communi- terms of mobile network coverage. Furthermore, cation (NFC)” award given by Sim Alliance. With At this moment, we are ahead of the technology in analysis conducted by Ericsson among 639 diffe- Our “Click to Talk” application, which marks another wave. As Turkcell, we are bringing cutting edge tech- rent 3G stations across 53 countries, we ranked as global first, we won “The Best Product” award at nologies to our country. In this respect, I strongly be- the number one operator with the fastest download the GSMA Mobile World Congress and became the lieve that in the coming periods we will increase our speed. Therefore, while global trends point to mobile only operator bearing Turkey’s name internationally. service quality, and thereby strengthen our leaders- internet as the driving force behind growth, as Turk- Furthermore, the value that we have created has hip through our continued investments in cutting cell Group, we have not fallen behind these trends; started to be recognized by international firms, and edge technology. Hereby, I would like to express my we have even surpassed them with our investments, in 2011 we began to export the technologies that we gratitude to all our employees, customers, business smartphone strategy and the contribution of our developed. partners and shareholders for their great efforts, subsidiaries. strong commitment and continued contributions to As the leader telecom and technology company of our success. With Turkcell Superonline’s strong fiber optic Turkey, we continued to carry out important projects infrastructure, we have created synergy with our with our awareness in social responsibility in 2011. (*) : Near Field Communication voice, mobile internet and services businesses. We With our Snowdrops, Bridge of Hearts and Runners achieved a fiber optic infrastructure of almost 30 to the Future projects, which we realized with the thousand km covering 75 cities. In 2011, we enriched passion of “creating equal opportunity for educati- SUREYYA CILIV our telecom services through the integration of clo- on” and “investing in the future of next generations”, ud computing, data center and advanced security so- we have created a difference in the lives of 200,000 lutions. In accordance with Turkcell Group’s strategy children so far. of providing its customers cutting edge technology of the highest quality, as Turkcell Superonline we de- In the aftermath of the earthquakes in Van which livered internet to homes at a speed of 1000 Mbps in occurred in the last months of 2011 we bound to- TURKCELL ANNUAL REPORT 2011

EXECUTIVE OFFICERS

2 1 3 7 4 6 5

1 Sureyya Ciliv Chief Executive Officer 2 Burak Sevilengul Chief Consumer Marketing Officer

3 Lale Saral Develioglu Chief International Business Officer 4 Ekrem Yener Chief International Expansion Officer 5 Tayfun Cataltepe Chief Regulation Strategies & Wholesale Business Officer 6 Meltem Kalender Ozturk Chief Group Human Resources Officer 7 Emre Sayin Chief Consumer Business Officer 8 12 14 9 13 10 11

8 Ilker Kuruoz Chief Information & Communication Technologies Officer

9 Cenk Bayrakdar Chief New Technology Businesses Officer

10 Selen Kocabas Chief Corporate Business Officer

11 Umit Akin Chief Legal Affairs Officer

12 Hulusi Acar Chief Consumer Sales Officer 13 Koray Ozturkler Chief Corporate Affairs Officer 14 Ilter Terzioglu Chief Network Operations Officer TURKCELL ANNUAL REPORT 2011

1 Sureyya Ciliv 5 Tayfun Cataltepe Chief Executive Officer Chief Regulation Strategies & Wholesale Business Officer Sureyya Ciliv was appointed the Chief Executive Officer of Turkcell on Tayfun Cataltepe is the Chief Regulation Strategies & Wholesale Business January 9, 2007. Having previously worked as Microsoft Turkey country Officer. After graduating from the Electronic Engineering Department of manager between 1997-2000, he served in various management positions Bosphorus University, Cataltepe received his MSc degree from Michigan in Microsoft Global Sales, Marketing and Service Group in the USA between Technology University and doctorate degree from the University of 2000 and 2007. Prior to 1997, Mr. Ciliv was the General Manager and California, Los Angeles. From 1990 to 1998, he worked as a Research and Chairman of Novasoft Systems Inc., a company he established in Boston, Development Engineer at Bell Laboratories. In 1998 he moved on to AT&T USA. Sureyya Ciliv received his MBA degree from Harvard University in as the IP Network and Service Planning projects manager, where he worked 1983 after successfully graduating with honors in Industry & Operations until 2003. Following AT&T, he started to work at Aycell as the Deputy Engineering and Computer Engineering from the University of Michigan in General Manager in charge of Technical Operations. He was then Deputy 1981. General Manager in charge of Network Operations at AVEA from 2004 to 2006. In 2007, Mr. Cataltepe served as the Europe Telecom Sector Expert in the Transaction Integration Services Department of Ernst & Young. Since 2 Burak Sevilengul 2007, he has been working at Turkcell as a Chief Officer. Chief Consumer Marketing Officer Burak Sevilengul joined Turkcell in 2001 and has been Chief Consumer Marketing Officer since August 2010. Prior to this appointment, hewas 6 Meltem Kalender Ozturk the Division Head of the Consumer Business Group and held various Chief Group Human Resources Officer other managerial responsibilities within the Marketing Department. Meltem Kalender Ozturk joined Turkcell in 1998 and is our Chief Group Burak Sevilengül is a graduate of The Middle East Technical University’s Human Resources Officer. Between 2001 and 2011, she was the Division Head Department of Business Administration and holds an MBA degree from the of Employee Relations Management in charge of training & development, University Of Georgia, Terry College of Business. talent management, remuneration, employee relations, recruitment, organizational development and quality management. Mrs. Ozturk also worked in various human resources functions at Logo Business Solutions 16 3 Lale Saral Develioglu and Isiklar Holding. Meltem Kalender Ozturk is a graduate of Business Chief International Business Officer Administration from Marmara University. Lale Saral Develioglu joined Turkcell in 2003 and has been Chief International Business Officer since May 2011. Prior to this position, she was Turkcell Group Marketing Services Officer for 2 years and Chief 7 Emre Sayin Marketing Officer for 4 years. Starting her career at Unilever in 1992, Lale Chief Consumer Business Officer Saral Develioglu had served as Brand Manager for 5 years and Marketing Emre Sayin is the Chief Consumer Business Officer of Turkcell. Prior to his Manager for 7 years in various product categories and markets until 2003. current position, he was the Chief Corporate Business Officer and Chief She is a graduate of the department of Industrial Engineering of Bogazici Consumer Sales Officer of Turkcell. Sayin worked for Evyap Pazarlama ve University. She also holds a Master’s degree in Operations Research and Tic. A.S. as the Deputy General Manager in charge of Marketing from 2005 Engineering Management from Rensselaer Polytechnic Institute, New York. to 2006, and for Kodak A.S. as the General Manager from 2002 to 2005. Prior to that Emre Sayin was the Chief Marketing Officer for Microsoft Turkey between 1999-2002. Sayin worked as the Marketing and Category 4 Ekrem Yener Manager of Unilever Turkey between 1992-1999. Emre Sayin is a graduate Chief International Expansion Officer of Bosphorus University’s Department of Industrial Engineering and holds Ekrem Yener joined Turkcell in 2007, and has held positions as Chief a Master’s degree in Systems and Industrial Engineering from Rutgers Corporate Business Officer and Chief Special Projects Officer. Currently, University. he is acting as Turkcell’s Chief International Expansion Officer. He worked for Aysu Dis Tic. A.S. and Digital Equipment A.S. as a Sales Manager from 1991- 1998. Yener worked as the Ankara Regional Manager of Microsoft Turkey in 1998. He was appointed Microsoft’s Deputy General Manager in Charge of Marketing in 2002 and was the Deputy General Manager in charge of Business and Strategy Development between 2004-2007. He graduated from the Istanbul Technical University’s Department of Metallurgical Engineering in 1982 and received a Master’s Degree in Material Sciences from the University of California at Berkley in 1986 and in High Level Marketing Management from Kellogg University. 8 Ilker Kuruoz 12 Hulusi Acar Chief Information & Communication Technologies Officer Chief Consumer Sales Officer Ilker Kuruoz became Turkcell’s Chief Information and Communication Hulusi Acar joined Turkcell in 2000 and was appointed Chief Consumer Sales Technologies Officer as of September 2009. He joined Turkcell in 2006. Officer on December 10, 2009. He graduated from Istanbul University’s Kuruoz began his professional career in 1994 at ABT. He then worked Business Administration department in 1995. Mr. Acar worked in sales at NCR as a System Consultant, at Garanti Teknoloji as a Business Unit positions at THY and Koctas A.S. before joining Turkcell. He held various Manager and at Accenture as a Senior Manager. Prior to his current other managerial responsibilities within the Sales Department including position at Turkcell, he was the Capability Management Division Head Turkey Sales Manager between 2000-2004. He was Sales and Customer of Turkcell. Ilker Kuruoz graduated from the Bilkent University Computer Relationship Chief Executive Officer of Astelit/Ukraine between March Engineering department in 1992 and holds a Master’s degree from the 2004 and November 2006. He also worked as Sales Management and same department. Wholesale and Distribution Management Division Head from 2007 to 2009 prior to his current position.

9 Cenk Bayrakdar 13 Koray Ozturkler Chief New Technology Businesses Officer Chief Corporate Affairs Officer Cenk Bayrakdar joined Turkcell in 2000 and was appointed Chief New Koray Ozturkler joined Turkcell in 1998, and since April 9, 2008 has been Technology Businesses Officer on July 27, 2011. Having started his the Chief Corporate Affairs Officer in charge of corporate communications, professional career at Arcelik, he held several managerial positions investor relations and Corporate Citizenship. Prior to this appointment he on the IT and Production Teams. He then worked at Corbuss as the had been the Investor Relations division head at Turkcell since 2002, and Business Development Coordinator between 2001-2002 and served as before that was the division head of International Business Development. the Partnership Development and Content Business Area Division Head Mr. Ozturkler started his career in the USA at Accenture Consulting. He of Turkcell between 2002 and 2006. Mr. Bayrakdar acted as the Chief continued his career at Yapi Kredi Bank. Mr. Ozturkler is a graduate of Information and Communication Technologies Officer during 2006-2009. Johnson C. Smith University with a degree in Marketing, and received his Prior to his current position at Turkcell, he was responsible for product and MBA concentrating on MIS from Mercer University. services management as Chief Product and Services Management Officer between 2009 and 2011. 17 14 Ilter Terzioglu Chief Network Operations Officer 10 Selen Kocabas Ilter Terzioglu joined Turkcell in 2003 and since April 1, 2006 has been Chief Corporate Business Officer the Chief Network Operations Officer. Mr. Terzioglu has worked in the Selen Kocabas joined Turkcell in 2003 and is the Chief Corporate Business communications sector since 1993 and served as Assistant General Manager Officer. Prior to this appointment, she was the Chief Business Support Officer at Ericsson, Superonline and Show TV. Mr. Terzioglu is a graduate of the in charge of human resources, corporate information systems, procurement Department of Econometrics at Istanbul University. Prior to his current and contract management, and administrative issues. Mrs. Kocabas started position as Chief Network Operations Officer, he was Turkcell’s Head of her professional career as a Management Trainee at Koc Holding, and later Business Strategies, Regulation and Risk Consolidation. worked as Human Resources Expert at Arcelik, then as a Human Resources Coordinator at Marshall, followed by Groupe Danone SA, where she worked as Human Resources Director. Selen Kocabas is a graduate of Economics from Istanbul University. She also obtained a Master’s degree in Human Resources Management from Marmara University.

11 Umit Akin Chief Legal Affairs Officer Umit Akin joined Turkcell in 2002 and was appointed Chief Legal Affairs Serkan Okandan Officer on February 1, 2010. Prior to his current position, he wasthe Chief Financial Officer Division Head of Turkcell’s Regulatory Legal Affairs department. Mr. Akin Serkan Okandan joined Turkcell in 2000. Since January 1, 2006, he has served as the Chief began his professional life in 1996 at Ankara University’s Faculty of Law Financial Officer. Prior to this appointment, he was the Financial Control and Reporting Division Head of Turkcell. Mr. Okandan started his professional career at PricewaterhouseCoopers in as a Research Assistant. He then worked as a Lawyer at Ericsson. Umit 1992. He then worked for DHL and Frito Lay as a Financial Controller. Serkan Okandan is a Akin graduated from Ankara University, Faculty of Law in 1995 and holds a graduate in Economics from Bosphorus University. Mr. Okandan, who served as Chief Financial Master’s degree in Public Law. Officer in Turkcell, resigned on December 31st, 2011. TURKCELL ANNUAL REPORT 2011

It’s sharIng that makes lIfe beautIful…

With its innovative communication solutions, social responsibility projects that Moments of happiness are create value for Turkey and serve as a model for the world and for millions of multiplied when shared, and customers, Turkcell, in its 18 year, remains “Turkey’s Turkcell”. give our lives more meaning. Rapidly developing technology requires us to work harder in order to keep pace with the times. Today, it is essential to be innovative, to keep abreast of the latest Turkcell connects us to each developments and to provide effective solutions to ever-changing needs. We are aware that it is never enough to simply monitor the latest innovations, but a must other, and to life, no matter to internalize them and always remain up-to-date. Only those brands that achieve these objectives and harness the power of technology are successful in growing where we are their businesses. In this light, Turkcell today is one of Turkey’s most valuable brands.

Similar to other global corporations, Turkcell’s high market capitalization can be attributed to the power of its brand. We conduct our operations with a sense of responsibility that goes beyond market share aspirations in order to represent Turkey globally and carry the Turkcell brand into the future. While providing developed and cutting-edge technologies to our subscribers, we are implementing 18 projects with the aim of carrying Turkey into the future and bringing the benefits of a better life to all.

As the projects we undertake in order to make life easier for our customers and enrich their life come to fruition with much success and appreciation, we become increasingly determined to pursue our goals. What’s more, we know that it is not enough to simply connect people with each other in an ever-changing technological environment. It is also imperative that they are connected with life itself.

As Turkcell, we allow our customers to share every moment of their lives, from simply saying “Hello” to exchanging the video clips they download to their mobile phones. Turkcell exists to empower its customers to carry the world in their pockets, access all information anytime and share their lives with their loved ones, no matter how far away they may be.

Because we believe that life is meaningful only when we share a simple remark, a movie, excitement or the happiness of a newborn baby. Because life is better when love, fun, excitement and information are shared.

It’s sharing that makes life beautiful. Turkcell exists to empower everyone to connect and share their lives with their loved ones whenever they want, and to carry the world in their pockets no matter how far away they may be

19 20 LEADER IN TECHNOLOGY Share life with whoever you want and wherever you are

21 TURKCELL ANNUAL REPORT 2011

LEADER IN TECHNOLOGY

Today, as Turkcell we are not only one of the to those places which we had not been able to leading Technology companies of Turkey, but reach previously due to a number of structural Turkcell subscribers also one of the most valuable ones in the world shortcomings such as thick concrete walls, spe- thanks to the investments we continue to make cial film-coated glass, or areas that were below share life with Turkcell in the latest sharing technologies available inter- ground level and could not receive a signal. nationally. technology Broad International Coverage As Turkcell Group, we made a TRY 1.6 billion in- On the 3G front, we signed 3G contracts with 263 vestment in 2011 and shared our pioneering tech- operators in 110 countries, placing us among the nology by offering consumers uninterrupted and world’s leading operators in terms of the interna- fast communication, and allowing them to “con- tional services. Furthermore, we are also ranked nect with life.” among the top operators in terms of GPRS roaming, where we have signed contracts with 494 Broadest Coverage operators from 166 countries. In terms of 2G/EDGE technology, we continued to deliver the highest quality services to Turkey’s Turkcell has the world’s fastest 3G largest mobile subscriber base, with 99.13% popu- We have introduced Dual Carrier technology to lation coverage and 88.3% geographical coverage Turkey with almost 100% coverage. in 2011. We maintained our leading position in 3G 22 coverage in Turkey with a population coverage of We surpassed all operators in the 53 countries that up to 88%. Indeed, research conducted by INSEAD participated in the benchmarking study from Europe in association with the World Economic Forum has & Middle East, Africa, Asia Pacific and the Americas ranked Turkey’s mobile communications network and ranked first in the world in terms of data down- Ericsson: first among 138 countries in terms of population load speed in the “International 3G Network Bench- Turkcell’s 3G speed coverage as a result of Turkcell’s coverage. mark Report” prepared by Ericsson in 2011. In the was awarded as the benchmark report which evaluated the performance Turkcell safeguards 74% of Turkey’s of 3G exchanges in terms of data download speed, population in emergencies 11 of Turkcell’s 3G exchanges ranked among the top world’s As part of a project launched by the Ministry of 11. In the report, Turkcell was also placed among Transportation, in 16 of Turkey’s 25 geographical the highest rankings based on other criteria such number 1 regions that fall under Turkcell’s responsibility as the “Minimum Drop Rate,” where 9 of Turkcell’s and cover 74% of Turkey’s population, we pro- exchanges were ranked among the top 25, and “Call vide mobile base stations at the request of related Completion Rate,” where 10 of Turkcell’s exchanges governorships. We are helping communication to were ranked among top 22. continue uninterrupted and without delay during emergencies (floods, earthquakes, roadblocks, We have introduced our customers to land and air transportation accidents, avalanches, AMR WB (HD Voice) technology First in Turkey: missing person cases and other unforeseen inci- As of April 2011, we have upgraded our 3G infra- dents) in regions where there is no established structure to make it compatible with HD Voice (AMR HD network. WB) quality throughout Turkey. Turkcell became the first operator in Turkey to implement HD Voice tech- Not a single square inch to be left nology, the latest in voice communications through Voice uncovered with GSM mini base stations mobile phone technology. As a result, Turkcell sub- (Pico BTS) scribers whose mobile phones support HD Voice, to- With the Mini Base Station solution we intro- day enjoy the highest-quality voice communication duced in 2011, we began to provide coverage by utilizing the latest technology. We have taken IPv6 for a test drive Aiming to be among the first in the world to intro- duce the latest technological innovations to our As a result of Turkcell’s customers, we have upgraded the infrastructures of Turkcell and Turkcell Superonline in order to make it compatible with IPv6 technology, also known as the 99.13% 2G and 88% 3G new generation Internet. In this context, tests for the use of IPv6 addresses through mobile phones population coverage, and IPv6 Internet access have been successfully completed, and the technological compatibility of the GPRS and 3G networks to IPv6 has been as- sured. Thus, Turkcell Superonline’s network is now ready to provide IPv6 Internet access. Turkcell has become the first Turkish company to receive four stars from RIPE, a regional organization that monitors IPv6 readiness.

Turkcell and Turkcell Superonline were the only pri- vately-owned companies from Turkey to participate in the World IPv6 Day event organized by the Inter- and 23 net Society on June 8, 2011, and completed a successful test drive of IPv6 participated in by such global giants such as NASA, Google, Facebook and Microsoft.

We have continued to support domestic design As a result of the projects we have undertaken with TÜBİTAK and SMEs, we have become the first mobile operator in Turkey to use a domesti- cally designed and manufactured radio link on its own network. We have improved the availability and quality of the services it provides to its subscribers by minimizing rain-related damage to its microwave radio link network. Turkey was ranked first for its Ahead in the transition to next generation networking We have completed the installation of a next mobile communications generation network (ALL-NGN) and switched to ALL-IP networks. We have expanded our ALL-IP infrastructure on the 3G network to include our 2G network and begun to offer more of our subscrib- network in terms of population ers the service availability advantage provided by package access. As Turkcell, we are one step ahead of many European operators by completing 41% of coverage the IP transition that covered the entire network. TURKCELL ANNUAL REPORT 2011

Turkcell Superonline has placed Turkey among the top 5 countries in the world to offer 1000 Mbps fiber internet to households

Fiber Internet in Turkey means Turkcell In line with Turkcell Group’s strategy of providing Superonline subscribers the latest technology with the high- Continuing its activities as a subsidiary of Turkcell est service quality, Turkcell Superonline began to 24 Group since 2004, Turkcell Superonline has so far connect households to the internet at 1000 Mbps for the first time in Turkey as of May 2011. And Approximately established approximately 30,000 km fiber optic infrastructure in Turkey. By the end of 2011, Turkcell by offering this service option to its customers, Superonline had increased the number of its interna- Turkcell Superonline has propelled Turkey into 30K km tional exit points to eight and become the first com- the top five countries in the world to offer 1000 pany to connect households to “light speed” Inter- Mbps fiber internet to households. fiber optic net using its own fiber optic infrastructure, in which it has invested a total of TRY 1.3 billion since 2008. Turkcell Superonline is aiming to transform Tur- network key into a major hub of the global communication Turkcell Superonline initiated the “fiber age” in network by expanding its fiber network to the Turkey simultaneously with the rest of the world. four corners of Turkey and through international Furthermore, Turkcell Superonline today provides exit points. In addition, Turkcell Superonline is fiber internet services to households in 10 provinces playing a crucial role for those Turkish cities to in Turkey: Istanbul, Ankara, Izmir, Bursa, Kocaeli, have been included in the “international digital 8 of every Adana, Gaziantep, Antalya, Mersin and Samsun. cities” category by turning the “Silk Road” upon Throughout these provinces, Turkcell Superonline which Turkey has always been a key location 10 people has connected almost 1 million households to “light down the centuries, into a “Fiber Road”. In the porting their fixed speed” fiber internet using its own fiber optic in- fast-growing Middle Eastern market, Turkcell numbers have preferred frastructure, and has reached almost 261,000 fiber Superonline is positioning Istanbul as the regional internet subscribers. In addition to its position as internet provider. Turkcell the leading fiber optic internet services company of Turkey, Turkcell Superonline maintained its leader- Turkcell Superonline also plays a key role in the Superonline ship position in fixed line number portability in 2011. RCN (Regional Cable Network) project, par- Eight of every 10 people to have ported their num- ticipating as the only operator from Turkey. The bers in Turkey have preferred Turkcell Superonline. project involves the region’s longest uninter- Also, half of all Turkcell Superonline fiber internet rupted land internet and data capacity services subscribers have ported their numbers. infrastructure implemented by 7 operators from 5 countries through the placement of a 7,750 km Steve Wozniak: fiber optic cable line from the city of Fujairah in the United Arab Emirates to Istanbul. The project is planned to serve as a internet gateway for 2 billion “Turkcell 3G is faster than people, and to commence operations in 2012.

As a leading company and a very strong player the 4G in US” in the cloud computing and data center business lines, Turkcell Group is converting all IT related Turkcell continued to organize Turkcell Technology Summit in requirements of companies with respect to hard- 2011: Apple’s co-founder and IT genius Steve Wozniak was one of ware, software and technical services into services that they can use whenever they need. Turkcell the guest speakers at the Turkcell Technology Summit. Wozniak’s Superonline acquired the infrastructure of Saban- comments on his experience with 3G performance in Turkey once ci Telekom in order to strengthen its presence in again revealed the quality of Turkcell the corporate segment. In this context, Turkcell Superonline acquired Global Iletisim in November 2011 and enriched its integrated telecommunications services including cloud computing, data center and security solutions. Turkcell Group will continue to provide services to all its corporate customers under the Turkcell Superonline brand with a more robust infrastructure by adding the customer portfolio of Global Iletisim to its own. 25

Turkcell Superonline is providing fiber internet, cloud computing solutions and new generation voice services to corporate customers by using its technological superiority of new generation infrastructure. Therefore, Turkcell Superonline will continue to enrich its portfolio comprised of value-added services (VAS), which provide its corporate customers the opportunity to share information, technology and life effortlessly.

The sharing industry is growing rapidly in Turkey, as throughout the world We, as Turkcell, are proud to be a leader in this industry. We allow our customers to share every moment of their lives, from simply saying “Hello” to the exchanging of video clips they download to their mobile phones. We closely follow global trends and continue to provide innovative and pioneering solutions in cooperation with our business partners. In 2011, our mobile internet and service revenues constituted 24% of the total revenues generated by Turkcell Turkey. Our value-added services, excluding data and messaging services, were used by more than 24.6 million subscribers in 2011. TURKCELL ANNUAL REPORT 2011

Starting with the slogan A surprise from Turkcell to HazirKart tions, Turkcell Music is offering its users the oppor- (prepaid) customers in the closing days tunity to identify the name of any song they listen “The Best Tablets of 2011! to by simply playing it to their mobile device. The For the first time in Turkey, we invited our prepaid Ring Back Tone service enables subscribers to play Deserve Turkcell customers, like postpaid subscribers, to take music for their callers. advantage of our mobile device offerings ranging Speeds,” we maintained from iPhone 4S to T20, and to purchase them Latest generation devices were our leadership position with 24 monthly installments without making any purchased from Turkcell in 2011 upfront payments. Turkcell has introduced more of its customers to in the tablet segment by smartphones and faster mobile internet services A better post-sales experience through offering the broadest coverage, 3G in- providing tablets In order to provide the best post-sales experience vestments and its network, which is compatible to our customers who purchased their mobile with the latest technologies in 2011. Also this of all sizes devices from Turkcell, we launched the “Defec- year, we have introduced our customers to many tive Device Follow-up” program in October. Sub- new products, especially in the high-end seg- scribers, who delivered their defective devices to ment, which has contributed significantly to our Turkcell Communication Centers, received SMS technological image. The smart phone launches in messages informing them about the status of the this segment are: follow-up process, and we began to trace these devices with our records. We became one of the very few GSM operators to have offered iPhone 3GS at special prices. We T20: The Best Tablets are in Turkcell offered the most affordable iPhone 4 by launch- The best selling We provided a wide range of tablets, including ing the iPhone 4 8GB. RIM’s most significant 26 android phone the iPad2, Samsung Galaxy Tablet, HTC Flyer, Dell device this year was the BlackBerry Bold 9900, Streak and Acer Iconia Tab A501, from 5 to 10.1 while the first launch of Galaxy Note in Turkey, in 2011 inches in screen size. We launched five different the HTC Sensation XL, equipped with the latest tablet campaigns with an emphasis on screen size. multimedia features, were the other high-end launches we carried out in this segment this year. We made an exclusive 1-year Turkcell internet access offer to customers who purchased laptops Smartphones have become from Casper. widespread with Turkcell! We also introduced many attractive offers in or- Music Services der to increase smartphone penetration in addi- We are offering our customers the opportunity to tion to the high-end segment. listen to music whenever and wherever they like with Turkcell Music service by providing them In June, we upgraded our individual BlackBerry with multiuser web, WAP and mobile applications, packages in order to expand the use of BlackBerry which were developed based on their individual smartphones especially in the youth segment. In needs and expectations. the BlackBerry segment, we offered BlackBerry devices and service subscriptions tailored to the Listeners can download their favorite songs to needs and requirements of our corporate custom- their mobile phones and computers too. ers. We introduced the new Blackberry Curve 8520 to our young customers in August. Fur- Turkcell Music also allows its users to create their thermore, we introduced our customers to smart own playlists and access them using mobile appli- devices such as the Samsung Chat 527, Galaxy Y cations. Music lovers are also sharing their favorite with a touchscreen, and the Nokia C7, which is songs or playlists with their friends through social equipped with NFC technology. networks. Thanks to the “What’s that song?” feature developed in cooperation with SoundHound We have empowered our customers to access the incorporated into its iPhone and Android applica- internet easily wherever they are, carry the world in their pockets and share every moment of their nearly 60,000 contactless payment points, but also lives with their loved ones with our smartphones enjoy the advantages of mobility. As of 2012, Turk- Having provided and VINNs. cell subscribers will have a complete mobile wallet Mobile payment experience by linking multiple cards to their mobile Turkcell continues to offer its phones and taking advantage of exclusive oppor- services since 2008, own-branded smartphones tunities and offers tailored to their needs by using Building on the success achieved with the launch Cep-T Cuzdan applications. Turkcell added the of our own-branded smartphone the Turkcell T10 in November 2010, we launched the T20, our new Thanks to the Turkcell Cep-T Para service Cep-T Cuzdan, Turkcell-branded smartphone, which was devel- launched in June, Turkcell customers are carry- Cep-T Para and Cep-T oped by Turkish engineers, to our product family ing out simple financial transactions using their in July 2011. Our Turkcell T20 smartphone left all mobile phones by either linking their debit/credit Paracard services in other smartphone models behind in August and cards or buying a pre-paid Cep-T Paracard from December to become the number one, according Turkcell Communication Centers. Users do not 2011 to the study conducted by GFK, an independent need to have a bank account to use the Turkcell research company. Cep-T Para service. They are also able to make money transfers to any mobile phone number We also introduced our customers to the T11, without the need to know details of the recipi- which is the new member of the T smartphone ent’s account number or send TRY to pre-paid series, in January 2012. The T11, which allows Turkcell subscribers. It will shortly be possible our customers to access the internet at Turkcell to make bill payments and shop online by using 3G speed anytime and anywhere, has won a much Turkcell Cep-T Para. recognition as an “all-inclusive” smartphone which can be purchased at affordable prices. Cep-T Paracard started a new era of shopping and has made life easier for all consumers regardless 27 TV & Video Services of whether they have a bank account or not. It Turkcell subscribers are accessing TV and video is possible to do shopping with the pre-loaded services using devices connected to the internet. amount, send money to a mobile phone number Mobile phones, iOS and Android phones, tablets without having to know the recipient’s bank ac- and computers are covered by Turkcell services. count number and buy credit for a pre-paid Turk- T11: MobileTV services became accessible through cell subscriber, anytime and anywhere by using smartphone all of these devices in 2011. Whilst expanding its the Cep-T Paracard. In addition, Cep-T Paracard technological capabilities, Turkcell also continues users win free minutes by shopping and transfer- at affordable its efforts to enrich user experience and content ring money thus turning in the convenience it af- prices portfolio. fords them to their advantage. In the forthcoming periods, Turkcell is planning to cooperate with Mobile Financial Services different banks in order to provide this service to In 2011, Turkcell added two new mobile financial its millions of subscribers. services platforms to its existing Mobile Payment Service, which has been in operation since 2008. Social Community and Entertainment Services Using Turkcell’s new mobile wallet platform “Cep- Gezenzi, upgraded in 2011, enables its users to take Cep-T T Cuzdan,” launched in April, Turkcell subscribers advantage of opportunities, promotions and dis- can make contactless payments by using the debit counts offered in stores and make purchases using Cuzdan: and credit cards that they have downloaded to mobile payment technology. Gezenzi provides many their mobile phones. Cep-T Cuzdan was developed opportunities to its users as they move around by World’s first in collaboration with MasterCard and is the first providing answers to questions such as “What to commercial NFC commercial NFC solution in the world to support eat, what to drink?”, “What to do, how to spend solution the payment applications of multiple banks on a time?”, “Who’s around and who’s not?”. Gezenzi SIM card. Turkcell subscribers are not only able users leave their mark on places they visit and to make secure and easy contactless payments at thus easily take advantage of other opportunities. TURKCELL ANNUAL REPORT 2011

Gezenzi is making social life more enjoyable by pro- Education Services We captured the viding exclusive Grupanya advantages and renewed Okul.com.tr provides digital education content to latest technology surprises at dozens of locations. meet the education needs of users. As a result of a cooperative arrangement with content providers through digital Information Services who specialize in their respective fields, students We deliver the latest and most relevant informa- and professionals looking for career opportunities content services. tion instantly by Turkcell Information Packages to are accessing online training courses by entering a the mobile devices of users. We keep our users single portal. Students are improving their perfor- Turkcell has provided up to date by sending them four SMS messages mance in courses and exams; preparing for universi- every day containing information on the latest ty entrance exams; learning new foreign languages training courses, developments with the Anadolu Agency News and even preparing themselves for professional life online tests and Package. We share all the latest development in by completing an online leadership program using politics, economy and sport. lecture videos, animation and tests on okul.com.tr. leadership programs Students can also participate in countrywide online With the Astrology Package, we provide daily, exams. to its subscribers monthly and annual horoscope interpretations to subscribers. By indicating their zodiac signs upon Travel Services ranging from school- subscription, users can access their personal Bavul.com serves the travel needs of all users re- horoscope interpretations every day on their gardless of which mobile operator they use. As the age children to mobile phones and listen to monthly horoscope first Personal Travel Assistant of Turkey, Bavul.com interpretations read by celebrated astrologer Re- is the most sophisticated user interface travel por- professionals zan Kiraz. tal in the Turkey. Bavul.com allows its users to list, filter and compare not only the flights offered by With the Magazine Package, we offer our subscrib- domestic airlines, but also hundreds of internation- 28 ers the opportunity to access any piece of news and al ones simultaneously. Bavul.com also allows its information they want whenever and wherever they users to purchase bus or combined tickets. Where Turkcell like. Furthermore, users who subscribed to informa- a user cannot find any flight on their desired des- tion package services within the last three months tinations or dates, the Travel Assistant conducts Information of the year get 30 free minutes per day. ticket searches on their behalf and informs them via SMS when it has found a ticket. Travel Assistant Packages: We repositioned our Information Services as “Turk- not only sends flight information, weather condi- The news is on cell Instant Response” services in 2011 and allowed tions, local time and exchange rate specific to your our customers to access any information they want destination, but also informs three pre-selected mobile phones instantly by sending a single SMS. We have begun to persons about the landing of your aircraft via an offer our users the opportunity to access any infor- SMS. Consequently, mobile technologies help to mation they want whenever and wherever by using deliver a unique travel experience. shorter keywords and dialing a single number (7777). Other Services Our subscribers are accessing lottery results, horo- With the “Click to Talk” service, we offer our scope interpretations, weather forecasts, latest subscribers the opportunity to make calls to any foreign exchange and gold-related news, location other Turkcell subscriber with or without using Turkcell information and latest developments instantly by their mobile phone numbers via web, WAP and Dergilik sending a single SMS. SMS channels. When the “Click to Talk” button is pressed on contracted websites, the call between free access to the With the location-based Turkcell Compass appli- two subscribers begins without numbers being highest quality cation, users can identify the nearest police sta- dialed. If, for any reason, Turkcell customers do tion, pharmacy, hospital and so on. If they wish not wish to share their mobile phone numbers, magazines on to do so, our users can make inquiries using the they may use an exclusive Rumara number to call mobile phones “Where am I?” service which enables them to ac- other Turkcell subscribers instantly. Rumara users cess immediate information about their current not only receive calls from other, but also from all location. Turkcell subscribers. At the 2012 Global Mobile Awards which defines the leaders of the mobile communication world, our “Click to Talk” service was awarded for being the best product. Wall Street Journal, the world’s Turkcell Dergilik Turkcell Magazine Kiosk is an application that gives most respected source of news and users free access to the highest quality magazines published in Turkey on their iPads, Android tab- information named lets, iPhones and T20s. The magazines available through the Dergilik application are enriched with additional videos, photographs and music and provide a unique experience to users with 3D anima- SUREYYA CILIV as tion.

The application allows users to access both the current and previous issues of the magazines, and attracts attention for its user friendly content. The one of “Text Only” feature available on its iPhone and T20 versions makes it easy to read even on small screens. Europe’s Top Mobile Signature The Mobile Signature service enables customers to sign electronic documents and transactions with a legally-accepted digital signature, which is 29 equivalent to a wet signature. We are currently collaborating with application providers in banking, e-government, insurance, healthcare and e- commerce industries.

We are maintaining our R&D leadership with Turkcell Teknoloji Turkcell Teknoloji has conducted different projects in cooperation with more than 200 leading technology companies and research centers from Europe. In recognition of our pioneering projects, we were accepted to the Boards of Directors of ITEA 2 and CELTIC+, collaborative platforms established for the sustainability of Europe’s competitiveness in the field of R&D. As a result, we have taken our place among those companies which play crucial roles in drafting Europe’s technology roadmap. In line with our strategy of growing with our eco-system, we are primarily targeting to ensure that Turkish companies take active roles in R&D platforms. Last year, we increased the number of our national Technology Leaders patent applications from 56 to 130 and submitted 20 international patent applications. We are maintaining our leadership in patent applications and strengthening it every year in our sector.

LEADER IN ADVANTAGES Superior Turkcell quality through affordable tariffs and packages TURKCELL ANNUAL REPORT 2011

LEADER IN ADVANTAGES

In 2011, as Turkey’s leading mobile communica- HazirKart (prepaid) subscribers made Turkcell subscribers tion company, we paid much more attention to more calls and earned more advantages enjoyed greater peace the needs of all subscribers, consumer/corporate, In 2011, we updated our offers and aligned them postpaid/prepaid. We understood them better, to the needs of our HazirKart customers. We of mind through and provided new benefits and advantages that launched the GençPlus tariff, which lets our young added value to their lives. subscribers make calls to all directions and does advantageous not use up their minutes during short calls. Our Turkcell subscribers enjoy greater peace customers who paid TRY20 and above in the Biz- campaigns and of mind bize tariff, received 60 minutes for all directions. In 2011, we launched affordable bundled pack- benefits when ages that met the voice-SMS and internet needs We prepared user-friendly packages for our of our customers to benefit more from the unin- HazirKart customers. In Spring 2011, we launched shopping terrupted communication of postpaid subscrip- our Kat Kat packages, which are open to all our tion. By switching to these packages, hundreds subscribers. of thousands of Turkcell subscribers have not only benefited from many advantages, but also Throughout the year, we enabled our custom- enjoyed greater peace of mind. ers to make more calls by providing them with seasonal campaigns and innovative offers such As a first for the sector, we have allowed both as Konuş Kazan, and as a result allowed them to 32 our old and new subscribers to benefit from a 6 enjoy greater peace of mind. or 12-month flat rate guarantee on their voice packages. These initiatives strengthened the loy- More advantageous international call alty of our post-paid subscribers to Turkcell as offers in 2011 we offer our subscribers the advantages of these We identified the communication needs of our contracted offers, including flat rates as well as customers who make international calls or travel additional minutes. abroad; accordingly we launched bundled pack- To talk ages including voice, messaging and internet. By We launched two innovative applications in Sum- using international advantage packages, Turkcell comfortably: mer 2011 and differentiated ourselves in the com- subscribers can make calls more comfortably and petition: “Invoice control” provides customers to- know how much they will be paying for their calls the “Talk and tal peace of mind by enabling them to learn their without any invoice surprises. Win tariff” usage and invoice amounts anytime they want. In addition, we offered our customers the “Joker 2011 was again the year of the Turkcell Package”, helping them to avoid any surprises subscriber from their invoices. Turkcell subscribers want to experience Turkcell’s advantages not only in communication, but also in Customer concerns over exceeding package lim- other areas of their lives. Therefore, adding value its were eased with our new “You’re in Control” and simplicity to the lives of our customers during Invoice control package launched in Fall 2011. We offered cus- their shopping remained among our focus areas + tomers the opportunity to make calls and send during 2011. Accordingly, we have provided exclu- Joker package: messages at affordable prices. sive shopping opportunities to our customers at thousands of locations ranging from gas stations An end to invoice Thereby, we increased switches from pre to post- to supermarkets, white goods outlets to clothing surprises! paid subscribers by providing the convenience stores, and tourism facilities to technology stores, of being a postpaid subscriber together with the thereby helping them make savings through our benefits of being in control. campaigns. Youth wanted it, gnçtrkcll provided it! well as lucky day offers and affordable price More than five million users participated in over campaigns. We sent women-related content We provided 30 national and 100 local campaigns carried out and information packages to the mobile phones need-based offers by gnçtrkcll, Turkey’s largest youth club with of housewives free of charge. We also revised 12 million members. These campaigns provided our club’s image in October by focusing on the to farmers and the total savings of over 200 million to gnçtrkcll appreciation of smart choices made by women. members. Young customers have voiced their Members of our renamed Smart Women’s Club youth market, as well wishes on the bumubumu.com platform, estab- (“Akıllı Kadınlar Kulübü”) had achieved total lished in 2011, and gnçtrkcll has realized these savings of TRY 5 million by the end of 2011. as to housewives suggestions with new campaigns. The gnçtrkcll campaigns were redesigned according to the We launched the Professionals Club, and professionals votes of more than 5 million customers collected offering exclusive opportunities to public over nine months. Those campaigns were diver- sector and white-collar employees segments sified among the areas of entertainment, food, In 2011, we maintained our strong position in GSM operators, mobile phones, and the Internet. the public sector, remaining its most-preferred Our young customers shared life by taking ad- mobile operator. In addition to offering the vantage of our free minutes and SMS bundles; most attractive tariff to our subscribers, we movie tickets, fast-food menus, coffee shop dis- increased our customers’ loyalty by provid- counts and concert events. In addition, beside ing them with discounted offers in many areas its national offers, gnçtrkcll has expanded its ranging from education to banking and from 33 advantage network to 365 days by reaching lo- travel agencies to clothing stores. We strength- cal youth in large numbers through the gncteklif. ened the loyalty of public sector subscribers by com platform. offering them advantageous mobile internet service (VINN) and a wider range of informa- Turkcell’s farmer subscribers are more tion services. productive with superior advantages We have launched the Turkcell Farmer Pack- In Summer of 2011, we launched the “Profes- age in response to the needs and life styles of sionals Club”, membership of which is exclusive farmers and landowners. We provided not only to white-collar employees. We focused on both advantageous communication offers to our the professional and social lives of white-collar postpaid and prepaid subscribers, but also sent employees, not only providing them with numer- detailed information to farmers free of charge. ous discount offers in areas ranging from shop- These messages included topics ranging from ping to travel and eating to entertainment, but humidity, precipitation and wind speed data, also offering them voice, messaging and internet to national and international farming-related as a bundle and making their lives easier. news, product and location specific information. We also supported hundreds of thousands We differentiated ourselves with Turkcell of farmers during fairs organized in six different Platinum in 2011 Young customers provinces throughout the year. The Turkcell Platinum program is used by Turkcell have voiced their customers with intensive communication needs, We didn’t forget housewives either and our subscribers enjoyed the privilege of be- wishes on the We launched the Ladies Club in February 2011. ing a Turkcell subscriber with the advantages this Here, we focused on enabling Turkcell’s house- program offered “on land, air and sea.” Receiving bumubumu.com wife subscribers to communicate easily by pro- instant responses from Customer Services, Plati- viding them with advantageous voice packages, num customers reaped the benefits of exclusive and free minutes if they refer their friends, as services provided to them by Special Services TURKCELL ANNUAL REPORT 2011

Teams, which even visited them on their yachts We won awards in two mobile marketing We allowed our during the summer. Platinum subscribers also categories at the Marketing Association customers to access benefited from special discounts on their mobile Global Awards phone bills, VINN 3G modems and mobile phones. In 2011, we implemented 1,500 projects with the Internet and They received a home delivery service for any de- 400 companies operating in more than 30 differ- vice they desired, which not only allowed them to ent industries. As a result, more than 10 million information anywhere get more for what they paid, thereby increasing subscribers included in our permission-based their loyalty to Turkcell, but also enjoy spending database, the largest in the world, were provided by providing new more on our services. with new opportunities. We sent 30 million commercial SMS messages to our subscribers via the mobile device Internet usage via mobile phones Targeted Messaging Platform, delivered over one campaigns, packages and computers increased with more billion commercial runs and 14 million minutes of advantages jingles. We also launched 14 new products with and new VINN offers We launched the Facebook package which was our business partners and shared our experiences seen as a business opportunity offered by popular in the Mobile Marketing book. social network sites, in 2011. In this manner we provided millions of customers with daily internet We are making a difference with our rich access using their mobile phones. And in order to application portfolio in the T-market enable more of our customers to access the In- We renewed our online application store under ternet from mobile phones, we not only launched the name Turkcell T-Market in 2011 in order to internet free-trial campaigns, but also offered better meet the needs of our customers as Tur- internet included device campaigns. Subscribers key’s leading communication and technology 34 were therefore able to access the internet im- company. Our customers can now access Turkey’s mediately on purchasing their devices by taking most comprehensive application portfolio much advantage of our internet included mobile device more easily anytime and anywhere by visiting T- campaigns. Market, which has over seven million users. Turk- cell made a difference by launching applications In 2011, we also continued to provide innova- that are operative on platforms such as iPhone, tions to our customers who access the inter- Android, Symbian, Java and Windows Mobile. net via their computers. We offered our public Furthermore, Turkcell offers a very rich portfo- sector subscribers exclusive advantages with lio of applications in areas including healthcare, the Public VINN, which stopped when reaching music, games, hobbies, entertainment, security predetermined limits. Responding to the sea- and education. With a weekly download rate of sonal needs of our customers, we launched the 1.5 million, there have been 50 million downloads Ready-to-Use VINN campaign, which consisted from T-Market since the beginning of 2011. of three-month internet packages. We continued to provide our corporate Meanwhile, in order to make it easier for our customers with advantageous tariffs and prepaid subscribers to purchase packages, we packages created new sales channels. This allowed them During the March-May period of 2011, we began to buy internet packages at our dealer chan- to offer our corporate customers bundled packages nels by cash payment, using POS or Telephone including roaming voice, data and SMS packages Backup Devices, or else by using their credit card that allowed them to meet their international com- thru the Internet. We offered additional prod- munication requirements more advantageously. ucts to our customers by developing promotions We simplified our customers’ international roam- and seasonal campaigns. We have increased the ing procedures by making some changes to the ar- availability of Turkcell Mobile internet through rangements throughout the year. We launched a growing chain stores as well as co-branding of- new tariff called Star Traveler in July for our corpo- fers with banks and computer brands. rate customers who make frequent overseas trips. We launched a new voice package campaign called 6 Months from Us between April and July The share of our mobile internet 2011, namely a six-month no-payment grace period provided to our corporate customers who and service revenues signed a 24-month contract. Meanwhile, in line with our strategy of meeting our customers’ na- in Turkcell Turkey revenues tional voice, data and SMS requirements by offering them a single package, we launched the Superstar package, also in July. reached 24% in 2011 To better meet our customers’ voice needs, in March we increased the number of minutes for all directions in the “Advantage Package”. In addition, we revised the minutes we offered, as part of our Eco Package in 3 forms, from intercompany, fixed line and all directions, to intercompany, Turkcell and all directions. In August we also increased the number of minutes in the intercompany calls of our Eco, Advantage, Eco Plus and Advantage Plus packages.

We launched Service Packages We launched the Elite, Premium and Classic Ser- 35 vice Packages in order to increase awareness of the services we offer our customers. Within this scope, we provided subscribers who had purchased Elite and Premium service packages information kits, explaining the services they received, accompanied by our gifts.

Our corporate customers keen to take advantage of connecting to their businesses outside their offices were introduced to mobile internet at the most attractive prices with Turkcell’s new VINN packages We offered our corporate customers, who need to conduct business anytime, anywhere, the choice of 1 GB, 4 GB or unlimited internet packages with Corporate VINN packages. We also prevented the exceeding of limits, achieving cost control with the All-Inclusive packages for 24-month contract terms. We decreased the price of the Limitless Package which came as a pleasant surprise for our subscribers who do not want to face limits when doing business. Moreover, Turkcell customers who subscribe to one of the new corporate VINN packages took advantage of owning the VINN E176 modem without having to pay an additional fee. TURKCELL ANNUAL REPORT 2011

We offered special advantages to Adopting the slogan “Priority in We offered special different business groups and sustained Development, Priority in Turkcell”, we advantages and our focus on professional clubs provided exclusive offers to priority In 2011, we enriched the content of our offers to development provinces diversified packages members of professional clubs and provided them In line with our slogan “Priority in Development, fast and exclusive services by creating specialized Priority in Turkcell”, we launched an advanta- to our corporate call centers to exclusively meet their needs. geous voice package called “Priority Regions Package” exclusively for those subscribers who customers from Furthermore, we made life easier for our sub- purchased corporate lines in 49 eligible provinces scribers by providing them with profession-spe- in January 2011. various professions cific services. Focusing on the mobile internet and home office needs of the members of different professions, During the January-October 2011 period, we al- we developed club-specific VINN offers that lowed our 20,000 corporate subscribers located in workers made them feel special. the priority provinces to make intercompany calls and all direction calls for only TRY 29 per month. We launched the Public Sector Plus tariff in order to meet the voice, data and SMS needs of Following our voice package, we began to provide our public sector customers. Elsewhere, we also our subscribers in 49 priority regions with the op- launched the Municipality Package to fulfill the portunity to benefit from exclusive VINN offers communication needs of municipalities. on April 6, 2011.

In May 2011, we enriched the content of the Ar- Users of the Priority Regions Package had the tisan Package with numerous alternatives. This advantage of deducting their telecommunica- 36 package allows craftsmen to receive discounts tion expenses from their taxable incomes, ben- of up to 50% in non-communication-related ex- efitting from special call centers, allowing their penses and save 15% on average with the Corpo- employees to communicate with each other over rateWin Program. The other Turkcell benefits of- a corporate line, and reaching their customers fered to craftsmen were two advantageous VINN with maximum efficiency using our bulk message Artisan offers, differentiating us through internet access, solutions. anytime and anywhere. package We revised our smartphone offers to Family doctors who are members of the Doc- deliver the best internet experience to tors Club benefited from discounts on a mobile our subscribers application specifically designed for them. All The number of devices in the smartphone portfo- member doctors had free access to the WAP lio of our customer segment, which we launched portal that contains customized information and in February 2011, rose to over 30 models, ad- applications. Moreover, Real estate agents af- dressing our corporate customers’ needs. filiated with the Real Estate Agents Club could post discounted ads on “sahibinden.com”, while As a result, we created a comprehensive prod- lawyers who were members of the Lawyers Club uct portfolio which could appeal to different Municipality had discounted access to UYAP (National Judi- market segments with different price levels ciary Informatics System) by using their mobile and with every possible feature. And in addi- package signatures. tion to the opportunity to own the devices in our product portfolio, we offered the option to In addition to doctors, lawyers, pharmacists and purchase our 100 MB, 250 MB, 1 GB or 4 GB in- real estate agents, we began to respond to the ternet packages. needs of public accountants with exclusive mobile internet offers in 2011. Indeed, we contin- What’s more, we allowed customers to switch ued to focus on this area throughout the year by to other packages during the contract period de- launching the Public Accountants Club. pending on their changing needs. We provided total benefits of TRY 21 In August 2011 we opened our Team Mobile (Ekip million to 35,000 corporate customers Mobil) service, used intensively by many of our We enriched our with the CorporateWin program corporate customers for long time, to our con- customers’ work (İşteKazan program) sumer segment and prepaid subscribers, and up- We launched a Corporate Loyalty Program called graded its interface to make it more user-friendly. style and increased CorporateWin on March 1, 2010. The program enabled our corporate customers to reduce their We launched our Turkcell Traffic Information (Yol their productivity expenses with savings of up to 50% on expen- Bilgisi) service in September 2011. This for the first ditures such as food, fuel, cargo, office supplies, time allowed our customers to plan their routes and through our corporate transportation, software, advertising, car rental navigate easily by using real-time traffic informa- and technology. As of 2011 year-end, 35,000 tion. solutions companies had made total savings of TRY 21 million through the discount contracts we signed In September 2011, we introduced Cargo Tracking with more than 40 different brands across differ- (Kargo Takip) devices and services, which enables ent industries. the real-time tracking of cargo, containers, post and commercial papers in transit. On the energy We provided more advantages to our front, we launched our Power Cut Warning (Elek- customers through our corporate trik Kesinti Uyarı) service in October 2011. loyalty program, İŞTECEP; we increased the number of Turkcell’s corporate Turkcell’s smart capabilities contributed customers to 28,630 to corporates’ successes We raised the number of Turkcell’s subscriber As of June 2011, we began to enhance Turkcell’s companies by 41% compared to 2010 through ex- IT and GSM capabilities used for our own services, panding our device portfolio and providing more and started to offer them to our corporate cus- 37 benefits under our contracted corporate loyalty tomers. In particular, we provided these capabili- program, İŞTECEP. The new offers we launched ties to banking sector customers. These services İŞTE on October 10 provided discounts on our custom- not only simplified their services, matching up ers’ invoices, in addition to device gifts. very well with their requirements, but also al- KAZAN: lowed them to better acquaint themselves with TRY 21 million We launched our new corporate slogan their customers, while assisting the strengthen- On April 4, 2011, we decided to replace the İşTcell ing of their own security processes. savings brand and launched a new communication strategy based on proven success with the slogan We increased productivity through our “Turkcell and Turkcell’s stamp on your business”. corporate solutions and added value to our corporate customers’ lives We continued to make life easier for our With our exclusive corporate customer offers, we corporate customers, empowering them continued to implement projects that met the needs with the support of our business partners of companies, provided solutions to their problems, We launched the Turkcell M2M (Machine-to-Ma- improved their business processes, boosted their chine Communication) platform in February 2011 productivity and offered benefits to their own cus- İŞTECEP: whereby Turkcell became one of the European tomers. In accordance with this aim, we generated Turkcell’s corporate operators to have its own M2M platform. We more than 11,000 solutions in cooperation with created four different Smart Tariffs for the M2M companies of various sizes in 2011. customers reached business. In this context, we offered our custom- 28,630 in total ers tariffs that provide incremental cost advan- • With approximately 3.5 billion SMS messages, tages based on penetration increases in low data we allowed our corporate customers to com- traffic lines. In addition, we launched the Turkcell municate with their own customer base, em- M2M Simcard, which exclusively used the M2M ployees and business partners, assisting them platform in order to meet diverse customer re- in acquiring new customers with our Targeting quirements. Messaging to Turkcell Users service. TURKCELL ANNUAL REPORT 2011

• On the educational front, we introduced the Turkcell’s corporate customers enjoy uninter- We have Smart School Era Students accordingly began rupted telephone and internet connectivity differentiated to use tablets during projects we carried out in thanks to FCT back up VoIP and 3G back up DSL cooperation with Yüce Schools and Nişantaşı & Metro Ethernet Internet solutions. Indeed, we ourselves with our Technical School. support our customers in saving on their com- • We initiated the Smart Home Era with the air- munication expenses by offering the latest tech- cloud computing conditioner project we realized in cooperation nology at affordable prices. In addition, with with Vestel and a security system project in the integration of mobile and fixed exchanges, services as a total cooperation with Pronet. our corporate customers can manage both their • In 2011, we made significant contributions to fixed line and mobile phones using a single ex- telecom solution energy efficiency by making it possible for change. Most recently, with our IP centrex ser- more than 20,000 electricity meters to be read vice, we have migrated our exchange services provider in new remotely, thus harnessing the latest develop- to the cloud computing system, once again for telecom era ments as well as our focus on the energy sec- the convenience of our customers. IP centrex tor. will not only provide a cost advantage, plus flex- • Turkcell became the first operator to provide ibility and mobility, but also will enable our cor- the location information of individuals mak- porate customers to receive telephone, internet ing 112 emergency number calls, and deliver services and exchange services from their mo- details such as patient info and location infor- bile operator. mation to the tablets of teams operating in the field; thus, we offered effective solutions that Our cloud solutions are adding new 38 directly impact people’s lives. dimensions to the virtual sharing experience We worked together with our corporate cu We have introduced our new data centers, tomers to provide services that address their own equipped with cutting edge technology, to our customers’ needs. Among the more prominent corporate customers. In addition to our classic examples of these are: the Istanbul Security Di- services, we have launched manageable IT servic- rectorate Find my car? Service, Mobile Damage es and cloud computing solutions, which are the application and Türksat Mobile State mobile hottest topics of the day. With the new genera- application. tion services we offer to our customers during this new era where IT and telecommunications As a Total Telecom Solutions Provider, industries converge, we are replacing the invest- we continued our investments in order ment costs of our corporate customers and pro- to provide our customers with more viding them with a pay-as-you-go model which advantageous services can be modified according to their needs. We offer uninterrupted communication solutions to our customers by converging mobile and fixed- In particular, we are transferring corporate data line communication services. to the cloud environment in order to prevent any data loss, and to reduce their costs by providing As a Total Telecom Solutions Provider, we de- low-cost corporate e-mail services. signed the first joint offer made by Turkcell and Turkcell Superonline, whereby we provided ADSL As Turkcell, we are going a step further than and 3G services together for SOHOs (small of- allowing our corporate customers to transform fices/home offices) through Corporate Solution their hardware and infrastructure investments Centers. We introduced an automatic 3G backup into operational costs, by offering them a bun- service with a VINN device attachable to ADSL dle of services that they adopt according to modems, thus providing companies with uninter- their changing requirements, and begin utilizing rupted communication. within a short period of time. 2005 Turkcell 1st 2006 Turkcell 2nd 2007 Turkcell 1st 2008 st Turkcell 1 39 Turkcell has been the most 2009 ADMIRED Turkcell 1st company In 2010 Turkey for the st past 5 years Turkcell 1 2011 Turkcell 1st again 40 LEADER IN SERVICES We pay attention to your needs and create solutions that provide you peace of mind

41 TURKCELL ANNUAL REPORT 2011

LEADER IN SERVICES

We offer the most More sharing with the most As Turkey’s leading communication and technol- widespread sales network ogy company, we have established Turkey’s largest relevant, innovative operator store. The TIM (Turkcell Communication Turkcell Communication Centers Center) opened its doors in Karşıyaka, Izmir, and solutions to Turkcell We have 1,056 exclusive Turkcell Communication covers 700 m2 on five floors. With this new store, Centers, providing expertise in communication we have upgraded the “specialist store in commu- customers with our technologies; these centers inspire confidence in nication technologies” concept itself. Our goal is to superior service customers and provide them with standard and enable technology enthusiasts to experience the solution-oriented services at convenient locations. latest smartphones and technologies of the future approach At the Turkcell Communication Centers, our most at first hand at Technology Life Centers, where comprehensive exclusive face-to-face service chan- serve our customers’ technology needs. The youth nel, our customers can acquaint themselves with segment in particular will come to appreciate the new technologies and receive technology consul- stores, effectively a “technology life center”, as a tancy services concerning the products they are center of information, experience and entertain- interested in purchasing. ment. In addition, throughout the year we offer training and development programs to our employ- We continue to lead the market in the belief that ees and customers on mobile technology products “technology is a way for us to make your life easier” and applications. along with our vision of being a “specialist retailer 42 of communication technologies”. In this manner our Turkcell Stores Turkcell Communication Centers extend our leader- We have three Turkcell Stores that are located in ship approach across the entire retail sector. convenient and popular locations. These serve as role models for Turkcell’s Retail channel by pro- Our stores are visited by 22 million people on aver- viding solutions to their customers, focusing on a age each month, and our customers are served by unique customer experience and having the vision a competent team of 8,000 well-trained, friendly to extend Turkcell’s leadership of the telecommu- staff, all of whom are communication technology nications industry into the retail industry. experts. Our technology experts, who have been serving in our stores since 2008, not only present Communication Consultants at Turkcell stores have a wide range of devices equipped with the latest been selected from those employees who have dis- technology and applications that make our cus- played superior performance at Turkcell stores, or tomers’ lives easier, but also focus on the profes- in Customer Services for a minimum of 2 years, and sional development of our store employees to en- who have completed their information, skills and sure customer satisfaction at first contact. capabilities assessments successfully. Thereafter, consultants participate in training sessions on sales As part of a new initiative for our technology spe- technique, solution generation and technology skills. cialists in 2011, we raised the quality of our technol- At our stores, on a per-location basis, nearly 36,000 1,056 ogy consultancy services by offering coaching ses- customers annually benefit from services offered by sions at 1,056 Turkcell Communication Centers. We Communication Consultants who understand their Communication continued to invest in training for store employees needs, display a friendly approach and make their in order to maintain and improve our service quality. lives easier by providing them with relevant solution We also engage independent research companies alternatives. Centers to measure the quality of our services and closely monitor our progress. Moreover, our stores are rou- The performance and skill management of Turkcell tinely audited to ensure sustainable, standardized, store employees is monitored by experienced Store and high-quality service. Managers, who are experts in their respective fields. 43

Through coverage in the leading titles of the world’s press, such as “The Wall Street Journal , The New York Times Global, Financial Times, Bloomberg Business Week and Newsweek Global”, we have not only demonstrated Turkcell’s global leadership, but also acted as an ambassador in promoting Turkey and its natural beauty worldwide. * Turkey is listed as number one in terms of mobile population coverage according to World Economic Forum and INSEAD. TURKCELL ANNUAL REPORT 2011

We have certified our service quality standards and customer satisfaction by international institutions

These managers evaluate the performance of their Other Channels employees monthly and offer them skill-based We have been providing services to our custom- coaching sessions. ers through Electronic Chain Stores since 2008. As a result, we are able to offer Turkcell advan- We consult independent research companies to tages at any point where our customers interact conduct research that measures the customer with technology. Our customers can meet both experience we provide at Turkcell stores; our their subscription and device needs through the solution generation capabilities; the quality of partnerships we established with eight brands, our services and the impression we leave on our and at approximately 100 stores. We also pro- 44 customers. We assess whether specified service vide our customers with other channels to fulfill standards are being met, and whether our em- their daily needs which they can use without any ployees have sufficient knowledge of our prod- interruption on a 24/7 basis. These include bank ucts by making shadow shopping visits. ATMs, online branches, call centers, kiosks, post offices and the Turkcell website. In addition, We also conduct post-service interviews with our we are increasing the efficiency of our market- customers to measure their satisfaction levels as ing channels by offering our customers the op- accurately as possible. The results are shared portunity to purchase voice, SMS and Internet with our stores each month and we monitor their packages online through the Turkcell Call Center. performance very closely thereafter. Turkcell partners with six official distributors (KVK, Genpa, Başarı, C5, Netcell) and a Service With 17,000 Turkcell Sales points, Provider (Atel), which have robust financial Turkcell has one of the most prominent structures and highly capable human resources, telecommunications supply chains as contributing to the company’s ecosystem. All of compared to Europe these partners distribute both Turkcell products There are approximately 17,000 Turkcell Sales (simcard, TL card) and other devices from differ- Turkcell Points, offering the products of all operators in ent brands and models in compliance with the Turkey and providing service even in the most strategies defined by Turkcell. Cep Anayasası: outlying locations. It is essential for us that our Transparent and customers can conveniently access Turkcell prod- Communication rights of our customers responsible ucts and services and get the best service pos- are safeguarded by the Turkcell sible at these stores. Accordingly, we established Constitution (Turkcell Cep Anayasasi) service 48 Turkcell Distribution Centers to make weekly We say that “Our business is about people and visits to these sales points, thus ensuring efficient technology” and that the satisfaction of our approach product supply, as well as providing accurate, customers comes first. We have been conduct- timely and effective information on our products ing customer focus studies in various areas for and services. many years. We have combined all efforts for our customer-oriented approach that we ini- proach, accountability and continuous improve- We are working tiated in 2010. The ultimate objective of this ment. As a result, Turkcell continued to be the approach was to improve our customers’ con- first and only operator in Turkey and provided its to understand fidence in Turkcell and realize a performance customers with EU-standard service in 2011. beyond their expectations. As part of this our customers’ customer-oriented approach, embracing our Therefore, Turkcell quality again received ISO principle that “We believe that our customers 9001 certification. To pass entire inspections requirements by come first”, we have focused on areas includ- without any inconvenience is significant proof ing operational excellence, culture, product/ that we have successfully implemented our “We empathizing and service/tariff offers and communication. We believe that the customer comes first” principle. embodied our responsible service approach satisfying their in the Turkcell Constitution and shared it with In addition, Turkcell Global Bilgi ranked first at the needs in line with our customers by leveraging the synergy and “2011 Top Ranking Performers” awards organized experience generated through this approach. by ContactCenterWorld.com, the most presti- “Turkcell Service and gious awards and recognition program in its sec- We differentiated our service quality in tor in the “Best Contact Center” and “Best Perfor- Sales Model” accordance with our customers’ needs mance Improvement Scheme” categories both in with our well- trained and friendly the world and across the EMEA region. Turkcell service teams Global Bilgi came second in the “Best Technology Innovation” category. It was also voted second at Turkcell’s service approach sets an example the European Call Center Awards. for the world We believe that sustainability of customer satisfac- We initiated new applications to tion depends on maintaining a solution-oriented strengthen the confidence of our approach. Therefore, we initiated a program that corporate customers to Turkcell, and 45 gathered all experiences gained through our all improved our processes channels. This approach, which adopted Turkcell’s We commenced a new era in our customer ser- service and sales principles, was established to vices and began to focus on how we communicate understand the feelings of our customers and our customers and how they feel about us. Our improve all service and sales communications goal was to feel more empathy with our custom- on a need by need basis. And in line with this ap- ers when serving them, by putting ourselves in proach, we are educating our customers in order their shoes and fulfilling their emotional expecta- to allow them to better select the tariffs, prod- tions with the “Turkcell Service and Sales Model” ucts and services that are meeting their specific approach which exists to enhance customer sat- needs during the decision-making process. In this isfaction. By launching the Turkcell Superonline context, we continued to provide the quality Call Center and Complaints Management Center, service of Turkcell to our customers in 2011. We we allowed Turkcell Superonline corporate cus- also launched Tariff and Campaign Support Line tomers, who are also Turkcell customers, to re- to offer our customers tariffs and campaigns cus- ceive customer services of Turkcell quality. tomized to their needs via a free-of-charge voice response system. We created areas for customers who purchased services from our stores, where they could access our Our quality and customer oriented customer services immediately, and free-of-charge. Turkcell approach has been acknowledged again In 2011, Turkcell received certification in compli- We are the first operator in Turkey to provide our Global Bilgi ance with requirements of the ISO 10002:2004 customers with the opportunity of a “Pre-Order” Customer Satisfaction Quality Management Sys- service for the latest devices entering the Turk- selected as the Best tem Certificate by Bureau Veritas, an internation- ish market. Therefore, our corporate customers Contact Center in al independent agency in 2010. The certification can log into Online Services before the start of requirements were responsiveness, objectivity, campaigns, submit their pre-applications and get the World tariffs, confidentiality, customer-oriented ap- priority for their receipt on arrival. TURKCELL ANNUAL REPORT 2011

With the My Cell Phone is Secure (Cebim Güv- As part of the restructuring process, we are aim- As the first and ende) service we insure our corporate customers’ ing to create a corporate culture that can compre- only operator in the mobile phones against accidents, damage and hensively give importance to the needs and wants theft. of end-users throughout each developmental sector to receive phase of products, services, campaigns and of- We allowed our customers to switch between fers. We aim to develop an approach that does “Customer Satisfaction different types of packages in device campaigns not think on behalf of our customers, but sees throughout the year. We also allowed them to things from their perspective. Management System make their choices on devices and internet package by providing flexible campaigns. We have upgraded our “Customer- Certification” Turkcell’s oriented” approach and established the With the invoice control service, we inform our 7th Sense Customer Insight Center, quality was again customers when they exceed their package limit a user experience center confirmed in 2011 via SMS message. We also began to inform our We say that “It’s sharing that makes life beau- customers who use Voice&Data&SMS packages tiful” and want to offer the technologies, ad- when they reached 80% and 100% of the pack- vantages, products and services that allow our age limits. As a result, our customers are well in- customers to live their lives fully, enjoying the formed before their limits are exceeded. benefits of their freedom.

We serve our customers on social media Accordingly, we established the 7th Sense Cus- platforms tomer Insight Center in order to understand the As a leading communication and technology com- various needs, motivations and expectations of pany, we realized the importance of the Internet our customers, measure the efficiency of our so- as an effective means of communication that lutions by understanding customer needs, evalu- 46 would ultimately replace conventional media. ate the conceptual and perceptual effectiveness We started to work on customer services strat- of our marketing and communication campaigns, egy on social media in 2010. In fact, we have been bring our employees together with our customers actively utilizing social media since January 2011. and identify potential customer concerns. We consider social media to be a means of com- We established munication with our customers, employees and We began to share the 7th Sense and its capa- investors. bilities as a user experience center with other the companies. We are therefore following the concept of “we th should go where people are” instead of “waiting We increased customer satisfaction 7 Sense for them to come to us”. Indeed, we offer services and reduced costs by introducing voice to all our customers who reach us via Turkcell ac- recognition technology customer Insight counts on Twitter and Facebook. As one of the We introduced voice recognition in 2010 so that companies that pioneered the introduction of our customers are no longer obliged to answer Center CRM in Turkey, we had reached 1.2 million and security questions before speaking to a service 145,000 users via Facebook and Twitter respec- representative. We have reached 3.9 million actively by the end of 2011. tive voice recognition records within the past one and a half years. We created our own customer experience team We started to offer an alternative service model We aimed at improving our “user-centered” ap- that provides our customers convenience and proach and designing new products and services speed when using call centers, by use of voice in line with this approach. In order to offer clear, recognition & mobile assistant technology. This simple and standard customer experience during technology enables the use of the call steering the change in our culture, we created our own application that directs our customers’ calls with- User Experience (UX) team in 2011. out the regular process. 47

PIONEERING EVENTS We celebrated the Press tour in celebration of the Turkcell Sponsors CeBIT Germany 10th anniversary of Turkcell’s Following its launch, we, as Turkcell Europe, 10th anniversary of listing on the New York Stock Exchange became the main sponsors of the national par- We organized a press tour to New York to cel- ticipation organization of Turkey, which became Turkcell’s listing on ebrate the 10th anniversary of Turkcell’s listing a Partner Country at CeBIT the Information and on the New York Stock Exchange between Octo- Technology fair organized in Hannover, Germany the New York Stock ber 19, 2011 and October 23, 2011. At the event, between March 1, 2011 and March 5, 2011. The Is- where we entertained the chief economists and tanbul Chamber of Commerce was the organizer Exchange columnists of the press, the Turkish and Turkcell of this organisation. At our CeBIT fairground, flags were flown on the NYSE building on Wall we carried out promotional activities for many Street. Turkcell CEO Sureyya Ciliv rang the clos- products and services, and gathered information ing bell with senior Turkcell executives and media from our potential customers, in addition to an- representatives. Our company CEO Sureyya Ciliv nouncing our operations in Germany. A special and NYSE Euronext CEO Duncan L. Niederauer section at the fair was opened with a ceremony have received the “Corporate Partnership Award“ and participation of Turkcell’s CEO Mr. Sureyya from the American Turkish Society for their roles Ciliv and the Chancellor of Germany, Angela in sustaining a long-term relationship between Merkel. Mr. Sureyya Ciliv presented a golden SIM Turkey and the United States. card to Mrs. Angela Merkel during the ceremony. TURKCELL ANNUAL REPORT 2011

Merkel embraced Turkcell’s symbolic Cello, which our main target group, by Turkcell CEO Sureyya Around 2,800 attracted a lot attention in the both Turkish and Ciliv and Chief Corporate Business Officer Selen corporate customers, German media. Kocabas. solution partners The second Turkcell Technology Summit In addition, our customers, who made a differ- was held with the participation of ence, improved their productivity, expanded and leading significant speakers from Turkey and their businesses by using Turkcell mobile tech- beyond as well as 2,800 guests nologies, and shared their success stories with technology executives The Turkcell Technology Summit was held at the other participants. As part of our Roadshow, we Halic Congress Center on November 24, 2011, also emphasized our industry focus through the participated in the with the participation of around 2,800 people live broadcasts we gave in five provinces in co- including corporate customers, solution partners operation with CNBC-e. During live broadcasts Turkcell Technology and leading executives from the business world. from Bursa, Adana, Izmir, Kayseri and Antalya, Summit In addition to listening to speeches delivered the leading executives of companies operating in by Steve Wozniak, the keynote speaker of the the automotive, agriculture, logistics, production summit and co-founder and founding partner of and tourism industries respectively exchanged Apple Inc.; Husnu Ozyegin, founder and Chair- views with Turkcell CEO Sureyya Ciliv. They ex- man of Fiba Group and Producer Acun Ilicali, the plained how they could make a difference in their participants had the opportunity to listen to more respective industries by exploiting technological than 50 leading executives from the Turkish busi- opportunities. ness community in nine parallel sessions on Cloud Computing, Mobile Marketing, Fiber Communica- Additionally, Minister of Transportation Binali tion, M2M, Industry Solutions, Devices and New Yıldırım and Minister of Education Huseyin Ce- 48 Technologies. Steve Wozniak’s comments during lik participated in our roadshows organized in his keynote speech that “Turkcell 3G is faster Izmir and Gaziantep, respectively and empha- than the 4G I use back home” emphasized once sized the contribution of technology to compa- again the perception of Turkcell as a technol- nies’ growth. Through these roadshows, which ogy leader. We introduced Turkcell and Turkcell attracted widespread participation and helped Superonline’s products and services in an area us achieve higher sales figures, we aim to touch covering 400 m2 and provided participants with not only our corporate customers in the prov- the opportunity to give demonstrations and ac- inces to be visited, and our Corporate Solution quaint themselves with the latest technologies. Centers, but also Turkcell Communication Cen- Furthermore, 35 Turkcell solution partners had ters and universities with Turkcell’s one Turk- the opportunity to share their solutions with cell vision. Indeed, we will continue our events participants. with the contribution of our Consumer Channel, Turkcell Academy and Human Resources divi- MobileCompany (MobilŞirket) sions in 2012. Organizations Turkcell’s MobileCompany (MobilŞirket) Road- Innovation Conference show represented the contributions of mobile During the Innovation Conference hosted by technologies to the growth of companies in the Turkish Exporters Assembly with Turkcell as Anatolia. These events were organized in Bursa, the strategic partner, we organized the Turkcell Adana, Mersin, Izmir, Gaziantep, Konya, Kayseri, Leaders Summit at the Ciragan Palace on De- Samsun, Denizli and Antalya with the participa- cember 6, 2011. The summit took place with the tion of approximately 3,000 corporate custom- participation of 450 high end corporate customers. The Mayors and Presidents of the Chambers ers of Turkcell. Well known management con- of Commerce and Industry of the visited prov- sultant Clayton Christensen delivered a speech inces supported the Roadshow and gave open- to public sector executives on Innovation at the ing speeches. Turkcell’s MobileCompany vision Public Sector Conference organized in Ankara on was explained to the senior executives of SMEs, December 8, 2011. 49

German Chancellor Angela Merkel, embracing Turkcell’s symbolic Cello noted “I would opt for Turkcell when I visit Turkey” 50 LEADER IN SOCIAL RESPONSIBILITY Turkcell cherishes you and creates value for Turkey

51 TURKCELL ANNUAL REPORT 2011

LEADER IN SOCIAL RESPONSIBILITY

CONTRIBUTION TO EDUCATION its contributions to the promotion of equal oppor- As Turkey’s Turkcell, tunities for women by the UN’s Beijing Declara- we share the dreams Snowdrops tion and Platform for Action, with participants Implemented in cooperation with the Society for under the roof of the United Nations. of our youth, and the Supporting Modern Life , the “Snowdrops Proj- ect” strives to provide equal educational oppor- The project was presented to 30 ministers and hopes of Snowdrops, tunities to girls who are unable to continue their nearly 500 participants from all over the world at education due to the economic disadvantages of the Global Women’s Summit organized in Istanbul while working towards their families. And with this project we help our in 2011. girls develop themselves as open-minded indi- a better future for viduals with professions. A Meaningful award for Snowdrops from London everyone living in our During the initial years of the Snowdrops Proj- Turkcell’s Snowdrops project won the “Social country ect, which was launched in 2000, 5,000 girls who Contribution Award” at the World Communi- wanted to continue their education were provid- cation Awards (WCA) 2011, the leading global ed with scholarships. In 2007, Turkcell extended event of its kind in the communication and tele- the scope of the project by increasing the number communication industries. of annual scholarships to 10,000. At the 13th WCA Awards, the jury consisting of 52 Snowdrops have been supported by Turkish so- 18 well known professionals, determined the ciety over the years, and now new educational winners competing in 18 award categories. Jury opportunities have been provided to tens of members, in determining their criteria, declared thousands of girls. Indeed, the Snowdrops project that “We have evaluated those projects in terms has become one of the most important social re- of effectiveness in reaching their targets and sus- sponsibility projects in Turkey. tainability, providing measurable results, being non-profit in nature and contributing to society Since the launch of the project in 2000: in the areas of healthcare, education or economic • Turkcell scholarships have been provided to prosperity”. 27,500 Snowdrops, • 11,000 Snowdrops have graduated from Bridge of Hearts high school, Initiated in 2008 in partnership with the Ministry • 3,500 Snowdrops have passed the of Education, the “Bridge of Hearts” project has university entrance exam, and reached 140,000 children from around Turkey • 1,250 Snowdrops have graduated over the past four years by visiting different prov- 85,000 from university. inces and establishing new and lasting friendships with other children, while also enabling them to scholarships have The United Nations selected the Snowdrops discover the natural and cultural beauties of our Project as an exemplary project country. been provided In March 2010, the Snowdrops project was se- through the lected by the United Nations (UN) as an exem- The Bridge of Hearts project enables children to plary project promoting equal opportunities for meet with their peers from other cities, and par- Snowdrops women and introduced to the world during the ticipate in activities that contribute to their social event of Beijing +15. development and life experiences. Project We shared details of the project, which was se- Within the scheme, 7th and 8th grade primary lected as part of a group of exemplary projects for school students and 9th, 10th and 11th grade 53

A Meaningful award for Snowdrops from London Turkcell’s Snowdrops project won the “Social Contribution Award” at the World Communication Awards (WCA) 2011, the leading global event of its kind in the communication and telecommunication industries TURKCELL ANNUAL REPORT 2011

As Turkey’s Turkcell, we initiated the education campaign for Van and developed Turkey’s Money-box. Our target is to build houses for 100 teachers and 100 student dorms, as well as providing grants to 100 successful students secondary school students participate in five-day “People think that life exists only where they live. school trips accompanied by teachers and school But, they forget that life is everywhere! No mat- in financial need administrators selected by Provincial Directorates ter how different people are from each other, they of National Education. Students are also offered share life together.” the opportunity to travel abroad. By participating Gamze Ozkan in the project, students from Turkey have had the “I had never travelled beyond my village before. I opportunity to visit Thessaloniki and Gumulcine saw the sea for the first time thanks to the Bridge in Greece, and have travelled to the Turkish Re- of Hearts. It’s so exciting to watch the horizon and public of Northern Cyprus (TRNC). In addition, breathe in the scent of the sea breeze. I’ve seen so 54 students from Gumulcine and TRNC have had the many tourists here. I’ve decided to learn English opportunity to visit Istanbul and Ankara. and speak as fluently as they do.” Muharrem Ozkan Within the Bridge of Hearts project; • 140,000 students from 81 provinces visited Turkey’s Money-box for Van new cities that they had never seen, and met Two powerful earthquakes devastated Van in new cultures in four years eastern Turkey on 23 October and 9 November • 6 million kilometers have been travelled 2011. In the aftermath, both the national and in- • 3,400 school administrators and 6,500 teach- ternational communities, showed great solidarity ers were appointed to accompany the students with Van to help our citizens. • The Bridge of Hearts teams have been established in 81 provinces As the Turkcell family, we also felt deeply for • Thousands of students have had their first VAN, and following the earthquake, we put our experience of travelling by air, train and sea, hearts and souls into fulfilling the responsibility and of using the subway that rested on our shoulders. And so we used our • Thousands of dreams have been realized technology, base stations and communication in- The Bridge of Hearts • Friendships have been established that frastructure to save lives. We took every measure cannot be expressed in numbers to secure the communication needs of the earth- was established quake victims. Turkcell once again ensured that Messages from the heart Van was connected to life and the world without 140,000 “With this project, we have gone beyond build- interruption. ing bridges of hearts and taken a long journey dreams into our souls. We have met many beautiful Turkcell Volunteers quickly transported six trucks people from Turkey and forged new friendships. of aid collected immediately after the earthquake have been I won’t be the same person when I return. I have to Van, delivering these supplies to victims by fulfilled expanded my horizons.” visiting each village. And yet Van still has a long Makbule Kelleci way to go to full recovery, especially in terms of education. We, the Turkcell family, visited the region and witnessed how the local community was striving to overcome its difficulties. We observed that there aren’t enough houses to shelter our teachers, who are making heroic efforts to survive. There also aren’t enough safe dormitories to shelter our children who are studying away from their families. The majority of them are trying to survive in tents.

When we witnessed at first hand these poor conditions and grasped the vulnerability of the situation, as the Turkcell Family we thought hard about how we could be of more help to Van. And so we decided to develop an aid campaign, which we named “Turkey’s Money-box”.

Supported by the Ministry of National Education, and in cooperation with the Turkish Education Foundation, we launched our aid campaign and donated 5,000,000 Turkish Liras to Turkey’s Mon- ey-box. This amount will be used to build houses and dormitories to accommodate 100 teachers and 100 students, respectively. And, 100 scholarships will be granted to successful students in financial need. 55 We know that these efforts are still not enough for Van. Because, there is a need for more student scholarships, more teacher housing and more support for everyone in the region. Therefore, we invite everybody who wishes to contribute to our education campaign for Van and donate to “Turkey’s Money-box”. We believe that we can re- build a brighter future for Van by supporting more teachers and students.

Dormitories and scholarships have been offered to students The student dormitory to be built by Turkcell CONTRIBUTION TO SPORTS tennis, and athletics, along with cycling for the will cover an area of 1,500 m2 and accommodate visually-impaired, across Turkey in 2009. Athletes 100 students. Also featuring social facilities, the Runners to the Future were offered a wide range of support including dormitory is being designed to be youth-friendly, Developed in cooperation with the General Direc- health checks, equipment, use of camp facilities, as well as earthquake-resistant and safe. It is torate of Youth and Sports, the Runners to the Fu- bonus payments, use of performance development planned to accommodate high school students ture project aims to support those athletes who will centers and work with trainers. In addition to sup- selected on the basis of need by the Ministry successfully represent Turkey in the international porting athletes of the youth team, the Runners to of National Education. Turkcell will also offer arena. The project was implemented to meet the re- the Future project also provided support to ath- scholarships to successful students in Van facing quirement to promote and contribute to the devel- letes who with their achievements would serve as financial difficulties. Construction of the Teach- opment of both team and individual sports. Included role models to young athletes. Among the national ers’ Campus and student dormitory will com- in the national plan of the United Nations’ Alliance athletes who represent our country successfully mence in March 2012 and is planned for delivery of Civilizations project, the project selected young abroad and receive support under the project are in September 2012, before the start of the new athletes based on their talent, and coaches them in Marsel Ilhan, Cagla Buyukakcay, Merve Aydin, Ay- academic year. sports, including weightlifting, skiing, swimming, segul Coban and Ediz Yildirimer. TURKCELL ANNUAL REPORT 2011

Through “The Startup Factory”, we support innovative ideas and transform them into sustainable business models that create benefit for society

In 2011, in cooperation with various sports fed- ing value-added projects accounts for a signifi- erations in Turkey, Turkcell became the main cant part of our social responsibility vision. In line sponsor in six individual sporting branches and with this vision, we are supporting the creation of Employs expanded the scope of the Runners to the Future new ideas through “The Startup Factory” (Girişim approximately project to include national teams. Fabrikası), which we launched in cooperation with Özyeğin University. With this collabora- Turkcell: The Main sponsor of the tion, our aim is to transform the innovative ideas 11,000 National Football and Basketball Teams in Turkcell’s focus areas into sustainable business Turkcell has been the “Official Communication models that will add value to society. people Sponsor” of the National Football Team since 2002 and “Main Sponsor” since 2005. We plan CONTRIBUTION TO EMPLOYMENT to continue our support of the National Football As Turkcell, we also prioritize investing in em- Team, recognizing the importance of the team’s ployment. Turkcell Group employs approximately 56 achievements in boosting national morale in or- 11,000 people. We have established an eco-sys- Ecosystem of der to increase our country’s reputation in the in- tem of 80,000 people, including our dealers and ternational arena. Turkcell also supports the Na- business partners. Moreover, we pay particular tional Basketball Team, encouraging and inspiring attention to employing disabled people, and ac- 80,000 upcoming generations. Starting off as the Official cordingly Turkcell Group currently employs 310 Communication Sponsor in 2002, we became the disabled individuals. The majority of our disabled people main sponsor in 2006. Turkcell was also the main employees (200 individuals) work at Turkcell sponsor of the World Basketball Championship in Global Bilgi Call Centers spread across Turkey. 2010, where our national team achieved success 50% of employees (100 individuals) at our Turk- by finishing runners-up, and we have extended cell Global Bilgi Karaman Call Center are disabled. sponsorship of this major event until 2015. We also employ seven disabled individuals, who provide call center services from their own homes CONTRIBUTION TO ENTREPRENEURSHIP through a project implemented in cooperation The MIT Enterprise Forum was founded in order with the Ministry of Transport, Maritime Affairs to stimulate entrepreneurship by the Massa- and Communication. With our Turkcell Global chusetts Institute of Technology (MIT), one of Bilgi call center, we employ around 10,000 people the most prestigious universities in the world. in 14 locations in total, including nine in Turkey The second Forum in Europe was realized in (Istanbul, Izmir, Erzurum, Eskişehir, Diyarbakir, Turkey with the contribution of Turkcell, one of Ankara, and Karaman), three in Ukraine, and one the stakeholders of the Global Entrepreneurship in Belarus. Week (GEW), held each November in more than 100 countries. This year Turkcell became the main We have also provided employment sponsor of the Global Entrepreneurship Forum, opportunities to more than 2,000 young where 1,500 entrepreneurs shared their views people in partnership with ISKUR (Turkish on subjects ranging from new ideas to financing Employment Agency) schemes. Investing in qualified human resources We cooperated with ISKUR (Turkish Employment and good ideas generated in Turkey and support- Agency), which operates under the Ministry of Labor and Social Security, with the leadership of Turkcell’s investment has not only led to an increase Turkcell Academy within the context of the “our in the number of credit card users, but also the es- Turkcell Global Bilgi people are our priority and pioneers” and “invest- tablishment of shopping mall projects in Erzurum. Erzurum Call Center, ing in people” vision. In this context, we founded Turkcell is also a leading example for other call cen- the “Turkcell Retail Sales Development Program” ters that have more recently relocated to the region. which is one of the and the “Customer Relations Development Pro- gram” Since the beginning of our strategic coop- TURKCELL VOLUNTEERS largest investments eration with ISKUR in 2010, we have trained 2,173 individuals, and 474 people have been employed at It’s sharing that makes life beautiful… ever to be realized in Turkcell Communication Centers and call centers. The Turkcell Volunteers group, composed of Turkcell employees, continues to implement projects focused the eastern part of Contribution to Regional Economic Develop- on children. Turkcell Group employees are offered ment: Turkcell Global Bilgi Erzurum Call Cen- the opportunity to work as Turkcell Volunteers by Turkey, has helped ter Economic Impact Assessment Study either providing financial support or participating in the creation of an The Turkcell Global Bilgi Erzurum Call Center, actively in various projects undertaken. Turkcell Vol- initiated by Turkcell five years ago as one of the unteers projects to date have included “Would You economy in Erzurum largest technology investments ever to be real- Share Your Toy?”; “My First Holiday”; “A Book for ized in the eastern part of Turkey, makes sig- Every Child”; and “Curiosity Room.” In 2011, Turk- over five years worth nificant contributions to the economic and social cell Volunteers introduced 17,000 students from 28 development of the region. The Turkcell Global schools in 20 provinces to the Curiosity Library. TRY 309 million Bilgi Erzurum Call Center Economic Impact As- sessment Study was conducted by the Economic Turkcell Volunteers supported the establishment Policy Research Foundation of Turkey in 2011 in of a sports field at the Tokat Harun Yüksel El- order to understand the impact of Turkcell on Er- ementary School. The volunteers have also helped zurum’s economy. According to the results of the Gebze Mimar Sinan Elementary School install a study, by investing TRY 40 million in the province science lab and conference hall. They have con- Turkcell has provided employment and helped to tinued to grant scholarships to hard-working and generate a TRY 309 million economy in Erzurum successful students studying at “sister schools” 57 by triggering the production and consumption who cannot continue their education due to finan- patterns of the city over the past five years. cial difficulties. Turkcell Volunteers also quickly transported six trucks of aid that was collected Pioneers of Female Employment immediately after the earthquake, to the Van Our private industry investment has made a huge province, personally delivering these supplies vil- difference to the socio-economic structure of Er- lage by village. In December, Turkcell Volunteers zurum by providing more than 1,000 new jobs. And delivered stationery supplies, toys, shoes and moreover, our investment has encouraged women clothes to hundreds of students studying at Kars to enter business life. In Erzurum, female em- Akören Elementary School and helped the school ployment has been limited, and most women are install a Curiosity Library (Merak Kütüphanesi). lacking social security rights from employers. The share of female employees at the Turkcell Global RESPONSIBLE TECHNOLOGY Bilgi Call Center has reached 46%, and 55% of these began their professional lives at Turkcell. It We linked our base stations with Kandilli has also been realized 33% of the female employ- As part of the “Earthquake Information System ees working in Erzurum would have looked for Project” and in cooperation with the Bogazici jobs in other cities had they not been employed by University Kandilli Observatory and Earthquake Turkcell. In consequence, we have seen that the Research Institute, we installed “accelerometers” call center investment has played a significant role at 25 base stations, establishing an information in reversing the regional brain drain . bridge between Turkcell and Kandilli. Thanks to the system, locating and determining earth- Increased disposable income across the province quake epicenters and magnitudes will take less In addition, we have seen that Turkcell contributed time, while seismic intensity maps will shortly be to the public budget in Erzurum. By increasing em- prepared and shared. The number of “accelerom- ployment opportunities in the region, Turkcell also eters” installed at Turkcell base stations in Turkey increased the potential for consumption. Indeed, will rise to nearly 120 within three years. TURKCELL ANNUAL REPORT 2011

Turkcell Academy makes a difference on HR Excellence Awards OUR AWARDS international platforms Turkcell won first prize with “I Have Much More As the strategy development center of Turkcell in Turkcell” in the “Best HR Strategy from Over- Our operations were Group, the Turkcell Academy has won many awards seas” category in an organization by British HR in previous years. In addition to an honor award Magazine. awarded in 2011. Life at the Cubic (Corporate University Best in Class) Awards in the “Best New Corporate University” Turkcell Annual Report is beautiful, when we category, Turkcell Academy has won the “Excel- Turkcell’s 2010 Annual Report was rated “best lence” award at the “Annual Corporate University annual report in the world” in the telecoms sector share our awards with Xchange Awards for Excellence and Innovation” by the League of American Communications Pro- organized by the Corporate University Xchange in fessionals LLC (LACP), one of the world’s most Turkcell subscribers the “Learning Technology” category, having being prestigious public relations platforms. voted the company that makes the most effective use of learning technologies. In 2010, Turkcell 3G Speed Test Academy won the “Leadership Development Prog- Turkcell earned the “Honor Award” in the “Best ram” and “Excellence in Practice” award given by Anniversary Event” category at the PR News the American Society for Training & Development Awards for its 3G speed test on the first anniver- (ASTD), the world’s largest association dedicated sary of 3G last year. to workplace learning and development professionals. In parallel with these achievements, Turk- More Tweets cell Academy was invited to sit on the Corporate Turkcell won an award for its “More Tweets” pro- University Xchange/Global Leadership Advisory ject at the Digital Communication Awards 2011, in Board. the “Innovation of the Year” category. The same project was considered worthy of winning both Furthermore, the Turkcell Academy won the follo- the “GD Grand Prix”, the jury’s special prize, and wing awards as the most effective user of learning the “Innovative Campaign” awards at the 18th technologies in 2011: Golden Drum Awards. 58 • “Excellence” award given by the American Soci- Snowdrops ety for Training & Development (ASTD), which The Snowdrops project won a prize in the “Best is the world’s largest association dedicated to Social Contribution” category at the World Com- workplace learning and development of profes- munication Awards (WCA) 2011. sionals, • “Best Practice” award given by Corporate Turkcell Global Bilgi University Xchange for its mobile learning app- Turkcell Global Bilgi won the “Employer of the lication, Year in Europe” award at the European Busi- • Awarded the Bronze Medal in the “Best ness Awards for its innovative human resources Content” and Silver Medal in the “Mobile Lear- practices. Additionally, Turkcell Global Bilgi won ning” categories by Brandon Hall Group, which first prize at the “2011 Top Ranking Performers” is considered to be one of the most prestigious awards organized by “ContactCenterWorld.com” research institutions of the world in the field of in the “Best Call Center” and “Best Performance Distance Learning. Improvement Program” categories. Turkcell appeared on the “Companies of the Decade” list of World Finance With its performance in the 2000-2010 period, Turkcell featured on the “Company of the Decade” list compiled by World Finance. Turkcell won this award based on such criteria as performance, reputation and excellence in customer services.

Together with Turkey’s Turkcell, global giants like Apple Inc. from the U.S., Nokia from Finland and Deutsche Bank from Germany also picked up awards.

Turkcell Teknoloji received the “Grand Prize” award at the “2nd Istanbul Chamber of Industry Innovation Awards” The second ISO Innovation Awards, for resident industrial establishments in Turkey, was held in December 2011, where Turkcell was awarded the “Grand Prize”.

Mobile Wallet (Cep-T Cüzdan) brought an award to Turkcell Teknoloji Turkcell Teknoloji won the “Best Contactless Mo- bile Transaction (NFC)” award for Cep-T Cüzdan, a world first, at the SIMagine Awards given by SIM Alliance. 59 Turkcell was ranked among the top five transparent companies in Europe for the second time Turkcell, as Turkey’s leading communication and technology company, was awarded “Best Fi- nancial Disclosure” during the IR Summit 2011, organized in London, and given by the Investor Relations Global Rankings (IRGR) for its financial disclosure procedures for the second consecutive year. Turkcell also won this award in 2010, ranking among the top five transparent companies in Europe.

Turkcell is number 1 in the “Most Admired Company in Turkey” listings “Innovation” left its mark on the 8th edition of the “Most Admired Companies in Turkey” survey conducted by Capital. We won first place with our Click to Talk (Tıkla Konuş) application global first technology, has been awarded “The best product” at the Global Mobile Awards Cep-T Cüzdan, in the With our Click to Talk application, which is a global first, we have been the only operator to add “Best Contactless Mobile Turkey’s name to the “winners list” during the GSMA Mobile Congress in Barcelona. Transaction (NFC)” category TURKCELL ANNUAL REPORT 2011

SUBSIDIARIES

In 2011, the contribution of Turkcell subsidiaries to consolidated revenues rose to 14% thanks to the success of our operations

INTERNATIONAL SUBSIDIARIES

UkraIne: Astelit By the start of February 2005, Turkcell’s 55% indirect subsidiary In 2011, Astelit’s EBITDA increased by 46% compared to 2010 due Astelit had launched its GSM operations in Ukraine under the “life:)” to the company’s profitability focused strategy and effective cost brand name. Of the company’s shares, 45% belongs to the System control initiatives. In 2011, its EBITDA margin rose to 25.5% from Capital Management Group. Astelit covers 98% of Ukraine’s popula- the 19% level of the previous year. The main drivers of this increase tion and 92% of the country’s territory. In 2011, Astelit’s number of were tariff redesigns resulting in a decrease in interconnection three-month active subscribers rose by 0.9 million and reached 7.0 costs, together with cost cutting measures. The 3-month active million. The number of registered subscribers reached to 9.7 million. ARPU rose by 20.5% compared to 2010, mainly driven by the rise in Astelit ranks third in terms of subscriber base and has a market share international call consumption and roaming services. In 2011 MoU of 18% in Ukraine. rose by 22% over the previous year. 60

BeST: Turkcell purchased 80% of Belarusian Telecommunications Net- The acquisition of BeST gives Turkcell the opportunity to enter a work (BeST) for US$500 million from the State Assets Committee market of growth potential. Belarus’ growing economy and young of the Republic of Belarus in July 2008 as part of the Company’s and well-educated population, make it an attractive market in a strategy to capitalize on the emerging investment potential of region where Turkcell is keen to grow. neighboring countries. BeST was able to achieve 80.1% geographical coverage within The purchase amount is scheduled to be paid in three installments: three years, while increasing its subscriber market share to 16% in The initial payment of US$300 million was made on August 26, a market with a penetration rate of 120% as of 2011. BeST’s sub- 2008, with the second installment of US$100 million made on De- scriber base rose by 20% compared to 2010 and reached 1.8 mil- cember 31, 2009. The final US$100 million installment was made lion. Increasing its market share to 16%, the company ranked third on December 31, 2010. In accordance with the agreement, an ad- in the Belarusian mobile market. As the first mobile operator in ditional payment of US$100 million falls due when BeST first an- Belarus to launch 3G services in November 2009, BeST continued nounces a net annual profit. its investments with a TRY 78 million capital expenditure in 2011.

TurkIsh RepublIc of Northern Cyprus: KKTCell Established in 1999, KKTCell is a subsidiary of Turkcell that operated Introducing 3G technology to Northern Cyprus in 2008, KKTCell under a revenue-sharing agreement with the government of the Turk- began offering 3G services and products to the people of Northern ish Republic of Northern Cyprus (TRNC) until the end of July 2007. In Cyprus on October 14, 2008. In 2010, through its radio link project, 2007, KKTCell signed an 18-year license agreement for the installa- KKTCell had the only international gateway other than that of the tion and operation of a digital, cellular, and mobile telecommunication TRNC Telecommunication Board. system with the TRNC Ministry of Communications & Works. This agreement replaced the GSM-Mobile Telephone System Agreement KKTCell, covering 100% of the population, has a market share of 69% that was based on revenue-sharing. with approximately 424,000 subscribers and ranks 1st in the market. GROUP OF COMPANIES

ASTELIT 55%

TURKTELL 99.99% BeST 80% ULUSLARARASI

TURKCELL EUROPE 100% GLOBAL 99.81%

FINANCELL100% GLOBAL 100% TOWER

61 TURKCELL 100% TURKCELL TEKNOLOJI TURKTELL 99.99% GROUP BILISIM TURKCELL 99.99% SUPERONLINE

A-TEL 50% INTELTEK 55%

KKTCELL 100% MOLDCELL 100%

KCELL 51% FINTUR 41.45% GEOCELL 100%

AZERCELL 51.3%

* Summary subsidiary chart TURKCELL ANNUAL REPORT 2011

FINTUR We conduct our mobile operations in growing markets like Azer- Fintur’s consolidated revenue increased by 9% to US$ 2 billion in baijan, Kazakhstan, Moldova and Georgia through our subsidiary 2011, mainly driven by a 17% rise in the revenues of our Kazakh op- Fintur Holdings BV, in which we hold a 41.45% stake. Fintur’s sub- eration, along with strong subscriber acquisitions and an improved scriber base continued to grow in 2011. The overall subscriber num- macroeconomic environment. We account for our investment in ber rose by 14.5% to 18.2 million, mainly as a result of significant Fintur using the equity method. Fintur’s contribution to income was net subscriber additions in Kazakhstan. US$ 165.3 million in 2011. The details about subsidiaries:

Azerbaijan: Azercell Azercell was established as a joint venture between Azertel and the had approximately 4.2 million subscribers, and held the leading po- Azerbaijani Ministry of Communications in 1996. Currently, Fintur sition in the telecommunication sector. owns approximately 51% of Azercell through direct and indirect holdings. Despite intensifying price competition, the Company has On November 2, 2011 Azercell acquired a 3G license by the Minis- managed to maintain its market leadership since its first year of try of Communications and Information Technology. Azercell then operation. launched 3G network services covering 62 regions in the country with 40-60% discounts on data rates, and with the features of Video Deriving its strength mainly from its wide coverage area, strong Call, and Mobile TV with 9 different local and international channels. network structure, high quality service, extensive product range, highly professional staff and support of shareholders, Azercell all Additionally, the Company holds the majority stake in Azeron- lows its subscribers to make calls using the networks of 430 opera- line, the internet service provider established as a limited liabil- tors in 153 countries around the world. In 2011 year end, Azercell ity company in December 1999.

Moldova: Moldcell 62 Moldcell was granted its GSM 900 license in November 1999 and to roaming for prepaid subscribers, WAP/Internet Access, GPRS/ commenced operations in Moldova in April 2000. EDGE, 3.5G and BlackBerry Enterprise Solution.

The Company is fully-owned by Fintur Holdings B.V. Moldcell was Moldcell, ranked second in the market, had increased its subscriber the first operator in Moldova to provide services ranging from SMS number to 1.1 million by the end of 2011.

Georgia: Geocell Geocell was founded in 1996 as a joint venture between the MHz operating license in April of that year. In 2006, the Company Georgian Ministry of Telecommunications and Turkish com- acquired its UMTS license (2100 MHz frequency), resulting in im- pany Gürtel Telekomunikasyon Yatirim ve Diş Ticaret Anonim proved network coverage, added capacity and the possibility for Şirketi (Gürtel) as the first GSM operator in Georgia. The prepaid subscribers to use 3G technology. As of December 2011, Company is fully owned by Fintur Holdings B.V. Geocell began Geocell’s subscriber base had reached 2.1 million, confirming it as commerci al operations in March 1997 and was granted a GSM 900 the market leader.

Kazakhstan: Kcell Kcell commenced its activities in 1999 as a joint venture be- agreement that provides the right to run an UMTS/WCDMA net- tween Fintur Holdings B.V. and Kazakhstan’s national telecom- work. As the undisputed market leader in Kazakhstan, based on sub- munications operator Kazakhtelecom. Currently, Fintur owns scriptions, growth rate, investment volume and variety of services. approximately 51% of Kcell. The Company operates on a renew- able 15-year licensing agreement that provides the right to run Ranking among the largest cellular operators in Central Asia, Kcell’s a standard GSM 900 cellular network, and a 15-year licensing subscriber base had reached 10.8 million as of the end of 2011. TURKCELL EUROPE Turkcell Europe was founded by Turkcell in 2010. Headquartered subscribers can access the exclusive product and service offers of in Cologne, Germany, Turkcell Europe commenced its operations in Turkcell via T-Mobile (Deutsche Telekom AG), Germany’s premium April 2011. Turkcell Europe brings together the Turkish community of mobile communications network operator. three million people living in Germany, and anyone else having close contact with Turkey with Turkcell’s service quality, both in Germany With its extensive distribution network, Turkcell Europe offers ser- and Turkey. Besides providing reasonable call offers to Turkey from vices to its customers at nearly 2,000 locations spread across Germa- Germany, along with advantageous Turkcell offers also in Turkey, ny. Having reached a subscriber base of more than 200,000 during its Turkcell Europe aims to provide a unique experience to its custom- first year of operation, Turkcell Europe is among the fastest-growing ers in both Turkey and Germany. Furthermore, Turkcell Europe Mobile Virtual Network operators in the world.

DOMESTIC SUBSIDIARIES Turkcell SuperonlIne Tellcom İletişim Hizmetleri A.Ş., founded in 2004, merged its for a fiber-optic cable between Istanbul and Ankara. In 2007, Turkcell strength and brands with those of Turkey’s leading Internet provider, Superonline became the first alternative operator in Turkey to carry Superonline Uluslararası Elektronik Bilgilendirme, Telekomünikasyon domestic traffic. Turkcell Superonline provides its customers with ve Haberleşme Hizmetleri A.Ş. in May 2009, to operate under the affordable packages for fiber Internet, the most advanced Internet- brand name Superonline. Turkey’s innovative telecom operator access technology in the world. With its fiber-optic-infrastructure Superonline has been pursuing its operations under the “Turkcell investments completed within a relatively short timeframe, Turkcell Superonline” brand name since May 2011 with the strong contribu- Superonline introduced its customers to 100 Mbps Internet connection of the “Turkcell” brand name. The company continues its invest- tions in 2007, and in 2011 started providing 1000 Mbps internet con- ments towards becoming a complete solution and service provider nection to residents for the first time in Turkey. In December 2009, for its corporate and individual customers. Turkcell Superonline won the public tender for the 15-year lease of BOTAS’s fiber optic infrastructure, with a bid of EUR 20.9 million, and Following its establishment, Turkcell Superonline obtained the li- has been granted the right to use BOTAS’s 11,280 km routes. These 63 cense for long distance telephone services (LDTS), which allows it routes enable Turkcell Superonline to access each of Turkey’s regions. to provide long-distance call origination and termination for individual and corporate customers, as well as wholesale voice-carrying In 2011, Turkcell Superonline’s fiber-optic network reached approxi- services. The Company received its Internet service provider license mately 1 million home passes. In 2011, its contribution to Turkcell’s fi- in February 2005, and was granted a landline data transmission li- nancials continued to improve on 37% revenue growth and an EBITDA cense in June 2005 and an infrastructure operating license in April margin of 17.7%. Throughout the year, the focus on the higher-margin 2006. Turkcell Superonline won a major infrastructure tender initi- residential segment increased, resulting in year-on-year segment rev- ated by the Turkish Electricity Transmission Corporation (TEIAS) in enue growth of 93%. Meanwhile, corporate segment revenues grew January 2007, and has been granted the 10-year operational rights by 29.5%, leveraging the strengths of the Turkcell Group.

GLOBALTOWER GLOBALTOWER, which was established in 2006 with the vision of operations in Ukraine under the name of UKRTOWER. The shared infrastruc- “spreading communication everywhere”, provides operators, TV and radio ture services provided by GLOBALTOWER enable to eliminate initial cost of broadcasters, as well as civil and military communication/monitoring cor- investment and bring significant advantage in the total cost of ownership. porations in wireless communication with installation, leasing, and maintenance services at international standards for tower, roof and on-premises GLOBALTOWER enables customers to start services faster and earlier infrastructural facilities. It operates more than 5,500 tower fields across at more locations, thereby facilitating operational activities, and ensur- Turkey. Services provided by GLOBALTOWER which mainly comprise ing that its customers meet their commercial targets in a shorter time- ready towers and energy infrastructure, managed system room, mobile frame. tower solutions also include turn-key telecom project solutions. Moreover, GLOBALTOWER’s business model also contributes to an im- GLOBALTOWER stands out as Turkey’s first and only and one of Europe’s portant social responsibility practice through the efficient use of national leading infrastructure operators, for its tower field portfolio, and contin- resources and the reduction of environmental impact. These services enable ues to grow steadily in its sector. GLOBALTOWER aims to extend its rapid operators to focus their investments, human resources and energies on their growth in Turkey to international markets. Accordingly, in 2009 it began core business activities. TURKCELL ANNUAL REPORT 2011

Inteltek Inteltek was established in 2001 and owned by Turktell, a Turkcell electronic agents over the Internet, GSM, a call center and digital TV affiliate, Intralot and Intralot Iberia Holding, with respective shares broadcasting platforms. of 55%, 20% and 25%. Established with the aim of exploring and utilizing available business opportunities within the gaming sector, An agreement to protect the ethical values of football has been the Company is the sole authorized operator of sports betting games signed with the Turkish Football Federation and Spor Toto Organi- in Turkey. zation, and a guaranteeing position has been undertaken in Turkish football. Furthermore, a similar agreement has been signed with Inteltek is successfully carrying out work and related services regard- UEFA and FIFA via a collective platform composed of official Euro- ing the establishment and operation of the central betting system for pean betting companies. With its membership of the World Lottery sports games based fixed-odds and paramutual betting, on behalf Association (WLA) and the European Lottery Union (EL), Inteltek is of the Directorate of the Spor Toto Organization under the Ministry making a bid to participate in the industry at an international level of General Directorate of Youth and Sports (GSGM). It has also es- and follow relevant developments accordingly. Inteltek, through the tablished and operates the risk-management system and services of ”iddaa” brand managed on behalf of Spor Toto Organization, contin- the main dealership, using Intralot’s technology and know-how, and ued to create added value for the Turkish economy with tax income the strong GSM infrastructure of Turkcell. Inteltek is now one of the generated for the state amounting to TRY1,172 billion, as well as con- world’s largest operators in the state-controlled betting-games sec- tributions to Turkish Sports of TRY 788 million in 2010. tor, and has become an exemplary and leading organization with its contributions to the public and Turkish sports, thanks to its opera- As part of Inteltek’s strategy of capitalizing on the emerging invest- tions and “iddaa” trademark. As a result, it has virtually created a sec- ment potential of neighboring countries, it received authorization to tor providing income for thousands of people. organize, operate, manage and develop the fixed-odds and paramutual sports betting business in Azerbaijan from Azerbaycan Azeridmanser- Inteltek won the tender held in August 2008 by the Directorate of vis Limited Company in 2010. Inteltek owns 51% of Azerinteltek, do- Spor Toto Organization under the GSGM to acquire the rights to oper- miciled in Azerbaijan, for a period of 10 years. Starting its operations 64 ate fixed-odds and paramutual betting games based on sports events on 18th of January 2011, Azerinteltek exceeded 245 stationary agents for a period of 10 years until August 2018. The sales activities of as of the end of 2011, and has become one of the best known brands Inteltek in Turkey are managed through a network of almost over with its “Topaz” brand. Inteltek will continue to pursue opportunities 6,000 agents (incl. 1,000 mobile agents) across 81 provinces, six beyond Turkey as a leading global operator in its industry.

Turkcell Global BIlgI Turkcell Global Bilgi, a Turkcell Group company, commenced its op- service, customer acquisition, telesales, customer retention, collec- erations as a call center in 1999. It provides services to prominent tion, customer value growth, customer data management and analy- companies as Turkey’s leading customer relations management cen- sis. Global Bilgi employs a number of diverse channels for customer ter from its 15 locations; 11 in Turkey, 3 in Ukraine and 1 in Belarus interaction that include Face-to-Face (Field Teams), Phone, IVR & with 10,000 employees and 7,500 desk capacity. Currently, Turkcell IVVR, Email, SMS, Web, Video CC and Social Media. Turkcell Global Global Bilgi has the best technological system in its sector in Turkey, Bilgi is specialized in cost effective customer interaction solutions as well as in Europe. by use of optimum contact channel mix and technology enabled services. Besides “self service” channels expertise, it leads the industry As the leader company with 45% market share in Turkey’s call center with pioneering voice technologies such as voice verification, auto- industry, Turkcell Global Bilgi is listed among Turkey’s top 500 indus- matic speech recognition and call steering. trial enterprises. Turkcell Global Bilgi, positioning itself as the region’s top innovative Turkcell Global Bilgi provides customer relations management servic- customer services solution provider, has been acknowledged by re- es to various industries in addition to its indept expertise in Telecom. ceipt of over 30 domestic and international awards. In Top Ranking Performer Awards organized by ContactCenterWorld.com in 2011, Government, Retail, Finance and Insurance are the other areas Turkcell Global Bilgi took first place in the categories of “The Best wherein Turkcell Global Bilgi has specialized and expanded its cus- Call Center” and “The Best Performance Development Program” in tomer portfolio. 5 million people have benefited from services of the world. Turkcell Global Bilgi also won “The Employer of the Year” Global Bilgi to public sector. With its “end-to-end ” solutions, Turk- award at the European Business Awards, and was selected as “Eu- cell Global Bilgi creates value for its clients in the fields of customer rope’s Second Best Call Center” at the European Call Center Awards. Turkcell TeknolojI Established to develop competitive services and products in infor- Turkcell Teknoloji further strengthened its patent achievements mation and communication technology, Turkcell Teknoloji stands by becoming the patent application champion in the Kocaeli out as one of Turkey’s leading R&D and innovation companies. province. All four projects submitted to TUBITAK (Scientific and Turkcell Teknoloji was founded in 2007 following the decision to Technological Research Council of Turkey) TEYDEB (Technol- enable R&D staff specialized in information and communication ogy and Innovation Funding Programs Directorate) qualified for technologies within Turkcell of 1994, to conduct their R&D and in- grant funding. novative activities in an optimal setting under the umbrella of a techno-park company. Construction of Turkcell Teknoloji premises, We are reinvesting the funds granted to our R&D designed with the goal of establishing the most favorable environ- projects into our new R&D efforts ment for those engineers responsible for research and develop- Our Applied Research Unit (ARU) was founded in early 2011 in or- ment, was completed in the Technology Free Zone in 2008. der to help Turkcell Group gain competitive advantages and develop products and services aligned with the company’s requirements Having established the basis of its overseas efforts as provid- and business models through conducting research on emerging ing products and services that make a difference for Turkcell and technologies. The focus areas of the ARU have been determined as Turkcell group companies, as well as for other operators, and be- Embedded Systems (ES) and Computational Intelligence (CI). We come a global brand in its operational field since its foundation, have since begun to enjoy the benefits of the prototypes in 2011. Turkcell Teknoloji has exported technology to Zain, one of the leading GSM operators in the Middle East and Africa. Becoming In the ES focus area we are developing an open source-based the first Turkish company to cooperate with the Zain Group in Turkcell Communication Module (TCM) in order to allow Turk- the software field, Turkcell Teknoloji transferred the Campaign cell’s corporate customers to use M2M technology more effi- Management System platform, developed in house, to another ciently. With the application toolkit created with this module, part of the world. As of November 2011, Zain Kuwait had started we are aiming to help Turkcell solution partners develop faster using the platform in designing and managing campaigns which and higher quality M2M applications. By using this application will contribute to the company’s competitive advantage. This toolkit in our laboratories, prototype applications for health, 65 successful project will offer new opportunities to Turkcell within smart home and smart car related concepts are being devel- Zain Kuwait and the Group’s other operation regions. oped.

Having adopted the strategy of engaging in world-class software As a result of the research and development activities carried out development, Turkcell Teknoloji became the first and only com- in behavior modeling and customer attrition estimates in the CI pany from Turkey to join the CISQ (Consortium for IT Software focus area, behavior models can be created, trained and tested Quality), which establishes the standards for software quality. faster with machine learning techniques. Continuing its activities with more than 400 high-caliber engineers as of 2011, Turkcell Teknoloji is developing services and products By developing high quality software applications, Turkcell in areas such as customer relationships and channel management, Teknoloji aims to provide its customers with systems that are mobile marketing, business intelligence solutions, SIM assets and managed with proven high quality processes. The “Software services management, mobile financial services, roaming solu- Quality and Testing” development program launched within this tions, value-added services and operational and business support framework allows us to conduct software tests, improve the systems. The success of these products and services, which are de- quality of test data and ensure consistency. Under this program, veloped in-house, is attested to by numerous international awards. Turkcell Teknoloji employees provide lectures to students studying at Turkey’s leading universities on topics including software Turkcell Teknoloji was held up as an example to the rest of the quality, test engineering and project management with the aim world for the projects it carried out in the area of business in- of contributing to the development of a skilled domestic work- telligence, and given the “2011 Technology Specialist: Corporate force. Architect” award at the Open World meetings organized by Or- acle Inc. And at the SImagine awards organized by SIM Alliance, In providing products and solutions that made a difference to Turkcell Teknoloji was the winner in the “Best Contactless Mo- Turkcell and Turkcell Group companies across the world, thus bile Transaction (NFC)” category with mobile wallet application, creating value-added for other operators, Turkcell Teknoloji aims Cep-T Cüzdan, itself a world first. In 2011 the ompanyc was also to be a global brand by continuing its technology and software the winner of the ISO Innovation Award, which honors leading export activities in the Commonwealth of Independent States industrial enterprises based on innovation in Turkey. (CIS), as well as the Middle East, Africa and Europe. TURKCELL ANNUAL REPORT 2011

HUMAN RESOURCES

Turkcell is a brand that enhances life by sharing, are engaging in corporate social responsibility We carefully create and adds value to the lives of all of its stakehold- projects, from education to environmental pro- and lovingly share ers through its technology and communication tection, through the Turkcell Volunteers program, solutions. In line with our corporate and brand adding value in many areas of Turkey under the with you values, our employee brand, which we have posi- Turkcell name. tioned by declaring that “I have much more with Turkcell”, is contributing to the development and We support innovative ideas by appreciating sustainability of a people-oriented culture. them more. We have rewarded 20% of our employees who have generated new ideas, which Our core strategies can be stated as operating as a have a total value of US$236 million to date. team, which entails putting customers first, making a difference, believing in open communication, be- Through the events organized by the Turkcell ing agile and honoring people, as well as realizing Social Activity Group (TSAG), we offer enjoyable our human resources practices in innovative ways, programs to our employees by organizing social leading the way in best practices and providing our entertainment activities. employees with experiences that create a difference. We have so far created numerous best prac- We are contributing to the professional tices in many areas with our business partnerships, development of our leaders, employees, Turkcell Academy, in-house communication efforts business partners and ecosystem with more and employee relations practices. With this new development solutions 66 strategy, Turkcell became the first company from We ensure that all employees in our ecosystem, Turkey to win the HR Excellence Award given by with particular attention to Turkcell Group em- HR Magazine in 2011. ployees and field team members, are “ready” to tackle the competition in parallel with both the Striving to become indispensable in the eyes fast-changing business environment and our cor- of our employees, we organized our human porate needs. resources practices in six categories: By providing more career opportunities to our Generating various development solutions under employees, we are allowing them to apply for va- such topics as “Customer,” “Technology,” and cancies shared on an in-house platform together “Leadership,” the Turkcell Academy provided with the Performance and Talent Management 1,419,745 hours of training to 62,066 individuals processes we apply across Turkcell Group com- operating in the Turkcell Group ecosystem in 1,419,745 panies. As a result, our employees can take ad- 2011. These figures correspond to 23 hours of hours of vantage of processes such as promotion, transfer, training on average per individual. and rotation, etc. We provide more support to our training were employees by offering them fringe benefits that Most Significant Development solutions provided to enhance their professional and private lives, such in 2011 as Flex Menu, Turkcell Assist and individual pen- As part of the Turkcell Group Sales Program, 62,066 sion schemes. which covered all Turkcell Group employees, individuals dealers, business partners and corporate solution We offer “More Sharing” opportunities to our centers in contact with Turkcell customers, we team through social channels like Habercell and offered development solutions training that cov- Share the Turkcell/ Turkcell Blog. The Share ered common service and sales culture, products Turkcell application has been used by all Turkcell and services and specialist training for more than Group companies, and our employees have deliv- 30,000 individuals. By expanding our expertise ered our services to customers. Our employees to include our KKTCell Communication Centers, 67

Superonline Subscriber Centers and Life Points ronment. Additionally, we were selected as the first also began the preparation of a three-year profes- of Service and Sales, we prepared exclusive pro- according to the results of the “Top 50 Companies” sional development process in cooperation with fessional development programs for employees (voted by undergraduates) survey conducted by universities. As part of the continuing strategic working at these locations. Bloomberg Businessweek in 2011. We also included relationship between ISKUR (Turkish Employ- 6,155 employees to ensure that they, in constant in- ment Agency) and Turkcell, we provided training The Turkcell Academy Offered Real Customer teraction with customers at all contact points, learnt to 573 individuals, 364 of which were employed Experience through “Customer 2.0” the processes developed within the framework of at Turkcell Communication Centers, or at our call Through “Customer 2.0”, a customer-focused con- the Turkcell Service and Sales Model, and display center. All of our training projects aim to create a version program, Turkcell Group executives and behavior patterns compliant with the model on a skilled workforce for the industry. employees as Turkcell Ambassadors, came togeth- continual basis through the development of a com- er with our customers in the scope of the aware- mon language and perspective. As part of the Technology Development Program, ness and knowledge improving project. 3,876 we offered professional development programs employees from Turkcell shared their improve- We revised our professional development pro- and specialist training in mobile communication ment-related ideas with the customers at Turkcell grams in order to swiftly prepare new employ- and information technologies with 300 different Communication Centers, and at our call center. ees of the Corporate Business segment for the training programs for 53 different technical pro- challenges of field operations. These programs files. We enhanced corporate memory through We have been selected as the “Most Admired Com- continue to prepare them for the business world training sessions hosted by Turkcell Academy pany in Turkey” by Capital magazine for the past with on-the-job-training, rather than theoreti- trainers. The Turkcell Academy Leadership and 5 years thanks to the support of our employees in cal instruction, thus familiarizing them with the Talent Development Unit continues to strengthen developing our services as well as our working envi- business world and its dynamics immediately. We Turkcell Group’s leadership approach and common TURKCELL ANNUAL REPORT 2011

leadership culture by supporting the professional 78% of our educational development solutions University-industry development of 1,090 managers and managerial through distance learning channels using educa- partnerships help the candidates employed across Turkcell Group com- tional technology which represented US$18 mil- panies. Accordingly, we continue our strategic lion in savings. younger generation partnership with the Harvard Business School and Harvard Business Publishing. As part of this We add value to our business through make healthy career strategic partnership, we use a comprehensive university-industry partnerships web-based leadership development platform. As part of the “university-industry partnerships” decisions and thus Our senior level executives participate in Harvard implemented under the Turkcell Academy (Turk- create a skilled Business Discussion sessions and we continue our cell Group’s corporate university), we work with studies towards our strategic priorities. the world’s leading universities such as Harvard workforce for our Business School and Massachusetts Institute of In 2011, with the Turkcell Academy Marketing Con- Technology (MIT), as well as many reputable uni- country ferences, we continued to bring together Turkcell versities in Turkey. These institutions support the Group and senior level executives from other lead- project by conducting research into technology, ing companies with well known speakers, each one innovation, entrepreneurship, brand manage- an expert in their respective field. Accordingly, the ment, mobile marketing, customer relationship Turkcell Academy hosted Malcolm Gladwell and management, and market research and leader- David Plouffe in 2010, and Dan Ariely in January ship, and also by providing coordination services and Charlene Li in December, 2011. to various business areas.

In order to support the personal development University-industry partnerships are crucial in Technology Leaders of our employees, the Turkcell Academy offers training a qualified workforce and helping the training sessions to its employees under the title younger generation that will constitute the fu- Postgraduate of “Programs on Life” by motivating them with ture workforce of the country. We are aware that 68 the principle that “our business is technology, today’s young population will shape the future of Scholarship our business is people”. Encouraging the sharing our country and of technology. Program of information within the company and transfor- mation of the information and experiences pos- In this light we have designed three programs: sessed by individual employees into corporate “Turkcell Mobile Communication and Technology knowledge, Turkcell Academy creates informa- Development Program”; “Turkcell Customer Re- tion sharing opportunities by supporting its em- lationship Development Program” and “Turkcell ployees in serving as volunteer trainers, along Mobile Marketing Development Program.” These Turkcell Academy with more than 600 “Academy Trainers”. programs were created to share our accumulated Leadership and Talent knowledge and experience with university stu- As a result, we carried out in-house training activ- dents thereby helping to create a skilled work- Development ities on nearly 500 topics and reduced our training force for the rapidly developing IT industry. Unit costs by nearly TRY 1.5 million. The main programs implemented within this Turkcell Academy, the leader in learning vision are: technologies • Turkcell Mobile Communication and Technologies In parallel with Turkcell’s leader approach as a • Turkcell Teknoloji Software Quality and technology company, we aim to implement the Testing First Step to most relevant methods of teaching. In our train- • Turkcell Superonline Optic Networks ing activities we developed platforms as an alter- • Turkcell Mobile Marketing Professionalism native to traditional classroom training. Indeed, • Turkcell Customer Relationship Management Turkcell is one of the first companies in Turkey • Turkcell Global Bilgi Call Center Services and Program to provide e-learning training, and we continue Associate Degree Programs to offer development opportunities to nearly • Turkcell Global Bilgi Customer Relationships 25,000 people through our Turkcell Academy Development Programs e-learning platform. In 2011, we implemented • Turkcell Retail and Sales Development Program Turkcell reached 1,364 undergraduates through eight certification programs it organized during the 2010-2011 academic year and offered internship and employment opportunities to 46% of the students who completed the program successfully. In 2011, the Turkcell Academy realized the “Life with Turkcell” and “If you are young, you are the future” projects, visiting more than 20,000 university students at over 50 universities in 23 provinces and offering them seminars on “Mobile Innovation,” “New Technologies,” “Entrepreneur- ship,” and “Careers.” Furthermore, the Turkcell Academy participated in 71 university events as a guest speaker, and had the opportunity to share its knowledge of the industry and practices by getting in touch with more than 5,000 students.

We support talented young people with promising futures in the world of technology! Since 2007, we have run the “Technology Leaders Postgraduate Scholarship Program” launched to support the development of promising young talent and provide the industry with a skilled workforce. Designed with the valuable participation of the Turkish Informatics Association, this program offers 69 successful postgraduate students (whose names have been shared with us by the administrators of their universities) one-year scholarships upon completion of an evaluation phase. As in 2010, we were selected as the number one company according to the results of the (voted by undergraduates) survey conducted by Bloomberg Businessweek and Realta Consultancy in 2011.

Turkcell Group recruits new graduates through Turkcell Academy’s PAF (First Step to Professionalism) Program Turkcell Academy continued its First Step to Pro- fessionalism (PAF) Program in 2011, which it initiated to enable successful young talents to begin their professional life one step ahead and in the right direction. The PAF Program consists of 3 phases: the internship–part-time employment– new graduate recruitment phases, and aims to improve the awareness of these young people of professional life, business fields, companies, and jobs, while widening their perspective. In 2011, Turkcell offered internships to 270 students under this program. On a part-time basis 72 interns were employed and 18 gained full-time positions. TURKCELL ANNUAL REPORT 2011

MobIle TelecommunIcatIon Sector

The Turkish mobile Penetration scriber base in the market rose by 3.6 million The increased importance of operational profit- compared to 2010. The mobile line penetration telecommunication ability is in part due to the change in shareholder rate in Turkey stood at 85% in 2010 and rose structures in the Turkish telecommunications to 89% in 2011. Meanwhile, the rate in Europe sector has growth sector. This change came about with the sale of has reached 130%. On the other hand, this fig- potential Telsim, the privatization of Türk Telekom, the sale ure indicates that the Turkish market has growth of Telecom Italia Mobile’s shares in Avea to Türk potential in the medium-term thanks to its young Telekom, and the purchase of Telsim by Vodafone. and dynamic population. Mobile number portability (MNP), which was introduced to the Turkish market on November 9, Competition 2008, led to aggressive flat rate offers that nega- Market share oriented price competition contin- tively impacted the previously rational approach ued throughout 2011 in the Turkish market. All to competition between operators in the Turkish operators focused on increasing their post-paid market. Unlimited flat offers in the aftermath of subscriber base by providing high minute incen- the introduction of MNP led to a change in traffic tive MNP offers, launching low-priced voice composition from on-net to off-net and a decline packages and continuing to offer flat-rate min- in multiple SIM card usage. Together these factors ute packages to all providers. At the same time, 70 had a negative effect on operational profitability operators focused on switches from the com- as well as decreasing mobile line penetration. petitors’ pre-paid customers to their post-paid base. On the terminal front, the mobile market In 2011, due to the rise in the number of data quickly adapted to the rapidly-growing mobile subscribers and population growth, mobile sub- Internet era with increasing device variety and

Mobile Subscriber Number (millions) Mobile Line Penetration (%) Subscriber Market Shares* (%)

7.1 19.4 31.4 Avea 20% 130% 55.7 107% Turkcell Türkiye 42.4 89% 53% 33.9 Vodafone 28 %

2009 2010 2011 EU EMEA Turkey Source: ICTA 2G 3G Source: ICTA Source: Turkcell, BoA Merrill Lynch Q3 2011 report * Due to rounding, total market share amounts to 101% smartphone offerings focusing on different seg- Summary Consolidated Financial Statements ments. Smartphone prices decreased throughout the year, which led to an increase in their sales (million TRY) 2010 2011 Change (%) whereby their share among total device sales Total Revenue 9,003.6 9,370.1 4.1% reached 27%. Direct cost of revenues (5,039.2) (5,954.3) 18.2% Depreciation and amortization (1,139.7) (1,592.9) 39.8% As Turkcell, we continued our market leadership Gross Profit 3,964.4 3,415.8 (13.8%) by increasing our subscriber loyalty and satisfac- Gross Margin 44.0% 36.5% (7.5pp) tion, and by positioning Turkcell as a brand that Administrative expenses (521.9) (410.9) (21.3%) stands for quality. As a result, in 2011, we record- Selling and marketing expenses (1,633.9) (1,684.9) 3.1% ed 1.1 million new subscribers and reduced our EBITDA1 2,948.3 2,912.9 (1.2%) churn rate to its lowest level since 2008. We also EBITDA Margin 32.7% 31.1% (1.6pp) added 1.5 million post-paid subscribers in 2011. Net finance income / (expense) 264.0 17.3 (93.4%) Consequently, we maintained our 53% market Finance expense (153.4) (528.3) 244.4% share during the last three quarters of 2011. We Finance income 417.4 545.6 30.7% enhanced our device portfolio and offerings in ac- Share of profit of associates 184.7 227.1 23.0% cordance with our strategy of increasing data and Income tax expense (483.5) (485.0) 0.3% smart device usages. In 2011, we focused primar- Net Income 1,764.3 1,177.7 (33.2%) 71 ily on Turkcell-branded smartphones with the of- 1: EBITDA is a non-GAAP financial measure. fers (T10, T20 and T11) at affordable prices.

Regulation rentheses following the operational and financial Administrative expenses: In 2011, expenses Maximum rates and international SMS rates in- results for the year end 2011 refer to the same as a percentage of revenues decreased by 1.4 creased by 4% as of April 1, 2011, whereas local item in the year end of 2010. pp YoY, which was mainly related to a 1.6 pp SMS rates dropped by 48%. Also, active subscrib- fall in bad debt expenses as a percentage of er definition was changed in 2010, which length- Revenue: For the full year of 2011, consolidated revenues. ened the duration of the pre-paid churn period revenue improved to TRY 9,370.1 million (TRY from seven to nine months. However, the impact 9,003.6 million), mainly due to the 20.1% in- Sales and marketing expenses: For the full of this change began to be observed in 2011. The crease in mobile internet and services revenues of year, sales and marketing expenses as a percent- one-time impact of the new “active subscriber” Turkcell Turkey to TRY 1,944 million (TRY 1,619 age of revenue were almost stable at 18.0% definition on prepaid subscribers was observed million), as well as the 32.3% higher contribution (18.1%), mainly due to lower frequency usage in Q2 2011. of subsidiaries year-on-year (particularly through fees paid for prepaid subscribers, which were Superonline and Astelit). partially offset by increased marketing and sales TURKCELL GROUP: FINANCIAL AND expenses. OPERATIONAL PERFORMANCE IN 2011 Direct cost of revenues: For the full year, rose The following comments are based on the devel- by 18.2% to TRY5,954.3 million (TRY5,039.2 mil- EBITDA: In FY11, EBITDA was at TRY 2,912.9 opments and trends in 2011. All financial results lion). As a percentage of revenue, direct costs million (TRY2,948.3 million), while the EBITDA in this annual report are prepared in accordance increased from 56.0% to 63.5%, mainly due to margin was at 31.1% (32.7%). As a percentage of with International Financial Reporting Standards increases in depreciation and amortization (up revenues, 1.4 pp lower general and administrative (IFRS) and expressed in Turkish liras (TRY) unless 4.3 pp), interconnect costs (up 1.6 pp), wages and expenses together with a 0.1 pp lower sales and otherwise stated. A year on year comparison of salaries (up 0.5 pp), as well as network related marketing expenses were compensated for by a our key indicators is provided and figures in pa- costs (up 0.4 pp) and other items (up 0.7 pp). 3.1 pp higher direct cost of revenues. TURKCELL ANNUAL REPORT 2011

Net finance income / (expense): For the full Cash Flow Analysis: For the full year of 2011, Subsidiaries included in the consolidation do year, we recorded net finance income of TRY major cash outflows included capital expendi- not have any shares in the shareholders’ equity. 17.3 million (TRY 264.0 million), mainly due to tures. 2011 capital expenditures amounted to Turkcell donated TRY 9.439.516 in cash to various TRY438 million translation loss recorded by BeST TRY 1,636 million, of which TRY 894 million was associations, foundations and charitable organi- in FY11 resulting from a 178% devaluation in the related to Turkcell Turkey, TRY 123 million to zations in 2011. BYR/US$ rate in Belarus. This is partially offset our Ukrainian operations, TRY 393 million to Su- by a TRY 227 million translation gain in Turkcell peronline and TRY 104 million to BeST. In FY11, Subscribers: Turkcell Turkey’s subscriber base Turkey due to TRY/US$ depreciation of 22.2% operational group Capex as a percentage of rev- totaled 34.5 million (33.5 million) in 2011, up in 2011, as well as a TRY 122 million increase in enues was at approximately 17%, and we expect by 3.0% YoY. We managed a highly price com- interest income on time deposits, due to the in- a similar ratio of 17% for 2012. petitive environment and recorded positive net crease in cash balance including time deposits subscriber additions of 1.1 million in FY11, which with maturity of more than 3 months. In accordance with IFRS, time deposits with ma- reflects the positive result of investment in our turities of longer than 3 months are classified as brand and sales channel, as well as our greater Share of profit of equity accounted investees: financial assets. Therefore, the cash balance in focus during the year on customer retention and In FY11, with the impact of Fintur and A-Tel on net the balance sheet is shown net of time deposits satisfaction. income, our share in the net income of unconsoli- with maturities longer than three months (TRY dated investees rose by 23.0% from TRY 184.7 1,596.1 million). Expenses incurred by Turkcell The share of postpaid subscriber base rose to million to TRY 227.1 million. Teknoloji, a Turkcell subsidiary, within the frame- 33.8% (30.1%), with the base improving by work of the “Industry R&D Projects Support Pro- 15.8% YoY to 11.7 million (10.1 million) in line Income tax expense: In FY11, the total taxation gram” conducted in association with TUBITAK with our value focus. In FY11 we registered 1.5 72 charge was at TRY485.0 million (TRY483.5 mil- and the Undersecretariat of Foreign Trade, are million postpaid subscriber additions, of which lion). Of the total tax charge, TRY512.2 million covered up to 60%. Accordingly, TRY 1.1 million 637,000 were achieved in the fourth quarter (our was related to current tax charges, while a de- was deducted from the cost of sales incurred from highest net postpaid additions since Q2 2009). ferred tax income totaled TRY27.2 million. January 1, 2011, through December 31, 2011. In the meantime, we saw a slowdown in the con- Net income: For the full year, decreased to The company’s policies stipulate that Turkcell meets traction of the prepaid subscriber base, declining TRY1,178 million (TRY1,764 million), mainly on its needs through capital increases and/or credit fa- by 1.7% to 22.9 million (23.3 million). total translation losses recorded at BeST in the cilities in accordance with pre-determined Debt to amount of TRY438 million, as well as the total Equity ratios. All group companies meet their cash Churn Rate: This refers to voluntarily and invol- impairment charges of TRY204 million in BeST needs, following their approval by their own Boards untarily disconnected subscribers. Our annual due to 178% devaluation of BYR against US$. Ex- of Directors and Turkcell Board of Directors, through churn rate decreased 6 pp to 27.9% (33.9%), cluding one-off items below the EBITDA line, cur- capital increases and/or credit facilities under the di- marking the lowest rate since 2008. rency devaluation in Belarus and legal penalties rection of the central management. of TRY98 million, Group net income would have MoU (Minutes of Use – monthly): MoU in- been TRY1,913 million. The company incurs long-term and short-term creased by 19.4% to 213.8 minutes (179.1) in 2011 debt in accordance with the group’s financing as a result of the effective and successful commu- Total Debt: Consolidated debt amounted to TRY needs and market forecasts. Debt instruments nication of our campaigns and tariffs focused at 3,529 million (US$ 1,868 million) as of Decem- used range from bank loans to Export Credit consumer needs and aimed at all segments. ber 31, 2011. TRY 982 million (US$ 520 million) Agency loans, and occasionally include various of this was related to Turkcell’s Ukrainian opera- capital market instruments in order to maintain ARPU: Blended average revenue per user tions. TRY 2,550 million (US$ 1,350 million) of our capital diversity. Debts are managed so as to pre- (“ARPU”) in TRY terms increased by 4.2% to TRY consolidated debt is at a floating rate, while TRY vent them from affecting the company’s credit 19.7. Postpaid ARPU in TRY terms fell by 1.8% to 1,531 million (US$ 811 million) will mature within ratings negatively, and financial debt ratios are TRY 37.5 (TRY 38.2) YoY, despite the rise in in- less than a year. also monitored on a continual basis. coming and mobile internet revenues, due to the intense competition, as well as the dilutive impact of switches from the prepaid segment. Consolidated Balance Sheet Data (year-end) (million TRY) 2010 2011 Change (%) Meanwhile, prepaid ARPU in TRY terms rose to Cash and Cash Equivalents 5,105.1 4,738.4 (7.2%) TRY 11.0 (TRY10.8) in Q4 2011 YoY, mainly due to Total Assets 15,142.4 17,186.7 13.5% incoming and mobile internet revenues, as well as Long-term Debt 2,175.7 1,997.3 (8.2%) upsell and packaging activities. For the full year Total Debt 2,840.8 3,528.6 24.2% 2011, blended ARPU improved by 1.5% YoY to Total Liabilities 5,505.3 6,360.3 15.5% TRY 19.8 (TRY19.5). Total Shareholders' Equity 9,637.1 10,826.4 12.3%

Forward Looking Expectations Consolidated Cash Flow Going forward, we view voice, mobile Internet in Turkey and our subsidiaries’ contributions as (million TRY) 2010 2011 Change (%) EBITDA1 2,948.3 2,912.9 (1.2%) important growth drivers. We will continue to Capex and License (1,667.5) (1,635.8) (1.9%) invest in the quality of our network. We aim to Investment & Marketable Securities (64.3) (1,596.1) - maximize customer satisfaction and ensure loy- Net Interest Income/Expense 283.8 403.0 42.0% alty by continuing to focus on value creation. In Other (662.6) (508.7) (23.2%) 2012, we expect our revenues to grow with the Net Change in Debt 465.9 58.0 (87.6%) increasing contributions of our subsidiaries and Dividends paid (859.3) - - mobile Internet services. Cash Generated 444.3 (366.7) - (1) EBITDA is a non-GAAP financial measurement. 73 International Credit Ratings Moody’s Profitability and Solvency Ratios Local currency rating Ba2 (million TRY) 2010 2011 Change (%) Foreign currency rating Ba2 Gross Profit Margin 44.0% 36.5% (7.5pp) Outlook Positive EBITDA Margin 32.7% 31.1% (1.6pp) Net Profit Margin 19.6% 12.6% (7.0pp) Fitch Ratings Total Liability/Equity Ratio 57.1% 58.7% 1.6pp Local currency rating BBB- Total Debt/EBITDA Ratio 96.4% 121.1% 24.7pp Foreign currency rating BBB- Outlook Stable Operational Review (Turkcell Turkey)

Standard & Poor’s (S&P) 2010 2011 Change (%) Local currency rating BB+ Number of Subscribers (mn) 33.5 34.5 3.0% Foreign currency rating BB+ Number of Post-Paid Subscribers (mn) 10.1 11.7 15.8% Outlook Positive Number of Pre-Paid Subscribers (mn) 23.3 22.9 (1.7%) ARPU (Average Monthly Revenue Per User), 13.0 11.9 (8.5%) Blended (USD) ARPU, Post-Paid (USD) 26.6 23.1 (13.2%) ARPU, Pre-Paid (USD) 7.6 6.6 (13.2%) ARPU, Blended (TRY) 19.5 19.8 1.5% ARPU, Post-Paid (TRY) 40.0 38.5 (3.8%) ARPU, Pre-Paid (TRY) 11.4 11.0 (3.5%) Churn Rate (%) 33.9% 27.9% (6.0pp) MoU (Average Monthly Minutes of Usage per Subscriber), Blended 179.1 213.8 19.4% TURKCELL ANNUAL REPORT 2011

OTHER INFORMATION ABOUT OUR OPERATIONS Public Announcements from December 31, 2011 to April 10, 2012

17.01.2012 has debt repayments to Euroasia in the amount 29”) as per the decision taken in the fourth quarter Yesterday, news appeared in the media concerning of USD150 million, and to our 100% subsidiary Fi- of 2011. Accordingly, implementation of hyperin- Turkcell’s interest in Bulgarian telecom operator nancell BV (“Financell”) in the amount of USD173 flation accounting as per IAS 29 has been required Vivacom. Turkcell continues to conduct studies in million. in the financial statements of our subsidiaries in various countries as part of its ongoing evaluation Belarus. of investment opportunities, and Bulgarian tele- Turkcell Board of Directors had issued waivers to com operator Vivacom is a project evaluated within Astelit until 1 February 2012 for the extension of According to hyperinflation accounting, all non- this context. However, no decision has been taken repayments of both loans. However on 1 Febru- monetary items of BeST, our 80% subsidiary in by the Board of Directors in this matter. ary 2012 Turkcell Board of Directors did not ap- Belarus, are inflation adjusted as of their acqui- prove the extension of repayments thru issuance sition date. The appreciation of assets has led to 30.01.2012 of waivers. higher depreciation and amortization expenses Turkcell Board of Directors decided that at the and potential impairment charges. Moreover, the request of the Istanbul 32nd Execution and Bank- In consequence, Astelit is unable to meet the re- effects of inflation adjustments on the balance ruptcy Management, our Company’s shares in payment obligations totaling USD323 million on sheet and income statement are presented as the nominal value of TRY 137,200 (amounting to the due date, which constitutes a breach of the “net monetary position gain/(loss)” in the income 74 0.01% of the share capital) held by Müflis Bilka Bil- related loan agreements. statement. gi Kaynak ve İletişim San. ve Tic. A.Ş. to be circulat- ed by being endorsed in blank in accordance with Under the circumstances, due to the failure of As- Additionally, in line with the IFRS implications of the requirements of the Capital Markets Board and telit’s debt repayments to Financell, Financell is hyperinflation accounting and changes in foreign Istanbul Stock Exchange Quotation Regulations. unable to meet its repayment obligations to the exchange rates, translation losses are converted banks, that were fully guaranteed by Turkcell. This to the reporting currency with the period-end rate 02.02.2012 event triggers a breach of the loan agreements of on the balance sheet date rather than the average Turkcell Board of Directors decided to extend Financell. exchange rate. Consequently, our TRY 263 million Turkcell’s guarantee to our 100% subsidiary estimate for translation losses in the fourth quarter Financell BV in order to perform its obligations However Turkcell Board of Directors intends to of 2011 that we disclosed on November 2, 2011 is with respect to the loans granted by the banks for evaluate whether or not to provide the extension no longer valid with the application of new meth- providing group financing. The guarantee will be up of guarantee to Financell within the obligations of odology. to USD 410,650,000. the loan agreements. The accounting treatment of hyperinflation ac- This guarantee includes the debt repayments 06.02.2012 counting, including the translation loss, and rou- related to the due amount of USD173 million under The chairman of Turkcell’s board of directors, Colin tine annual impairment tests regarding Group the loan agreements signed between Astelit (55% J. Williams, has filed a lawsuit requesting the can- companies were discussed in the Audit Committee owned subsidiary) and Financell, and of the other cellation of a decision taken at the Extraordinary meeting held today and which are also agreed with loans that Financell granted to Astelit which have General Assembly held on October 12, 2011, not to our independent auditors. not fallen due. release him from his activities and operations during the fiscal year of 2010. In this context, Turkcell Group’s consolidated net 02.02.2012 income in the fourth quarter of 2011 is expected to Astelit LLC (“Astelit”), the 100% subsidiary of 17.02.2012 be around TRY 330 million. We maintain our 2011 Euroasia Telecommunications Holdings BV (“Eu- Belarus is recognized as being a hyperinflationary revenue and EBITDA guidance for Turkcell Group roasia”) in which Turkcell holds 55% stake and economy within the context of IAS 29 “Financial as is. System Capital Management holds 45% stake, Reporting in Hyperinflationary Economies” (“IAS 01.03.2012 29.03.2012 Since Euroasia does not have the necessary funds Today, news appeared in the media stating that In 2004, Turkcell was awarded Iran’s first private to repay the loan and as Turkcell Board has not tak- Turkcell might bid for Bulgarian telecom operator GSM license through an international tender. en a decision to extend the guarantee as of today, Vivacom. Turkcell continues to conduct studies in Subsequently Turkcell was barred from conclud- Euroasia breached the loan agreement on March various countries as part of its ongoing evaluation ing its license arrangement, and Iran entered into 30, 2012. Therefore, Turkcell will be obliged to of investment opportunities, and Bulgarian tele- a license agreement with the South Africa based make the related loan repayment on or before April com operator Vivacom is a project evaluated within operator MTN, instead of Turkcell. 6, 2012 as a result of the given guarantee. this context. However, our evaluations on the project continue, and no decision has been taken by the Newly received information by Turkcell indicates 02.04.2012 Board of Directors in this matter. The potential bid that the signing of the license agreement with In accordance with the Audit Committee’s recom- amount referred to Turkcell for Vivacom valuation MTN instead of our Company was a consequence mendation, Turkcell Board of Directorsdecided on stated in the media is groundless. of MTN’s actions at that time. In light of the harm 2 April 2012 to extend the appointment of DRT caused by MTN’s actions to both Turkcell and to its Bağımsız Denetim ve Serbest Muhasebeci Mali 06.03.2012 shareholders, Turkcell today filed a lawsuit against Müşavirlik A.Ş. for a period of one year regarding Our Board of Directors has decided to submit an MTN seeking the compensation of such damages. the audit of our Company’s 2012 consolidated fi- offer to acquire a 93.99% stake in the Bulgarian nancial statements. This decision shall be submit- 75 telecom operator, Bulgarian Telecommunications Because both companies have extensive business ted to the approval of our shareholders during the Company AD (Vivacom). dealings in the United States and due to the alle- first Ordinary General Assembly Meeting of our gations that MTN breached rules of international Company. 26.03.2012 law, the lawsuit has been filed in the United States Previously we announced that Turkish Capital District Court for the District of Columbia. Turkcell 09.04.2012 Markets Board (CMB) had informed our Company had previously conducted settlement discussions As per our announcement on May 16, 2011, the that one of our audit committee members’ status with MTN, however, MTN terminated the discus- Large Taxpayers Office had informed our Com- as an observer member on the audit committee sions in March through a public announcement. pany that a provisional seizure in the amount of did not satisfy the requirements of the relevant Because the dispute is now part of a formal legal TRY450,000,000 was to be applied to Çukurova CMB regulation according to which the said com- process carried out in the United States, all press Holding A.Ş’s registered assets, rights and receiv- mittee should be composed of at least two board inquiries about the case should be directed to Pat- ables pertaining to our Company (including atten- members. The CMB had requested that we take ton Boggs LLP, Turkcell’s legal counsel handling the dance fee and dividend). Large Taxpayers Office necessary measures to comply with the provi- case, at +(1) 202-457-6170. notified our Company on April 6, 2012 that the sions of this regulation. The court had dismissed debt repayment has been made. Therefore, the the action that we initiated against the CMB’s 02.04.2012 provisional seizure in the aforementioned amount decision and the Council of State rejected our ap- Euroasia Telecommunications Holdings BV (“Eu- will be lifted. peal request. roasia”) is a group company with 55% shareholding by Turkcell and 45% by System Capital Man- 09.04.2012 The Company then applied for the correction of agement. Euroasia is 100% shareholder of Astelit Pertaining to our announcement dated April 2, the decision but the Council of State rejected our LLC (“Astelit”), a company operating in Ukraine. 2012, Turkcell has paid the guaranteed loan of application. This ultimately ends the judicial pro- Euroasia Telecommunications Holdings BV (55% cess. We continue our studies regarding our audit In order to provide financing to Astelit through owned subsidiary) amounted to USD 150 million as committee structure and the compliance with a shareholder loan, in 2005 Euroasia borrowed of April 6, 2012. Our Company continues to evalu- new corporate governance principles published USD150 million from banks with due date of March ate the exercising of its rights arising from the re- by the CMB. 30, 2012 under full Turkcell guarantee. lated guarantee. TURKCELL ANNUAL REPORT 2011

1 7 3 6 4 5 2

1 Nihat Narin 3 Berk Sener 5 Esra Agca 7 Tevfik Turhan [email protected] [email protected] [email protected] [email protected]

2 Banu Uzgur 4 Yesim Tohma 6 Esra Karacanli Murat Ali Aslanhan [email protected] [email protected] [email protected] [email protected]

Contact Information for Investor and International Media Relations Phone: +90 (212) 313 18 88 Fax: +90 (212) 292 93 22 E-mail: [email protected] URL: http://www.turkcell.com.tr/en/investorrelations Investor RelatIons

Investor Information

Five-year Share Performance and Market We give priority to provide timely and accurate Turkcell is the only Capitalization information to the market with full transparency Turkcell shares were simultaneously listed on the to ensure that the company’s market capitaliza- Turkish company with Istanbul Stock Exchange (İMKB) and in the U.S., tion is reflected accurately in its share price. As on the New York Stock Exchange (NYSE) on July it has been to date, our aim is to contribute to a dual listing on the 11, 2000. The shares trade under the TCELL ticker the capital markets by implementing the “best at the IMKB, and the TKC ticker on the NYSE, in investor relations practices”. New York and Istanbul the form of American Depositary Shares (ADS). Stock Exchanges 77 Currently, two ADSs represent five tradable To this end, we are working to raise the standard shares. The nominal value of Turkcell’s issued of our practices through consistent research. In share capital is TRY2,200,000,000, consisting of order to accurately communicate the long-term 2,200,000,000 shares with a nominal value of strategy and potential of Turkcell, the accuracy, TRY1 each. timing and accessibility of company specific data is of paramount importance. As the sole Turkish company listed on both the ISE and NYSE, Turkcell had the fourth highest In addition, we are identifying key performance market capitalization among all stocks listed on indicators for Turkcell by examining financial and the ISE as of December 31, 2011, with a market operational indicators used by other GSM opera- capitalization of US$10.4 billion. tors in different countries and allowing our investors to access complete, reliable and clear infor- We have endeavored to continue providing mation within a short period of time. both company and shareholders maximum Share Performance value in 2011 We contribute short and long term Turkcell strat- The Turkcell Investor and International Media egies by investigating new findings that contrib- TCELL (TRY) 2008 2009 2010 2011 Relations Department strives to ensure that ute to the strategic decisions of senior manage- Lowest 6.19 6.86 7.80 7.36 Company shares remain a favored investment in- ment in light of benchmark studies and global Highest 11.30 10.32 11.18 10.95 strument for domestic and overseas institutional trends. investors and shareholders in accordance with TKC (US$) 2008 2009 2010 2011 our company’s corporate governing principles. Since Turkcell’s shares are traded on both the U.S. Lowest 8.74 10.04 12.34 10.36 We work in order to reflect the operational suc- and Turkish stock exchanges, Turkcell has shaped cess of Turkcell on its market capitalization and its corporate governance model in accordance Highest 24.08 17.91 19.59 17.73 promote Turkcell’s activities. with the requirements of both markets. Source: Bloomberg TURKCELL ANNUAL REPORT 2011

As the only Turkish Relative share performance in 2011 (TCELL) company listed TCELL İMKB-100 on both the IMKB 1.2 and NYSE Turkcell 1 contributed to the 0.8 capital markets with 0.6 April May June July January March August February October our best investor Source: Bloomberg September November December relations practices Relative share performance in 2011 (TKC) TCELL DJ Industrial 78 1.2 1

0.8

0.6

0.4

0.2

April May June July March January August February October December Source: Bloomberg September November

In line with these requirements, in 2011, we con- holders are foreign investors, we aim to promote tinued to disclose information on our strategy and the company’s brand, along with its innovative activities, on sectors and markets where we oper- strength, strategies, products and services and ate, and on the rules and regulations to which we social responsibility projects in the most presti- are bound, and to investors and analysts through gious international media channels. We believe regular meetings, local and international confer- that managing the company’s reputation effec- ences, analyst days, and teleconferences. tively across the financial media has beneficial effects on the company’s market capitalization, Accordingly, we met approximately 380 inves- working to strengthen the image and reputation tors in 2011, attending 53 local and international of the Turkcell Group across the most presti- conferences, visiting their premises in the U.S., gious TV channels, newspapers, magazines, Europe, and Canada. On the International Media blogs and digital platforms, which are referred Relations front, as the majority of our share- to as Tier 1 and Tier 2. We reinforced the difference we created in two-thirds of the European average. Sizemore, Our close Investor Relations with awards in 2011 then attracted attention to Turkcell’s overseas Turkcell IR was rated “Best Financial Disclosure” operations, adding that Turkcell was the market communication with for its financial disclosure procedures at the IR leader in five of the nine countries in which it Summit 2011 in London, according to the Investor operated. He added that “The mobile communi- our investors was Relations Global Rankings (IRGR). cation sector is still a growing industry in most emerging markets, and Turkcell will benefit from rated “Best Financial In the “Best Financial Disclosure” category, the this growth with its formidable position”. Disclosure” for its companies’ financial disclosure methods have been assessed and ranked accordingly. IR Global Shareholder Structure financial disclosure Ranking identifies and rates how companies dis- Turkcell’s free float initially at 10.5 % over time close their financial information in terms of what rose to 34.7 % as of year-end 2011, as a result of procedures at the IR is being disclosed and how the information is gen- the stake sales of shareholders. Summit 2011 in London erally presented to the public. As of December 31, 2011, Turkcell’s shareholder structure is as follows:

Turkcell appeared on the Forbes “10 Best Stocks for 2012” list Turkcell was placed on the “10 Best Stocks for 2012” list compiled by the recommendations of Shareholder Structure Wall Street’s fund, as well as market and invest- Shareholder Value of Stake (TRY) Share Capital (%) ment specialists. Ten specialists responded to the Turkcell Holding A.Ş. 1,122,000,000.238 51.00% question, “If you were given the chance to buy a single stock you were obligated to keep for 2012, Sonera Holding B.V. 287,632,179.557 13.07% what would be your choice?”. MV Holding A.Ş. 26,021,712.590 1.18% Çukurova Holding A.Ş. 995,509.429 0.05% Charles Sizemore, who serves as Chief Financial Müflis Bilka Bilgi Kaynak ve İletişim San. ve Tic. A.Ş. 137,199.575 0.01% Officer at The Sizemore Investment Letter, responded that he would select Turkcell, authoring Free Float 763,213,398.611 34.69%* an article entitled, “Turkcell: A Telecom Company TOTAL 2,200,000,000.000 100.00 % at the Crossroads of Powerful Macro Trends.” (*) While 34.69% of our company is listed in the stock exchange, the number of our Company’s free floating shares on 31.12.2010 was 557,614,008.03 In his article, Sizemore emphasized that mobile according to a“report on Free Float ratios” released by the Central registry Agency in accordance with Capital markets board’s decision 21/655 of 23.07.2010 as amended by its decision 24/729 of 18.08.2010 and its free float ratio is 25.34%. The difference between those rates results from the exclusion of shares phones were the most essential tools of the mod- which are “ i. held by a public entity, ii. Held by the company’s incorporators and its affiliates (companies subject to consolidation), iii. Held by shareholders ern world and that Turkcell was the lead player who may be a natural person or a corporate body and control at least 5% of the Company’s capital, iv. Held by a) the members of the Company’s board of Directors and the board of Auditors, b) General manager or executives who are equal to or superior to a general manager in terms of their powers and with a 53% domestic market share. Sizemore functions, c) senior executives who report to General manager or executives who are equal to or superior to a general manager in terms of their powers and added that although mobile phones were attain- functions, v. owned by the savings funds or foundations of companies, vi. provided as equity capital pursuant to regulations applicable to the capital markets legislation or as a collateral in respect of a margin trading or as a collateral except the ones which are given as a collateral only for Central Depository bank able in Turkey, the overall market remained far markets, vii. Which are legally restricted and cannot be subject to purchase and sale, viii) prohibited , ix. seized “ in the definition of free float ratio. from saturated with market penetration at about The difference may result from one or more situations described in the decision and it is not possible for our Company to know. TURKCELL ANNUAL REPORT 2011

2011 Corporate Governance Compliance Report

We have begun to implement corporate governan- SECTION 1 • New practices were developed which will facilita- ce mechanisms in parallel with the corporate go- te shareholder participation in general shareholders’ vernance efforts we launched in tandem with the SHAREHOLDERS meetings and improve communication during these company’s IPO and accelerated in 2003 by establis- meetings. A Company Kit was created which contained hing an Investor Relations Department. 1.1 Shareholders Relations Department documents to help shareholders during the meetings. Turkcell manages its relations with its shareholders • In addition to material event disclosures made in This step was based on the belief that maintaining through the Investor and International Media Rela- accordance with the applicable laws, the Investor high standards of corporate governance is important tions Unit which reports to Chief Corporate Affairs and International Media Relations Unit held talks for the perpetuation of successful business practices Officer. Details of the Shareholders Relations De- with investors and analysts, organized meetings and generation of long-term economic value for the partment are as follows: with media representatives and participated in con- company’s shareholders. ferences, panels, seminars and roadshows. Head of Department: Nihat Narin Turkcell’s Board of Directors initially established Address: Turkcell Plaza, Meşrutiyet Cad. No: 71, Te- 1.2 The Use of Shareholders Rights to Obtain a Capital Markets & Corporate Governance Comp- pebaşı, Beyoğlu - Istanbul Information liance Unit in 2009 in order to provide our share- Telephone: (212) 313 1888 The company’s shareholders and stakeholders made holders with a fair, accountable, responsible and E-mail: [email protected] many requests for information on various subjects transparent structure. throughout 2011. These requests, excluding tho- The Investor and International Media Relations Unit se concerning undisclosed information which was This decision was based on the fact that Turkcell was established for the following reasons: confidential and considered as proprietary or trade shares are traded at the NYSE, in accordance with • To facilitate the exercising of the shareholders’ secret, were filed in an open and transparent manner the Capital Markets Law, and by taking into acco- rights. in the shortest time possible. 80 unt the best practices of other companies. In this • To coordinate communication between the Board unit, only the personnel who meet the licensing of Directors and shareholders. The company launched its corporate website requirements imposed by the Capital Markets Law, • To establish a communication bridge between exis- (www.turkcell.com.tr) in 1996 and began to provide is responsible for fulfilling the obligations imposed ting and potential investors of the company based on its shareholders, both local and foreign, with infor- on Turkcell by the Capital Markets Law and coordi- mutual trust. mation in both Turkish and English, in the Investor nating the company’s corporate governance comp- • To strengthen awareness of the company and imp- Relations section of the website in order to allow liance efforts. In 2011, new efforts were launched rove relations between the investors, analysts, sha- them to exercise their right to obtain information with the aim of increasing the number of indepen- reholders and international media outlets. in accordance with the provisions of the CMB’s Cor- dent members and improving the effectiveness of porate Governance Principles concerning corporate the executive activities through the efforts of the The unit’s 2011 activities are briefly summarized as websites. The updating and monitoring of the infor- committees serving under the Board of Directors. follows: mation posted on the company’s corporate website • The dematerialization of shares with the Central was carried out by the Investor and International In addition to these, the company’s Public Disclo- Registry Agency (CRA) was coordinated with the Media Relations Unit. sure Policy and its amendments were shared with Legal Affairs Department with the aim of ensuring shareholders during the General Shareholders’ Me- that shareholder records are kept accurately, safely All material event disclosures filed with the ISE thro- eting. Also, the company’s corporate website was re- and up-to-date. ugh the Public Disclosure Platform (PDP), in accor- launched with impressive visual design elements to • Shareholders’ requests for information, excluding dance with the law, were also delivered to those in the provide the general public with as much information, those concerning undisclosed information which company’s database by email or social media outlets. as fast and as accurately as possible; in accordance was confidential and considered as proprietary or a with the Capital Market Law and the company’s Cor- trade secret, were filed in an open and transparent The appointment of a special auditor has not been porate Governance Principles. manner either face-to-face or by indirect means of separately included in the company’s Articles of communication in accordance with the company’s Association since this is a right extended to the mi- The Board of Directors, senior management and public disclosure policy. nority shareholders by law. During the concerned entire employee base of the company provided sup- • Ordinary and Extraordinary General Shareholders’ operating period, no requests for the appointment of port and participated in the implementation stage Meetings were held in cooperation with the con- a special auditor were submitted. of the Corporate Governance Principles. As a result cerned departments and Legal Affairs Department of these efforts, Turkcell has established a fair, res- in accordance with the provisions of the applicable 1.3 General Shareholders’ Meeting Information ponsible, accountable and transparent management law, Articles of Association and other rules and re- • The company held its 2010 Ordinary General Share- approach. gulations. holders’ Meeting on April 21, 2011 at 15:00 at Turk- cell Plaza, Konferans Salonu, Meşrutiyet caddesi, At the Ordinary General Shareholders’ Meeting, which had been rendered inoperational, continue its No:71 Tepebaşı. the proposal of Sonera Holding B.V., which holds a operations with its existing statutory auditors. The 13.07% stake in the company, to add a new clause company made the minutes of the General Sharehol- As required by the provisions of the applicable law to the agenda pertaining to the removal of the Cha- ders’ Meeting available to shareholders at its head and Articles of Association, the invitation to the irman of the Board of Directors and the nomination office and also disclosed them to the public through General Shareholders’ Meeting, including the date of a new candidate, was rejected by Government the ISE/PDP system. The company also provided its and agenda of the meeting, was published in a ti- Commissioners in accordance with the provisions of shareholders and stakeholders with exhaustive in- mely manner in the Turkish Trade Registry Gazette Article 369 of the Turkish Commercial Code (items formation on the General Shareholders’ Meeting on on April 4, 2011, Issue 7786, in Akşam newspaper not appearing on a previously announced General its corporate website. dated April 4, 2011, and on the company’s corpora- Shareholders’ Meeting agenda cannot be discussed). te website at www.turkcell.com.tr. In addition, for Consequently, the representative of Turkcell, which • Turkcell’s statutory auditors assessed the request the benefit of shareholders, the 2010 annual report holds a 51% stake in the company, decided to absta- of the Chairman of the Board, Colin J. Williams, an was made available at the company’s headoffice and in from voting on all agenda items due to the additio- independent member of the Board of Directors, for financial tables were published on the website. The nal item. The representative noted that this rejection the company’s statutory auditors to continue to per- company simultaneously issued invitations to share- would violate the minority shareholders’ rights, and form their legal obligations arising from the Turkish holders resident in foreign countries. The holders of therefore duly abstained from voting on all agenda Commercial Code and the Extraordinary General registered shares were issued invitations through re- items. Sonera Holding B.V., which holds 13.07% in Shareholders’ Meeting to convene, as a Board of Di- gistered mail with return receipt, as required by law. direct shares in Turkcell and additionally holds a rectors’ resolution cannot be made on this matter. As The deadline for those shareholders who wished to 47.09% stake in Turkcell, voted against approval of per the statutory auditors’ decision dated June 22, be registered with the “General Assembly Blocking the Balance Sheet and Profit/Loss Statements for 2011, the Extraordinary General Shareholders’ Mee- List” was declared as April 14, 2011. the fiscal year of 2010, the Board of Directors’ di- ting of the company was held on August 11, 2011, at vidend distribution proposal, the release of the sta- 15.00 at Turkcell Plaza, Konferans Salonu, Meşruti- 81 The General Shareholders’ Meeting was attended only tutory auditors and their replacement. Since, accor- yet Cad. No.71 Tepebaşı, Istanbul. by the company’s shareholders. Stakeholders and me- ding to the applicable law, each of the items on the dia representatives were not present at the meeting. agenda requires approval by a simple majority of the As required by the provisions of the applicable law shareholders who are present, none of the items on and Articles of Association, the invitation to the A total of 240,186 and 1,476,373,346.843 shares out the agenda, excluding the establishment of the Exe- General Shareholders’ Meeting, including the date of 2,200,000,000 shares were represented in princi- cutive Board of the General Shareholders’ Meeting, and agenda of the meeting, was published in a timely pal and by proxy, respectively, corresponding to the authorization of the Executive Board to sign the Mi- manner in the Turkish Trade Registry Gazette on company’s paid-up capital of TRY 2,200,000,000. nutes of the Meeting, were approved. In particular, June 27, 2011, Issue 7845, in the Akşam, Posta and Thus, a total of 1,476,373,587.029 shares were rep- the Balance Sheet and Profit/Loss Statements for Dünya newspapers dated June 27, 2011, and on the resented at the General Shareholders’ Meeting; cor- the 2010 operating period, which had been appro- company’s corporate website at www.turkcell.com. responding to a 67.11% participation rate. ved by the statutory auditors, the Audit Committee, tr. In addition, shareholders were given access to all and the Board of Directors, and also audited by an kinds of information including the annual report and Shareholders were offered the right to ask questions independent audit firm, were not approved. Conse- financial tables on the website and these releases at the General Shareholders’ Meeting. All questions quently, the proposed that a 75% dividend distribu- were made available in hardcopy at the company’s asked by the shareholders were answered in detail tion of 2010’s profits could also not be approved. For head office for the examination of shareholders. The by the members of the company’s Board of Directors, this reason the members of the Board of Directors company simultaneously issued invitations to the auditors, members of the company’s senior manage- and statutory auditors could not be released from shareholders residing in foreign countries. Registe- ment and company’s independent auditor. All of the their duties and thus statutory auditors could not red shareholders were issued invitations by registe- proposals made by the shareholders at the General be replaced. Consequently, the proposed 75% di- red mail with return receipt, as required by law. The Shareholders’ Meeting were discussed and recorded vidend distribution could also not be approved. For deadline for shareholders who wished to be registe- in the minutes of the meeting. this reason, made public at the dividend proposal of red with the “General Assembly Blocking List” was the Board of Directors, the proposed dividend pay- set as August 10, 2011. Shareholders were informed about the donations ment scheduled for May 16, 2011, could not be made. made during the 2010 operating period, which amo- The Chairman of the company’s Board of Directors Our shareholder Sonera Holding B.V. filed a lawsuit unted to TRY 8,469,952.24, and detailed answers resorted to legal action to ensure that the statutory requesting the addition of a new item to the agenda were provided to their questions in accordance with auditors, who had not been appointed at the General of our Extraordinary General Shareholders’ Meeting the provisions of the Board of Directors approved Shareholders’ Meeting, are appointed by legal met- to be held on August 11, 2011, pertaining to “the re- donations policy. hods. As a result, the court ruled that the company, moval and election of one or more board members” TURKCELL ANNUAL REPORT 2011

2011 Corporate Governance Compliance Report (Continued)

and also made a request for a precautionary measure and Ertan Mitap were elected as Turkcell’s statutory given access to all kinds of information including the for the Extraordinary General Shareholders’ Mee- auditors for a year without being paid any remune- annual report and financial tables on the website ting not be convened until a court decision is made. ration. and these releases were made available in hardcopy at the company’s head office for the examination of The General Shareholders’ Meeting was attended The company made the minutes of the General shareholders. The company simultaneously issued only by the company’s shareholders. Stakeholders Shareholders’ Meeting available to shareholders at invitations to the shareholders residing in foreign and media representatives were not present at the its head office and also disclosed them to the pub- countries. Registered shareholders were issued invi- meeting. lic through the ISE/PDP system. The company also tations by registered mail with return receipt, as re- provided its shareholders and stakeholders with ex- quired by law. In accordance with the rules and regu- A total of 726,186 and 1,630,426,349.843 shares haustive information on the General Shareholders’ lations of the Central Registry Agency, shareholders out of 2,200,000,000 shares corresponding to the Meeting on its corporate website. of publicly traded shares who applied to the CRA and company’s paid-up capital of TRY 2,200,000,000 received a “blocking letter” up to one day before the were represented in principal and by proxy, respecti- The lawsuits filed by members of our Board of Direc- start of the General Shareholders’ Meeting were of- vely. Thus, a total of 1,630,427,076.029 shares were tors Gülsün Nazlı Karamehmet Williams and Meh- fered the opportunity to attend the meeting. represented at the General Shareholders’ Meeting, met Bülent Ergin requesting the cancellation of a corresponding to a 74.11% participation rate. resolution made at the Extraordinary General Share- The General Shareholders’ Meeting was attended holders’ Meeting held on August 11, 2011, were disc- only by the company’s shareholders. Stakeholders Shareholders were offered the right to ask questions losed to the public and provisions of the legislation and media representatives were not present at the at the General Shareholders’ Meeting. All questions were implemented. The said resolution stated that meeting. asked by the shareholders were answered in detail the Board members were not released in respect of by the members of the company’s Board of Directors, the Company’s activities and operations for the 2010 A total of 67,586.186 and 1,640,255,905.843 shares 82 auditors, members of the company’s senior manage- operating year. out of 2,200,000,000 shares corresponding to the ment and company’s independent auditor. All of the company’s paid-up capital of TRY 2,200,000,000 proposals made by the shareholders at the General The lawsuit filed by our shareholder Çukurova Hol- were represented in principal and by proxy, respecti- Shareholders’ Meeting were discussed and recorded ding A.Ş. requesting the cancelation of a resolution vely. Thus, a total of 1,640,323,492.029 shares were in the minutes of the meeting. The questionsfiled by taken at the Extraordinary General Shareholders’ represented at the General Shareholders’ Meeting, the shareholders’ that could not be answered during Meeting held on August 11, 2011, pertaining to “the corresponding to a 74.56% participation rate. the General Shareholders’ Meeting, due to the fact election of statutory auditors” was disclosed to the that a preliminary examination must be held, were public and provisions of the legislation were imple- Shareholders were offered the right to ask questions brought to the agenda of a Board of Directors me- mented. at the General Shareholders’ Meeting. All questions eting which resolved that they would share the re- asked by the shareholders were answered in detail sults and answers with shareholders during the next • In accordance with Articles 353, 355 and 356 of by the members of the company’s Board of Direc- General Shareholders’ Meeting. the Turkish Commercial Code, Article 14 of Turkcell’s tors, auditors, members of the company’s senior articles of association and upon the convocation of management and company’s independent auditor. At the Extraordinary General Shareholders’ Mee- the company’s statutory auditors; the company’s All of the proposals made by the shareholders at the ting, the Executive Board was not authorized to sign Extraordinary General Shareholders’ Meeting was General Shareholders’ Meeting were discussed and the Minutes of the Meeting, the Balance Sheet and held on October 12, 2011, at 15:00 at the company’s recorded in the minutes of the meeting. Profit/Loss Statements for the 2010 operating peri- head office located at Turkcell Plaza Meşrutiyet Cad. od (approved by statutory auditors, the Audit Com- No:71, Tepebaşı, Beyoğlu, Istanbul. At the Extraordinary General Shareholders’ Mee- mittee, and the Board of Directors and also audited ting, among our Board members, Colin J. Williams by an independent audit firm), were not approved As required by the provisions of the applicable law was not released from his duties while Gülsün Nazlı and consequently, the proposed 75% dividend dist- and Articles of Association, the invitation to the Karamehmet Williams, Mehmet Bülent Ergin, Alexey ribution of 2010 profits could also not be approved. General Shareholders’ Meeting, including the date Evgenievich Khudyakov, Oleg Adolfovich Malis, Tero For this reason, the members of the Board of Direc- and agenda of the meeting, was published in a timely Erkki Kivisaari and Karin Birgitta Eliasson, who held tors and statutory auditors could not be released manner in the Turkish Trade Registry Gazette on office in 2010, were released from office separately. from their duties and thus statutory auditors could September 16, 2011, Issue 7901, in the Sabah, Posta, And regarding the agenda item pertaining to the “re- not be replaced. Pertaining to the agenda item on Dünya and Hürriyet Newspapers dated September moval of one or more than one of the members of the election of auditors for a period of one year and 14, 2011 and on the company’s corporate website at the Board of Directors and election of new members determination of their remuneration; Faika Bozkaya www.turkcell.com.tr. In addition, shareholders were in lieu of those removed; and determination of their remuneration” was not voted upon based on the on the Board of Directors. However, all sharehol- profits could also not be approved, the 75% dividend opinion of the Government Commissioners that the ders and stakeholders including the minority share- distribution proposal of the Board of Directors which agenda item does not comply with the Decree Law holders are equally represented by an independent was disclosed to the public and previously scheduled No: 654 dated October 11, 2011 and Communiqué member sitting on the Board of Directors. to be made on May 16, 2011 could not be made by Serial: IV, No: 54 of the CMB on the Principles Re- 2011 year-end. garding Determination and Application of Corporate Turkcell has a total of 29 affiliated companies as of Governance Principles. And as the Balance Sheet and December 31, 2011. Turkcell also has shares in a joint 1.6 Transfer of Shares Profits/Loss statements for the 2010 operating year managing company (A-Tel) and one subsidiary (Fin- While there is no limitation in the Articles of Asso- were not approved, the proposed 75% dividend dist- tur). However, there is no reciprocal shareholding ciation of our company with respect to the transfer ribution could not also be voted upon. and thus no situation arose which would require that of shares, Provisional Article 4, Paragraph c, Phra- The company made the minutes of the General this relationship be voted upon at the Extraordinary se 4 of the authorizing regulations relating to the Shareholders’ Meeting available to shareholders at General Shareholders’ Meeting. Electronic Communication Sector (to which Turkcell its head office and also disclosed them to the pub- is subject) states that the written approval of the lic through the ISE/PDP system. The company also Since the exercise of cumulative voting is optional Information and Communication Technologies Aut- provided its shareholders and stakeholders with ex- for publicly traded companies in accordance with the hority is required for “actions for gaining or trans- haustive information on the General Shareholders’ relevant communiqué issued by the Capital Markets ferring or movement of shares which shall result in Meeting on its corporate website. Board, this method has not been used yet by the change of control.” company. However, the representation which would The lawsuit filed by our shareholder Çukurova Hol- otherwise be provided by the use of the cumulative SECTION 2 ding A.Ş. requesting: voting is provided by an independent member sitting • the cancellation of Turkcell’s statutory auditors’ on the Board of Directors. PUBLIC DISCLOSURE AND 83 decision to hold Turkcell’s Extraordinary General TRANSPARENCY Shareholders’ Meeting on October 12, 2011; 1.5 Dividend Distribution Policy and Time of • the cancellation of the meeting agende and the in- Dividend Distribution 2.1 Company Public Disclosure Policy vitation to the Extraordinary General Shareholders’ The Articles of Association do not grant any privile- Turkcell’s Public Disclosure Policy regarding material Meeting; ges regarding participation in the company’s profits. event disclosures was prepared in accordance with • in the event that the agenda is not cancelled in its Each share is entitled to an equal dividend. the CMB’s Corporate Governance Compliance Prin- entirety, the cancellation of the agenda item perta- ciples and ISE, SEC and NYSE regulations to which ining to “the removal and election of one or more The company’s Dividend Distribution Policy, appro- the company is subject to and following its appro- board members”; ved by the Board of Directors in light of operational val by the Board of Directors, it was posted on the • and a precautionary measure for the Extraordinary performance, financial position and other deve- company’s corporate website and presented to the General Shareholders’ Meeting not be convened on lopments, was posted on the company’s corporate company’s shareholders at the Ordinary General October 12, 2011, and even if it is convened, not to website. The Board of Directors intends to distribu- Shareholders’ Meeting held in 2005. discuss the agenda item that is subject to the lawsuit te cash dividends to a sum of not less than 50% of during the meeting Turkcell’s distributable profits for each fiscal year, Turkcell’s Public Disclosure Policy was revised in 2009 starting with profits for 2004. However, the pay- and published on the company’s corporate website af- were disclosed to the public and provisions of the ment of dividends will still be subject to cash flow ter it was approved by the Board of Directors. legislation were implemented. The court’s decision requirements of Turkcell, compliance with Turkish pertaining to the dismissal of the lawsuit was also law and the approval of, or amendment by, the Bo- The purpose of Turkcell’s Public Disclosure Policy is disclosed to the pubic. ard of Directors and the General Shareholders’ Me- to ensure an active and transparent communication etings. Dividend payments are made within the legal which is complete, fair, accurate, timely, clear, cost 1.4 Voting Rights and Minority Rights periods stipulated. effective and equally accessible for all stakeholders The company’s Articles of Association do not provide including shareholders, investors, employees and voting privileges to any group of shareholders or in- Since the Balance Sheet and Profit/Loss Statements customers in accordance with the regulations with dividual shareholder. According to the Shareholders’ for the 2010 operating period, which had been appro- which the company must abide by. Turkcell follows- Agreement, Çukurova Holding, Telia Sonera B.V and ved by the statutory auditors, the Audit Committee, up news and rumors about the company and makes Alfa Group Consortium are each represented by two and the Board of Directors, and also audited by an material event disclosures in accordance with the representatives on the Board of Directors. Minority independent audit firm, were not approved and thus company’s follow-up procedures if deemed approp- shareholders and stakeholders are not represented the proposed 75% dividend distribution out of 2010 riate or necessary. TURKCELL ANNUAL REPORT 2011

2011 Corporate Governance Compliance Report (Continued)

Turkcell publishes Turkcell’s list of persons who are shares the Communiqué on Corporate Governance legislation on insider trading sanctions regarding mi- privy to inside information since 2011, which it es- Principles and resolutions and announcements suse and improper distribution of such information. tablished by taking every kind of measure in accor- concerning the implementation of these princip- The persons on the list are not authorized to disclose dance with CMB and CRA rules and regulations. les published by the Capital Markets Board on the any inside information, which has not been disclosed company’s corporate website and updates them re- to the public, to any other parties including their fa- The implementation, development and following up gularly. mily and cannot make any comments or statements of the public disclosure policy are the responsibility on any inside information concerning company sha- of the Board of Directors and the supervision and 2.4 Disclosure of the Company’s Ultimate res traded on the ISE. In the event that an employee surveillance of all issues concerning public disclosu- Controlling Individual Shareholder/Shareholders makes a comment or discloses inside information to re is the responsibility of the Investor and Internati- As of December 31, 2011, Turkcell’s shareholder third parties, the company shall immediately make a onal Media Relations Unit. structure is as follows: material event disclosure concerning the subject. On

2.2 Material Event Disclosures Shareholder Structure Information which can be shared with the public through material event disclosures is evaluated Shareholder Value of Stake (TRY) Share Capital (%) under the coordination of the Investor and Interna- tional Media Relations Division and with the comp- Turkcell Holding A.Ş. 1,122,000,000.238 51.00% liance advice of the Capital Markets and Corporate Sonera Holding B.V. 287,632,179.557 13.07% Governance Compliance Unit in accordance with MV Holding A.Ş. 26,021,712.590 1.18% the local and the international capital market regulations to which our Company is subject. Any such Çukurova Holding A.Ş. 995,509.429 0.05% material event disclosures are made by the Investor Müflis Bilka Bilgi Kaynak ve İletişim San. ve Tic. A.Ş. 137,199.575 0.01% 84 and International Media Relations Unit in a timely Free Float 763,213,398.611 34.69% manner. TOTAL 2,200,000,000.000 100.00 % In 2011, Turkcell made a total of 47 material event disclosures to the domestic and foreign capital mar- 2.5 Public Disclosure of Persons Who May Have the other hand, the rules and regulations pertaining kets to which it is subject. There were no requests Inside Information to the management of inside information have been for additional explanations from regulatory bodies Turkcell’s Public Disclosure Policy contains guideli- provided to Turkcell’s senior management and emp- regarding material event disclosures made in 2011. nes concerning the Blackout Period Practice relating loyees and they are kept up-to-date by email messa- to insider trading issues. In accordance with these ges and mobile training programs. Furthermore, this Since Turkcell shares are traded on the New York guidelines, employees are prohibited from selling or information is provided to every new Turkcell emp- Stock Exchange, these material event disclosures purchasing Turkcell securities during the blackout loyee through an orientation program. Employees were made both in Turkish and English. Turkcell’s period. Turkcell employees with access to inside in- are also required to sign an affirmation stating that material event disclosures are posted in the Investor formation that can affect the price of capital market these regulations are an indispensable part of their Relations section of the company’s corporate websi- instruments are restricted from selling or purchasing respective employment contracts. te at www.turkcell.com.tr. Turkcell securities regardless of blackout periods. In addition to complying with the Capital Market SECTION 3 Turkcell did not make any postponement decision in Law and applicable laws regarding employees with 2011 within the framework of the mechanism for the access to inside information, Turkcell has also crea- STAKEHOLDERS postponement of the public disclosure of inside in- ted an in-house “Management of Inside Information” formation which the company established in 2009 in workflow. 3.1 Stakeholder Communication accordance with the provisions of the Capital Mar- Turkcell informs its stakeholders by organizing kets Board. Capital Markets & Corporate Governance Complian- pre-scheduled and regular meetings such as emp- ce Unit keeps and updates the list of persons who loyee communication meetings, platforms where 2.3 Corporate Website and Its Contents have access to inside information in accordance with the employees can communicate their ideas and Turkcell’s corporate website (www.turkcell.com.tr) the rules and regulations issued by the Capital Mar- provide their suggestions, Supplier Day for the was launched in 1996 in order to provide sharehol- kets Board. Turkcell employees who figure on the members of the supply chain, Business Partner ders, stakeholders and general public with informa- list are also informed in writing and upon signature Day for the companies Turkcell partners with on tion in an open, clear and timely manner. Turkcell about their obligations stipulated in the applicable value-added services and dealership meetings. Information is shared through periodic meetings, preventive actions are taken to prevent complaints tices are developed to encourage the employees to emails and intranet. from recurring and they are made part of business say “There is more for me in Turkcell”. The company’s processes. Root cause analysis (RCA) is carried out goal is to provide employees with more sharing, In addition, the company have devised new policies in order to go to the root of the problem when re- more appreciation, more pleasure, more career op- and procedures to inform its employees and stake- currences are identified. Necessary actions are taken portunities, more support and more development holders. to prevent the complaint from being repeated. Also, opportunities and to ensure that they get the best concerned teams are offered development and trai- job experience possible. Turkcell monitors and reports the satisfaction level ning programs on a regular basis to help them solve of its customers by conducting monthly market rese- customer complaints in a fast and appropriate man- While providing our employees the best possible job arch. The company gives priority to customer experi- ner and by assuming a customer-focused approach. experience, we continue to invest, to add value to ence. Turkcell partners with an independent market In addition to satisfaction and Net Promoter Score the company and to create a flexible, sensitive, and research firm, which conduct regular market rese- (NPS) which are monitored regularly each month, democratic work environment. We define our work arch in order to monitor customer experience and other factors which have a bearing on customer lo- environment not as “a place to work”, but as a “place identify priority action areas. Satisfaction measure- yalty are evaluated both within the company and in to live ”; and we carry out our practices based on this ments are made and action areas are identified for comparison to other companies. approach. each and every point of contact with the customers. The company can thus respond to the changing ex- Working with the best talent, therefore retaining Turkcell’s customers can access the company thro- pectations of customers and monitor the performan- the best talent are our company’s priority. With ugh various communication channels. Customers ce of both its own and competitors in these areas. our distinctive human resources practices, we con- can file their complaints by calling Turkcell Custo- The company carries out research by using vari- tinue “to develop dedicated employees who yield mer Services and Video Customer Services at 444 0 ous methods in order to understand the market successful results”. We are proud to say that our 532 and 532, using the Turkcell Service application, better, identify customer needs and take the most employees feel “There Is More for Me in Turkcell”, visiting complaint sites or petitioning government appropriate actions. In addition to these research and evaluate Turkcell with the highest ratings, both 85 institutions in writing or airing their complaints in efforts, Turkcell organizes separate Customer Ad- in the industry and across Turkey, in employee lo- person. Although the company receives complaints visory Board meetings for its retail and corporate yalty surveys conducted by independent research through various channels, it pools them together be- customers in order to provide them with a platform companies. fore beginning any handling procedure. where they can air their concerns and communicate their needs. The company has created written procedures and The company has established the necessary infrast- regulations regarding all human resources proces- ructure for the administration of customer compla- During these meetings, which are organized to crea- ses (recruitment, promotion, transfer, rotation, ints and improves it on a regular basis. The rationale te a pool of ideas, issues identified by the company performance and talent management, headcount behind this is to meet customer expectations in a ra- are discussed and customers are provided with the planning, compensation & benefits, organizational pid, consistent and satisfactory manner. Accordingly, opportunity to communicate their experiences. Ideas development and process improvement) and all the- every complaint is evaluated by competent teams in generated during these meetings are evaluated with se documents are made available to all employees at the shortest time possible in a diligent and careful the company’s senior management and then imple- an easily-accessible corporate portal. Furthermore, manner and customers are provided feedback with mented. employees are informed on a regular basis via inter- of solutione. Actions taken towards the resolution of nal postings and e-mail. the complaints are shared with the customers who 3.2 Participation of Stakeholders in Management filed them and solutions are provided within the fra- There is no special provision concerning the participa- Turkcell does not discriminate against its employe- mework of the complaint management process. tion of stakeholders in management. Senior managers es based on ethnicity, language, religion, race and are invited to participate in Board of Directors mee- gender during the implementation of Training & Pro- The complaint management process of the company tings in order to provide information. Shareholders fessional Development, Performance Management, and systems deployed are reviewed regularly with and other stakeholders are represented by an inde- Career Management, Compensation and other HR the aim of identifying the areas which can still be pendent member sitting on the Board of Directors. Processes. The company has not received any comp- improved and increasing efficiency, their effective- laints of discrimination from its employees. ness is reported and improved on a regular basis. 3.3 Human Resources Policy The most common issues of complaint are monito- Human Resources processes are performed by the Managing the expectations of employees for bu- red regularly. After the implementation of impro- Turkcell Employee Relations Management Division ilding careers compatible with their own goals and vements, similar issues of complaint are monitored which reports to Chief Human Resources Officer. capabilities is one of the important priorities of the for any trend of decline or increase. Corrective and Giving priority to “Sharing Life “ concept, all prac- company. TURKCELL ANNUAL REPORT 2011

2011 Corporate Governance Compliance Report (Continued)

Accordingly, Turkcell: its employees with the latest content and develop- All newly-recruited employees participate in an Ori- ments in the industry by using the most effective entation Training Program, of which the content and • provides its employees with professional develop- technological solutions and infrastructures. Turkcell duration are determined by Turkcell Academy. ment opportunities across different career paths. systematically monitors the individual performance • Turkcell’s managers recognize the importance of and development of the potential of the employees 3.4 Information on Relations with Customers career movements such as promotions, transfers and working in its whole ecosystem; with specific atten- and Suppliers rotations and support the career development of tion to Turkcell Group employees and field members Turkcell segments its customers into two categories: their subordinates. in parallel with the fast-changing business needs and retail and corporate. Retail customers have individu- the corporate strategies. al subscriptions whereas corporate customers are Performance and Talent Management system institutions or organizations which have purchased has been created in order to allow the company’s Furthermore, employees with high potential are of- subscriptions under their company name. The res- employees to realize their potentials. The system fered special professional development programs, ponsibility of Turkcell products and services belongs recognizes that this potential cannot be realized in- which have been developed by Turkcell Academy, in to Retail Marketing and Sales Group and Corporate dependent of business results and business behavior order to be trained in line with their career plans. In Marketing and Sales Group. and the real potential can only be attained by the addition, Turkcell encourages its employees to pur- synergy of these two. Performance and Talent Ma- sue post-graduate, PhD and certificate programs in Turkcell Group uses an approach in line with global nagement processes are implemented by measuring parallel with the in-house training they receive. quality standards wherever the company has con- employee performance and potentials through the tact with and/or provides services to its customers. use of objective processes, providing regular, clear Turkcell aims to implement the most relevant met- The Company has a holistic view over all products and constructive feedbacks and offering personali- hods of teaching, which would serve the develop- and services to understand the experience from zed development/career opportunities. ment requirements of individuals, via platforms a customer’s perspective in order to improve the developed as alternatives to traditional classroom system, the processes, and human resources; and, if 86 Corporate Strategy Planning and Target-Setting & training. As one of the first companies in Turkey to necessary, to make timely corrective adjustments to Assessment Process consists of the following stages: provide its employees with e-learning solutions, systems or processes related to that specific expe- we continue to offer development opportunities to rience. • Target-Setting nearly 25,000 employees through the Turkcell Aca- • Mid-term Evaluation demy e-learning platform. Aiming to provide operational excellence at every • Behavioral Model Evaluation point of contact with its customers, Turkcell also • Performance Evaluation and Talent Management Also paying attention to the motivation of its emp- regularly assesses its services and its approach in all loyees in accordance with the company’s “Our busi- business channels to identify areas of improvement Turkcell evaluates its employees’ performance every ness is technology, our business is People” principle, and to make adjustments that simplify the lives of year based on the results of their performance and Turkcell Academy is offering training sessions to its our customers and ensure their satisfaction. behavioral results through the Talent Management employees under the title of “Programs on Life” to process. According to year end evaluation ,emplo- support their personal development. Encouraging Turkcell designs its processes and service structu- yees’ next year career planning ,compensation and the sharing of information within the company and re by taking customer experience into account and training programs are planned. transforming this information into corporate know- stepping into the shoes of its customers and sets ledge, Turkcell Academy is providing sharing oppor- its targets by evaluating customer satisfaction and Compensation & Benefits policy is based on the tunities by supporting its employees in serving as emotional impact generated. capabilities of the employees, responsibilities they volunteer trainers. Today, there are more than 600 have taken, trainings they have received and busi- “Academy Trainers” serving for this purpose. In parallel with ever-changing and improving global ness experience they possess . Also with this policy conditions, Turkcell Group does not content itself we aim to reward “high performance”, to be fair, At the end of each in-class training provided by only with providing superior high-quality service, and to take into account the individual needs of the Turkcell Academy, employees’ learning performance but also plans and implements activities in line with employees. is measured by post tests. Whereas, the success of social responsibility, environmental awareness, and the e-learning classes is subject to both pre and post respect for the rights of its customers, suppliers and The mission of Turkcell Academy is to provide trai- tests. Employees can learn at their own pace by pau- employees. ning and professional development solutions which sing the course video when needed and they can re- create value and make a difference in employees’ ceive their final score instantly. Reports and history As a matter of joint responsibility, suppliers are also performance. Due to ever-changing conditions of of the e-learning training provided to employees are expected to act in line with these principles, and business and its dynamic structure, Turkcell provides kept on the training management tool. improve their environment correspondingly. The company requires all its suppliers to comply Turkey who are decisive and determined to study support to the development and training of natio- with general legal rules and with the Turkcell Com- were granted scholarships and in 2007, the scope nal athletes in tennis, swimming, weightlifting, ath- mon Values and Code of Conduct. Turkcell selects of the project was expanded and the number of letics and skiing along with cycling for the visually- its suppliers based on quality/price balance, pre- scholarships was increased to 10,000. At the end impaired. Athletes are offered a wide variety of vious performance, market conditions, references of the 2010-2011 academic year, 2,400 and 283 services including getting health checks, accessing and other relevant criteria as well as mutual trust. Snowdrops graduated from high school and univer- equipment, using camp facilities, receiving bonus sity, respectively. Nearly 27.500 Snowdrops have payments, using performance development centers Turkcell values suppliers that have quality manage- been provided with Turkcell scholarships since the and working with trainers. ment and information security management certi- launch of the project. ficates, are sensitive to the ecological balance, and In addition to supporting the training of athletes conduct social responsibility projects and assesses Among our Snowdrops who have graduated from for the youth setup, the Runners to the future pro- them accordingly, in addition to other supplier se- university are doctors, lawyers, nurses and teachers. ject also provides support to those athletes who lection criteria. would serve as role models to young athletes with In March 2010, the Kardelenler (Snowdrops) Pro- their achievements and perseverance. Among the Turkcell’s employees should protect the company’s ject was made a part of a group of exemplary pro- national athletes who support our country success- information assets and ensure their proper use and jects during a panel organized at the UN Headquar- fully abroad and receive support under the project are required to comply with “Turkcell Information ters as part of the Beijing +15, an event organized are Marsel İlhan, Çağla Büyükakçay, Merve Aydın, Security” policies and procedures, which are posted by the United Nations (UN). The project was pre- Ayşegül Çoban and Ediz Yıldırımer. on the company intranet. sented to 30 ministers and nearly 500 participants from all over the world at the Global Women’s In 2011, cooperating with various sports federati- All employees act with the knowledge and aware- Summit organized in Istanbul in 2011. Until now, ons in Turkey, Turkcell became the main sponsor in ness that they represent Turkcell Group in their re- the Snowdrops project has garnered 17 national six individual sport branches and expanded the sco- lationships with third parties and that the Group’s and international awards. pe of the Runners to the future project to include 87 image can be damaged as a result of a negative national teams. encounter. Bridge of Hearts (Gönül Köprüsü) As part of the Bridge of Hearts (Gönül Köprüsü) Turkcell is the main sponsor of the National Suppliers are responsible to take every kind of project which was launched in 2008 in cooperation Football and Basketball Teams measure to ensure the confidentiality of informa- with Turkcell and National Ministry of Education Turkcell has been the “Official Communication tion pertaining to Turkcell Group. Turkcell does and allows seventh and 8th grade primary school Sponsor” of the National Football Team since 2002 not work with suppliers who do not sign Non- students and 9th, 10th and 11th grade secondary and “Main Sponsor” since 2005. Turkcell intends to Disclosure and Confidentiality Agreement and also school students from across Turkey to visit diffe- continue the support it has provided the National the Framework Agreement, which regulates gene- rent provinces of the country, discover the natu- Football Team, recognizing the importance of the ral business conditions. ral and cultural treasures of Turkey and establish team’s achievements in boosting the national mo- new long-lasting friendships with other children, rale, as well as our nation’s international standing. 3.5 Social Responsibility 140,000 children from 81 provinces have visited Turkcell invests in the future of the next genera- other provinces and 6 million kilometers have been Turkcell also assumed the main sponsorship of the tions in the areas of education, sports, and emp- travelled. 2010 FIBA World Championship for Men, where loyment, by developing or supporting sustainable, our National Basketball Team achieved a phenome- long-lasting and measurable projects that promote Runners to the future nal success by finishing runners-up, and extended youth development. Born out of the crucial need to promote and cont- its sponsorship until 2015. ribute to the development of not only team but Kardelenler (Snowdrops) also individual sports and developed in cooperation Contribution to Employment Within the framework of the Snowdrops project, with the General Directorate of Youth and Sports, As Turkcell Group, we provide employment oppor- which was launched by Turkcell in 2000 in coope- the Runners to the Future project aims to help train tunities to approximately 11,000 people. The com- ration with Society for Supporting Modern Life, in athletes, who will lead Turkey’s sport into the futu- pany enjoys an ecosystem of 80,000 people which order to provide equal educational opportunities re and represent our country successfully abroad in includes our dealers and business partners. to girls unable to continue their education due to individual disciplines. the economic disadvantages of their families; and In line with the importance given to the creation subsequently to develop them into open-minded Included in the United Nations Alliance of Civiliza- of new employment opportunities by the company individuals with a profession, 5,000 girls across tions National Plan in 2009, the project provides and since the beginning of our strategic coopera- TURKCELL ANNUAL REPORT 2011

2011 Corporate Governance Compliance Report (Continued)

tion with İŞKUR in 2010, Turkcell trained 893 in- built. Nevertheless, 121 lawsuits were opened bet- Corporate Governance Principles. To date, the mem- dividuals and 668 individuals have been offered ween January 1, 2011 and December 15, 2011, clai- bers of the Board of Directors have not made any employment at Turkcell Communication Centers ming that base stations had adverse effects on the requests for any training or compliance programs. and call centers in 2011. environment and health, and violated neighborhood In the event that such training or program becomes laws. A verdict was reached in 32 of the lawsuits in necessary, they will be offered by the Corporate Turkcell also paid particular attention to employing 2011 claiming violation of environmental and human Governance Committee. The members of the Board disabled people. Turkcell employed 310 disabled health and neighborhood laws. Turkcell won 8 of of Directors are regularly informed of amendments people across the group companies and the far ma- these cases and lost 24. made to the applicable legislation. jority of these employees (200 individuals) work at Turkcell Global Bilgi Call Centers spread across Tur- SECTION 4 4.3 Vision and Strategic Objectives of the Company key. Fifty percent of employees working at Karaman The vision and strategic objectives of Turkcell are (100) call center of Turkcell Global Bilgi are disab- BOARD OF DIRECTORS posted at the company’s corporate website at www. led. Through a project implemented in cooperation turkcell.com.tr under the “About Turkcell” section with the Ministry of Transport, Maritime Affairs and 4.1 Structure and Composition of the Board of and also in the Annual Report. Communication, Turkcell has begun to employ seven Directors and Independent Members disabled individuals, who provide call center services Information on the Board of Directors is provided in 4.4 Risk Management and Internal Control from the convenience of their homes in Diyarbakır, the Investor Relations section of Turkcell’s website Mechanisms Izmir and Istanbul. (www.turkcell.com.tr)). Turkcell Internal Audit Department, in compliance with the “principle of independence” and in line At Turkcell’s Turkcell Global Bilgi Call Centers, the On our Ordinary General Shareholders’ Meeting with the relevant communiqué issued by the CMB, company currently employs nearly 10,000 people dated April 29, 2010, the following members were directly reports to the Chief Executive Officer, Chief 88 at 14 locations, ten in Turkey (Istanbul-3 locations, selected as Turkcell Board of Directors for a period Financial Officer, and the Audit Committee comp- Izmir, Erzurum, Eskişehir, Diyarbakır, Ankara, Kara- of three years: rised of the independent members of the Board of man and Artvin), three in Ukraine and one in Belarus. Board of Directors Structure Contribution to Regional Economic Development: Turkcell Global Bilgi Erzurum Call Center Colin J. Williams Chairman (Independent Member) Economic Impact Assessment Study Nazlı Karamehmet Williams Member Turkcell Global Bilgi Erzurum Call Center, which was commissioned by Turkcell, as an “innovative entrep- Mehmet Bülent Ergin Member reneur”, five years ago as one of the largest techno- Karin Birgitta Eliasson Member logy investments ever to be realized in the eastern Tero Erkki Kivisaari Member part of Turkey, has made very important contributi- Oleg Adolfovich Malis Member ons to the economic and social development of the Alexey Evgenievich Khudyakov Member region. Turkcell Global Bilgi Erzurum Call Center: Economic Impact Assessment Study, which was carried out by the Economic Policy Research Foundati- All members of the Board of Directors are non- Directors. Internal Control/Internal Audit Activities: on of Turkey in 2011, explored the impact of Turk- executive members and Colin J. Williams fulfills Being listed on the New York Stock Exchange in the cell on Erzurum’s economy in multiple dimensions. the criteria of the Corporate Governance Principles United States, Turkcell has established an internal Having invested TRY 40 million in the province and released in 2003 as well as the U.S. Securities and control mechanism across all Group companies in thus provided a significant amount of employment, Exchange Commission’s (SEC) independence crite- compliance with the provisions of Article 404 of Turkcell has helped generate a TRY 309 million eco- ria. The members of the Board of Directors are not the Sarbanes-Oxley Act, to which all publicly traded nomy in Erzurum by triggering the production and prevented from assuming other responsibilities out- companies are required to comply with. consumption patterns of the province and creating a side the company. multiplier effect within the last five years. Within this framework, Turkcell Internal Audit De- 4.2 Qualifications of the Members of the Board partment is responsible to provide support for the Turkcell establishes base stations to provide mobi- of Directors establishment of internal control system both in le communication services which is Turkcell’s area Minimum qualifications required for the election Turkcell and consolidated group companies in audit of business. Safety tests are conducted both by members to the Board of Directors of the company scope and to evaluate and report on the effective- the manufacturer and Turkcell on the base stations coincide with the qualifications stated in CMB’s ness of the internal control system for ensuring the compliance with the provisions of Article 404 of action plans which are taken for the safeguarding the members. Members thus are offered the oppor- the Sarbanes Oxley Act, report control deficiencies of information, critical operations and protection of tunity to schedule their activities by taking the Bo- identified during this process to the Internal Audit personnel during natural, terrorist attacks, sabotage ard meeting dates into account. Also, at the end of Department and Turkcell’s senior management regu- etc. and other catastrophes caused by human error each Board meeting, the date of the next meeting larly and monitor the corrective actions which have or misuse of technology based on relevant polices is set based on the requests made by the members. been taken or planned to be taken. prepared for these purposes. Invitations to the meetings are sent through fax or e-mail. In line with the Corporate Governance Prin- Corporate Risk Management is responsible for Thanks to our geographically dispersed technical ciples, the Secretariat which has been set up under the following tasks: To identify the risks that affect infrastructure, extensive coverage, solution part- the Board of Directors, notifies Board members of Turkcell’s performance in achieving its; coordinate ner network, mobile exchanges, additional capa- meetings and provided them with the agenda and risk analysis activities: share results with the Exe- city, emergency centers and extensive experience documents related to the matters on the agenda. cutive Team and the Risk Management Committee, in handling emergencies allow us to minimize the and report and follow up the results. The motive impact of risks. Also, experience of our Group com- Neither the Chairman of the Board of Directors and behind determining risks is not to suspend business panies in customer services, fast fiber-optic inf- nor Board members enjoy any preferential voting activities which create these risks, but to reduce the rastructure, data storage services, experiences IT rights or the right to veto the resolutions made by likelihood of the risks or their possible impacts. Here, teams which are composed of seasoned software the Board of Directors. All Board members, including the goal is to minimize unpleasant surprises, enable developers allow us to manage disasters and ca- the Chairman, have an equal vote. Turkcell to run seamless operations, and provide a tastrophes which would hit an emergency center reasonable level of assurance to the management from another center and ensure the continuity of 4.7 Prohibition on Carrying out Transactions with for Turkcell to achieve its goals. our activities. the Company and Prohibition on Competition Permissions contained in the Article 334 and Article Every department in Turkcell identifies the risks it 4.5 Authority and Responsibilities of the 335 of the Turkish Commercial Code pertaining to faces on a regular basis and classifies them on the Members of the Board of Directors and Executives the prohibition on having dealings with the company 89 basis of priority. Also, the company prepares detailed The Article 9 of the Articles of Association of and on competing with it have been given to the Bo- action plans to tackle critical risks, which are then Turkcell states that “The Board is fully authori- ard members at the Ordinary General Shareholders’ implemented. These processes are coordinated by zed to carry out the affairs of the Company and Meeting on April 29, 2010. However, no board mem- Corporate Risk Management Committee and repor- management of Company assets and the activities ber did any business with the Company in 2011, nor ted on a regular basis. relating to the Company purpose and subject mat- were there any matters that might lead to compe- ter other than those that have to be solely carried tition with the company or any conflict of interest. In addition, the Regulation Strategies Function, out by the General Assembly”. In addition, within which supervises sector regulations and competition the context of enhancing the Company’s corporate 4.8 Code of Ethics issues, also performs risk management. governance practices, the authority and duties of The Turkcell Common Values are defined as common the Board of Directors are examined in the Corpo- concepts and values, which Turkcell employees are Turkcell and Turkcell Group Business Continuity rate Governance Principles adopted by the Board expected to comply with in their work lives, inter- Management of Directors, and posted on the company’s corpo- nalize and integrate into their conduct. All Turkcell Turkcell formulated its business continuity plans in rate website at www.turkcell.com.tr in the Inves- employees and Management Team are responsible 2000, which also encompass its technical operations tor Relations section under the title of Corporate for complying with these codes and regulations. and repositioned its business continuity plan as Bu- Governance. siness Continuity Management by broadening and Each new Turkcell employee is introduced to these re-positioning it in 2004. 4.6 Principles of Activity of the Board of Directors codes in the orientation program and signs an affir- The agenda of the meetings of the Board of Direc- mation stating his/her understanding that they will With the new restructuring in 2011, the scope of tors are prepared by the Chairman of the Board of be considered an integral part of his/her employment the program was expanded to include Turkcell Gro- Directors, who takes into account requests made contract. The signature date of the commitment let- up companies and suppliers. This aimed at providing by members of the Board of Directors and executi- ter is specified on the affirmation. Any subsequent the responsible persons with business continuity ves. The Board of Directors met a total of 14 times revisions in the Turkcell Common Values and Code information flow and rescue plans anytime and any- during 2011. The overall rate of attendance at these of Ethics are posted on the Turkcell’s intranet. Emp- where both online and offline during natural disas- meetings was 99%. In order to increase the rate of loyees are responsible for following the revision up- ters. Turkcell’s Business Continuity Program which attendance, Turkcell sets the schedule of the Board dates. All related definitions are determined by the encompasses Turkcell Group companies and supp- meetings to be held in the following year before Ethics Committee, tasked by the Audit Committee liers, aims at ensuring business continuity through the end of the current year and delivers them to operating under the Turkcell Board of Directors. The TURKCELL ANNUAL REPORT 2011

2011 Corporate Governance Compliance Report (Continued)

Ethics Committee revises, updates, and improves the 4.9 Number, Structure and Independence of the the Board of Directors be paid an annual salary of Codes, checks them for inconsistencies and submits Committees Established Under the Board of €250,000 as of February 25, 2010 and members of the final version to the Audit Committee. The defi- Directors the Board of Directors be paid an annual attendance ned adjustments become effective after approval Within the Board of Directors, there is an Audit fee of €100,000 as of April 25, 2010. The amount of of the Audit Committee. Each Turkcell employee is Committee and a Corporate Governance Committee. the attendance fee to be paid to the members of the responsible for reporting, through existing reporting Each committee advises and makes recommendati- Board of Directors and statutory auditors are set by channels, all cases and rumors which may be cont- ons to the Board of Directors. Each committee has the shareholders at the General Shareholders’ Me- rary to the codes and regulations specified in the rules specifying their working principles. Member of eting. As was also the case in earlier years and as Manual for Turkcell Common Values and Business both the Audit Committee’s and the Corporate Go- per company policy, it was resolved also in 2011 that Ethics or which may cause reasonable doubt or con- vernance Committee consist of the non-executive statutory auditors are not paid any salaries or fees. cern that such a contrariness may arise. members of the Board of Directors. Information abo- Members of the Board of Directors are nor provided ut the committees formed under the Board of Direc- with any other privileges and there is no performan- While investigating such complaints/reports, the tors is posted on the company’s corporate website ce-based rewarding scheme on which the remune- Audit and Ethics Committees may receive guidance at www.turkcell.com.tr in the Investors Relations ration of the members of the Board of Directors are from managers, employees, or from external so- section under the Corporate Governance title. based. urces with expertise on the related issue, provided that the principle of confidentiality is observed. The At the Board of Directors meeting on May 27, 2010, No loans have been granted to any members of the Audit and Ethics Committees are free to include the within the context of Turkcell’s corporate gover- company’s Board of Directors or managers, no gu- management team, internal audit team, independent nance practices and applicable regulations, it was aranties such as sureties have been given and no auditors, consultants, or experts into the investi- decided that Mr. Colin J. Williams and Mr. Alexey collateral in favor of the members of the company’s gation phase or analysis of the results, provided Khudyakov will continue their Audit Committee Board of Directors or senior executives have been that new participants comply with the principle of memberships and that Mr. Colin J. Williams will con- given. 90 confidentiality. After the investigation phase has tinue as Chairman of the Audit Committee. At the been completed, the Audit and Ethics Committees same meeting, it was decided that Mr. Colin J Willi- independently work to make decisions and settle the ams, Ms. Karin B. Eliasson, Mr. Mehmet Bülent Ergin issue. If the complaint/report investigated by the Et- and Mr. Oleg A. Malis are appointed as Corporate hics Committee is not a critical case, action may be Governance Committee members of the Company taken upon a decision by the chairman of the Ethics and that Mr. Colin J. Williams will serve as Chairman Committee. For critical cases, the majority of the Et- of the Corporate Governance Committee. hics Committee must agree on the decision. The Audit Committee held a total of 11 regular me- The committee imposes sanctions on the etings in 2011. The Recommendations and documen- employee(s) involved in the case, taking into consi- tation of these meetings are kept and archived by deration of the consequences of the case. the Secretariat of the Board of Directors.

Training programs and notifications are provided to Among the main activities carried out by the Audit employees through various channels during the year Committee in 2011 are checking the content and to increase their awareness and acknowledgement accuracy of the financial statements and related an- of the Turkcell Common Values and Business Ethics. nouncements; application and effectiveness of the accounting system of the company and running and Our Code of Ethics is posted on the company’s cor- effectiveness of the independent audit system. porate website, in the Investor Relations section under the Corporate Governance title. These codes 4.10 Remuneration of the Members of the Board of ethics are complementary to other related polici- of Directors es, codes of conducts, and guides that have already At the General Shareholders’ Meeting held on Ap- been published or will be published by the company. ril 29, 2010, it was resolved that the Chairman of Turkcell OffIces

Office Name Adress

Tepebaşı Plaza Asmalı Mescit Mh. Meşrutiyet Caddesi No: 71 Asmalı Mescit Beyoğlu - Istanbul

Maltepe Plaza Yeni Mh. Pamukkale Sk. No: 3, 34880 Soğanlık Mevkii - Kartal - Istanbul

Davutpaşa Plaza Serçe Kale Sk. No: 2, Topkapı - İstanbul Kartal Plaza Topselvi Dipçik Sk. No: 31, Kartal - Istanbul

Şişli Plaza 19 Mayıs Cad. Dr. İsmet Öztürk Sokak Şişli Plaza Ofis blokları E Blok B2 Şişli-Istanbul

Kartal Plaza Topselvi mah. Dipçik sok. No:31 34873 Kartal / Istanbul 34873

Adana Plaza Turhan Cemal Berikel Bulv. No: 212, 91 Seyhan - Adana

Ankara Plaza Eskişehir Yolu 9. Km No: 264, Söğütözü - Ankara

Antalya Plaza Kızıltoprak Mah. 915 Sk. No: 3, Antalya

Bursa Plaza Organize San. Bölgesi Kırmızı Cad. No: 4, Nilüfer - Bursa

Diyarbakır Plaza Urfa Yolu 6. Km Diyarbakir

İzmir Plaza Ankara Asfaltı No: 64, Bornova - Izmir

Samsun Plaza Mimar Sinan Mah. 60. Sokak No: 18, PK 55200 Atakum - Samsun

Erzurum Plaza 1. Organize sanayi bölgesi 1. cadde 4. sokak NO:10 Aziziye-Erzurum

Trabzon Plaza Mısırlı Mahallesi Hasan Turfanda Yolu No: 1, Çukurçayır – Trabzon TURKCELL ANNUAL REPORT 2011

TURKCELL İLETİŞİM HİZMETLERİ A.Ş. AND ITS SUBSIDIARIES

92 CONSOLIDATED FINANCIAL STATEMENT AND INDEPENDENT AUDIT REPORT CONTENTS PAGE

ConsolIdated Statement Of FInancIal PosItIon 97

ConsolIdated INCOME Statement 98

ConsolIdated Statement OF COMPREHENSIVE INCOME 99

ConsolIdated Statement OF CHANGES AND EQUITY 100

ConsolIdated Statement OF CASH FLOWS 101

Notes to the consolIdated fInancIal statements 102-218

NOTE 1. Reporting entity 102 NOTE 2. Basis of preparation 103 NOTE 3. significant accounting policies 109 NOTE 4. Determination of fair values 130 NOTE 5. financial risk management 133 NOTE 6. Operating segments 135 NOTE 7. acquisition of subsidiaries 140 NOTE 8. Revenue 142 NOTE 9. Other income and expenses 142 93 NOTE 10. pERsonnel expenses 143 NOTE 11. finance income and costs 143 NOTE 12. iNcome tax expense 144 NOTE 13. pROperty, plant and equipment 146 NOTE 14. iNTangible assets 148 NOTE 15. iNvestments in equity accounted investees 153 NOTE 16. Other investments 154 NOTE 17. Other non-current assets 156 NOTE 18. Deferred tax assets and liabilities 156 NOTE 19. Trade receivables and accrued income 159 NOTE 20. Other current assets 159 NOTE 21. cash and cash equivalents 160 NOTE 22. share capital and reserves 160 NOTE 23. Earnings per share 162 NOTE 24. Other non-current liabilities 163 NOTE 25. lOans and borrowings 163 NOTE 26. Employee benefits 166 NOTE 27. Deferred income 166 NOTE 28. pROvisions 166 NOTE 29. Trade and other payables 168 NOTE 30. financial instruments 169 NOTE 31. Operating leases 178 NOTE 32. guarantees and purchase obligations 178 NOTE 33. cOmmitments and contingencies 179 NOTE 34. Related parties 211 NOTE 35. gROup entities 217 NOTE 36. subsequent events 218 TURKCELL ANNUAL REPORT 2011

DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Sun Plaza, Bilim Sok. No:5 Maslak, Şişli 34398, İstanbul, Türkiye

Tel : (212) 336 60 00 Fax : (212) 336 60 10 web : www.deloitte.com.tr

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Turkcell İletişim Hizmetleri A.Ş.

We have audited the accompanying consolidated statement of financial position of Turkcell İletişim Hizmetleri A.Ş (“the Company”) and its subsidiaries (together “the Group”) as of December 31, 2011 and 2010 and the related consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the years ended December 31, 2011 and 2010. These consolidated 94 financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Fintur Holdings B.V. (“Fintur”); a 41.45 percent owned equity accounted investee of the Group. The Group’s investment in Fintur as of December 31, 2011 and 2010 was $359 million and $304 million, respectively and its share in profit of Fintur was $165 million and $153 million for the years 2011 and 2010, respectively. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Fintur, is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other independent registered public accounting firm provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other independent registered public accounting firm, such consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2011 and 2010 and the results of their operations and their cash flows for the years ended December 31, 2011 and 2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting as of December 31, 2011 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 20, 2012 expressed an unqualified opinion on the effectiveness of Group’s internal control over financial reporting. Other Matter

Without qualifying our opinion, we draw attention to the following matter:

As already discussed in Note 2a and 22, the Group’s audited consolidated financial statements for the year ended December 31, 2010 were approved by the Company’s Audit Committee and Board of Directors and authorized for announcement on February 23, 2011. However; these consolidated financial statements were not approved by the General Assembly meeting on 21 April 2011 and the Extraordinary General Assembly meetings on August 11 and October 12, 2011. The General Assembly has the authority to amend the consolidated financial statements. Additionally, the Company’s Board of Directors proposed a dividend distribution for the year ended December 31, 2010 amounting to TL 1,328,697 thousand on March 23, 2011. Since consolidated financial statements for the year ended December 31, 2010 were not approved in General Assembly and Extraordinary General Assembly meetings, the dividend distribution proposal was 95 not approved and no financial liability has been recognized in the accompanying consolidated financial statements.

Istanbul, Turkey

April 20, 2012

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED TURKCELL ANNUAL REPORT 2011

DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Sun Plaza, Bilim Sok. No:5 Maslak, Şişli 34398, İstanbul, Türkiye

Tel : (212) 336 60 00 Fax : (212) 336 60 10 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM web : www.deloitte.com.tr

To the Board of Directors and Shareholders of Turkcell İletişim Hizmetleri A.Ş.

We have audited the internal control over financial reporting of Turkcell İletişim Hizmetleri A.Ş. and its subsidiaries (together the “Group”) as of December 31, 2011 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinion.

96 A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audit, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the years ended December 31, 2011 and 2010 of the Group and our report dated April 20, 2012 expressed an unqualified opinion on those financial statements based on our audit and the report of other independent registered public accounting firm.

Istanbul, Turkey

April 20, 2012

DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Financial Position As at 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

(The Group’s audited consolidated financial statements prepared as at and for the year ended 31 December 2010 were approved by the Audit Committee and the Board of Directors (Board Resolution dated 23 February 2011 and numbered 797), however not approved by the General Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.)

Note 2011 2010 Assets Property, plant and equipment 13 2,709,600 3,068,021 Intangible assets 14 1,246,308 1,709,311 GSM and other telecommunication operating licenses 691,895 955,703 Computer software 502,974 547,607 Other intangible assets 51,439 206,001 Investments in equity accounted investees 15 414,392 399,622 Other investments 16 22,568 33,849 Due from related parties 34 43 1,044 Other non-current assets 17 125,389 107,277 Trade receivables 19 113,581 35,024 Deferred tax assets 18 3,286 2,876 Total non-current assets 4,635,167 5,357,024

Inventories 26,069 24,386 Other investments 16 844,982 8,201 Due from related parties 34 43,215 88,897 Trade receivables and accrued income 19 842,381 816,151 Other current assets 20 198,458 197,740 Cash and cash equivalents 21 2,508,529 3,302,163 Total current assets 4,463,634 4,437,538

Total assets 9,098,801 9,794,562

Equity Share capital 22 1,636,204 1,636,204 Share premium 22 434 434 97 Capital contributions 22 22,772 22,772 Reserves 22 (1,920,974) (660,121) Retained earnings 22 6,053,702 5,258,327 Total equity attributable to equity holders of Turkcell Iletisim Hizmetleri AS 5,792,138 6,257,616

Non-controlling interests 22 (60,533) (24,019)

Total equity 5,731,605 6,233,597

Liabilities Loans and borrowings 25 1,057,380 1,407,316 Employee benefits 26 28,259 29,742 Provisions 28 58,219 57,055 Other non-current liabilities 24 92,669 160,832 Deferred tax liabilities 18 67,374 93,105 Total non-current liabilities 1,303,901 1,748,050

Bank overdraft 21 1,084 5,896 Loans and borrowings 25 811,953 430,205 Income taxes payable 12 61,891 96,080 Trade and other payables 29 929,488 951,976 Due to related parties 34 14,582 10,760 Deferred income 27 118,376 164,186 Provisions 28 125,921 153,812 Total current liabilities 2,063,295 1,812,915

Total liabilities 3,367,196 3,560,965

Total equity and liabilities 9,098,801 9,794,562

The notes are an integral part of these consolidated financial statements. TURKCELL ANNUAL REPORT 2011

Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Income For the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Note 2011 2010 2009

Revenue 8 5,609,679 5,982,093 5,789,972 Direct costs of revenue (3,528,928) (3,349,035) (3,097,097) Gross profit 2,080,751 2,633,058 2,692,875

Other income 32,600 14,668 978 Selling and marketing expenses (1,010,615) (1,085,750) (1,085,081) Administrative expenses (246,543) (347,290) (273,139) Other expenses 9 (161,236) (64,233) (111,220) Results from operating activities 694,957 1,150,453 1,224,413

Finance income 11 330,277 277,130 329,550 Finance costs 11 (289,648) (102,662) (187,514) Net finance income 40,629 174,468 142,036

Monetary gain 144,813 - - Share of profit of equity accounted investees 15 136,907 122,839 78,448 Profit before income tax 1,017,306 1,447,760 1,444,897

98 Income tax expense 12 (292,193) (320,799) (340,093) Profit for the year 725,113 1,126,961 1,104,804

Profit/(loss) attributable to: Owners of Turkcell Iletisim Hizmetleri AS 751,709 1,170,176 1,093,992 Non-controlling interests (26,596) (43,215) 10,812 Profit for the year 725,113 1,126,961 1,104,804

Basic and diluted earnings per share 23 0.34 0.53 0.50 (in full USD)

The notes are an integral part of these consolidated financial statements. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Comprehensive For the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2011 2010 2009

Profit for the year 725,113 1,126,961 1,104,804

Other comprehensive income/(expense): Foreign currency translation differences (1,293,917) (184,352) 53,046 Net change in fair value of available-for-sale securities - (1,318) 1,197 Change in cash flow hedge reserve (459) - - Income tax on other comprehensive (expense)/income (4,430) (754) (1,091) Other comprehensive income/(expense) for the year, net of income tax (1,298,806) (186,424) 53,152

Total comprehensive income for the year (573,693) 940,537 1,157,956

Total comprehensive income/(expense) attributable to: Owners of Turkcell Iletisim Hizmetleri AS (540,624) 984,187 1,146,681 Non-controlling interest (33,069) (43,650) 11,275 Total comprehensive income for the year (573,693) 940,537 1,157,956

The notes are an integral part of these consolidated financial statements. TURKCELL ANNUAL REPORT 2011 - - - - 89 544 1,197 (459) 4,570 53,152 51,955 (1,318) 36,088 32,484 42,662 (1,676) (3,989) 725,113 940,537 (12,689) 1,126,961 (185,106) 1,157,956 1,104,804 (590,541) (186,424) 5,896,201 (744,380) 5,896,201 5,731,605 6,233,597 5,443,643 6,233,597 (573,693) (1,298,347) (1,298,806) Total Equity ------89 544 463 463 (435) (435) 11,275 10,812 58,116 36,632 36,632 (1,676) (6,473) (3,989) (6,473) (24,019) (17,090) (43,215) (31,083) (26,596) (43,650) (24,019) (60,533) (33,069) Non- Interest Controlling Controlling ------1,197 (459) 4,570 51,492 (1,318) 36,088 32,484 42,662 52,689 751,709 984,187 (12,689) 1,170,176 1,146,681 (184,671) (573,451) (185,989) (713,297) 6,257,616 1,093,992 6,257,616 5,792,138 5,859,569 5,385,527 (540,624) 5,859,569 (1,291,874) (1,292,333) Total ------1,004 42,662 751,709 751,709 (50,652) 1,170,176 1,170,176 (105,512) (573,451) (713,297) 4,712,254 1,093,992 1,093,992 4,437,071 4,712,254 5,258,327 5,258,327 6,053,702 Earnings Retained ------51,492 51,492 51,492 (184,210) (184,210) (184,210) (931,080) (931,080) (746,870) (798,362) (746,870) (1,281,157) (1,281,157) (1,281,157) (2,212,237) Reserve Translation Translation ------(461) (461) (461) 36,088 32,484 (10,717) (10,717) (12,689) (10,717) (263,984) (250,834) (242,217) (286,922 ) (263,984) (250,834) Put Option Reserve for Non- for Reserve Controlling Interest Interest Controlling ------(459) (459) (459) (459) Hedge Reserves Cash Flow Cash Flow ------121 1,318 1,197 1,197 1,197 1,318 (1,318) (1,318) (1,318) Attributable to equity of the Company to holders Attributable Reserve 100 Value Fair ------50,652 (1,004) 105,512 484,291 484,291 534,943 534,943 378,779 533,939 Legal Legal Reserves ------434 434 434 434 434 434 Share Premium Share ------4,570 The notes are an integral part financial statements. of these consolidated an integral are The notes 18,202 22,772 22,772 22,772 22,772 22,772 Capital Contribution ------1,636,204 1,636,204 1,636,204 1,636,204 1,636,204 1,636,204 Share Capital Share Total other comprehensive income/(expense) comprehensive other Total Net change in fair value of available-for-sale securities, net of tax of available-for-sale value Net change in fair Change in cash flow hedge reserve hedge Change in cash flow Other comprehensive income/(expense) Other comprehensive net of tax differences, translation currency Foreign Total comprehensive income comprehensive Total year for the Profit Balance at 1 January at Balance 2011 Balance at 31 December 2010 31 December at Balance Change in reserve for non-controlling interest put option interest non-controlling for Change in reserve Change in non-controlling interest Change in non-controlling Dividends paid (Note 22) Dividends paid (Note Increase in legal reserves Increase Total comprehensive income/(expense) comprehensive Total Total other comprehensive income/(expense) comprehensive other Total Net change in fair value of available-for-sale securities, net of tax of available-for-sale value Net change in fair Other comprehensive income/(expense) Other comprehensive net of tax differences, translation currency Foreign Total comprehensive income comprehensive Total year for the Profit Balance at 1 January at Balance 2010 Capital contribution granted Capital contribution 2009 31 December at Balance Change in reserve for non-controlling interest put option interest non-controlling for Change in reserve Change in non-controlling interest Change in non-controlling Balance at 31 December 2011 31 December at Balance Dividends paid (Note 22) Dividends paid (Note Change in reserve for non-controlling interest put option (Note 30) (Note put option interest non-controlling for Change in reserve Increase in legal reserves Increase Change in non-controlling interest Change in non-controlling Total comprehensive income/(expense) comprehensive Total Effects of inflation accounting (Note 2b) (Note accounting of inflation Effects Total other comprehensive income/(expense) comprehensive other Total Dividend paid (Note 22) Dividend paid (Note Net change in fair value of available-for-sale securities, net of tax of available-for-sale value Net change in fair Transfers from legal reserves from Transfers Other comprehensive income/(expense) Other comprehensive net of tax differences, translation currency Foreign Total comprehensive income/(expense) comprehensive Total Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year Of Changes In For Statement Consolidated amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board Total comprehensive income comprehensive Total year for the Profit Balance at 1 January at Balance 2009 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Consolidated Statement Of Cash Flows For the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

Note 2011 2010 2009 Cash flows from operating activities Profit for the year 725,113 1,126,961 1,104,804 Adjustments for: Depreciation and impairment of fixed assets 13 636,758 515,515 384,257 Amortization of intangible assets 14 287,792 241,839 206,421 Net finance (income) 11 (300,307) (237,628) (254,582) Income tax expense 12 292,193 320,799 340,093 Share of profit of equity accounted investees (165,408) (154,457) (115,240) (Gain)/loss on sale of property, plant and equipment (3,771) 101 25,150 Unrealized foreign exchange and monetary gain/loss on operating assets (159,292) (5,847) 88,572 Impairment losses on goodwill 52,971 23,499 61,835 Provision for impairment of trade receivables 30 31,361 126,257 75,379 Deferred income 27 (16,005) (77,854) (2,966) Impairment losses on equity accounted investee and other non-current investments 9 21,558 - - 1,402,963 1,879,185 1,913,723

Change in trade receivables 19 (275,271) (204,403) (269,360) Change in due from related parties 34 33,984 28,752 (20,312) Change in inventories (6,110) 3,083 (8,662) Change in other current assets 20 (35,736) (29,389) (37,099) Change in other non-current assets 17 (22,867) (29,011) (21,272) Change in due to related parties 34 4,159 (3,775) (6,290) Change in trade and other payables 43,853 32,541 180,469 Change in other current liabilities 57,741 (96,118) (115,306) Change in other non-current liabilities 24 (21,185) (14,051) (82,893) Change in employee benefits 26 3,917 2,690 942 Change in provisions 28 (8,060) (45,102) 123,644 1,177,388 1,524,402 1,657,584 101 Interest paid (46,716) (38,829) (29,497) Income tax paid (276,176) (322,754) (395,024) Dividends received 71,331 99,759 83,543 Net cash generated by operating activities 925,827 1,262,578 1,316,606

Cash flows from investing activities Acquisition of property, plant and equipment (660,359) (912,097) (1,044,165) Acquisition of intangible assets 14 (198,607) (132,827) (723,507) Proceeds from sale of property, plant and equipment 8,603 8,506 4,471 Proceeds from currency option contracts 6,081 12,147 10,549 Payment of currency option contracts premium (1,267) (4,988) (1,150) Acquisition of financial assets (858,667) (16,762) (83,951) Proceeds from sale of financial assets 11,191 70,528 32,015 Acquisition of subsidiary including cash acquired 7 578 - - Interest received 281,965 270,602 320,697 Net cash used in investing activities (1,410,482) (704,891) (1,485,041)

Cash flows from financing activities Proceeds from issuance of loans and borrowings 552,859 1,071,777 1,692,866 Loan transaction costs (938) (12,100) (14,357) Repayment of borrowings (516,901) (772,892) (944,133) Change in non-controlling interest 544 89 - Proceeds from capital contribution - - 4,570 Dividends paid (3,989) (590,541) (744,380) Net cash generated by (used in) financing activities 31,575 (303,667) (5,434)

Net (decrease)/increase in cash and cash equivalents (453,080) 254,020 (173,869)

Cash and cash equivalents at 1 January 3,296,267 3,090,242 3,255,420

Effects of foreign exchange rate fluctuations on cash and cash equivalents (335,742) (47,995) 8,691

Cash and cash equivalents at 31 December 21 2,507,445 3,296,267 3,090,242

The notes are an integral part of these consolidated financial statements. TURKCELL ANNUAL REPORT 2011

1. Reporting entity

Turkcell Iletisim Hizmetleri Anonim Sirketi (the “Company”) was incorporated in Turkey on 5 October 1993 and commenced its operations in 1994. The address of the Company’s registered office is Turkcell Plaza, Mesrutiyet Caddesi No: 71, 34430 Tepebasi/Istanbul. It is engaged in establishing and operating a Global System for Mobile Communications (“GSM”) network in Turkey and regional states.

In April 1998, the Company signed a license agreement (the “2G License”) with the Ministry of Transport, Maritime Affairs and Communications of Turkey (the “Turkish Ministry”), under which it was granted a 25 year GSM license in exchange for a license fee of $500,000. The License permits the Company to operate as a stand-alone GSM operator and releases it from some of the operating constraints in the Revenue Sharing Agreement, which was in effect prior to the 2G License. Under the 2G License, the Company collects all of the revenue generated from the operations of its GSM network and pays the Undersecretariat of Treasury (the “Turkish Treasury”) a treasury share equal to 15% of its gross revenue from Turkish GSM operations. The Company continues to build and operate its GSM network and is authorized to, among other things, set its own tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, issue invoices directly to subscribers, collect payments and deal directly with subscribers. Following the 3G tender held by the Information Technologies and Communications Authority (“ICTA”) regarding the authorization for providing IMT-2000/UMTS services and infrastructure, the Company has been granted the A-Type license (the “3G License”) providing the widest frequency band, at a consideration of EUR 358,000 (excluding Value Added Tax (“VAT”)). Payment of the 3G license was made in cash, following the necessary approvals, on 30 April 2009.

On 25 June 2005, the Turkish Government declared that GSM operators are required to pay 10% of their existing monthly treasury share to the Turkish Ministry as a universal service fund contribution in accordance with Law No: 5369. As a result, starting from 30 June 2005, the Company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish Ministry as universal service fund.

In July 2000, the Company completed an initial public offering with the listing of its ordinary shares on the Istanbul Stock Exchange and American Depositary 102 Shares, or ADSs, on the New York Stock Exchange. As at 31 December 2011, two significant founding shareholders, Sonera Holding BV and Cukurova Group, directly and indirectly, own approximately 37.1% and 13.8%, respectively of the Company’s share capital and are ultimate counterparties to a number of transactions that are discussed in the related parties footnote. Alfa Group holds 13.2% of the Company’s shares indirectly through Cukurova Holdings Limited and Turkcell Holding AS.

The consolidated financial statements of the Company as at and for the year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in one associate and one joint venture. Subsidiaries of the Company, their locations and their business are given in Note 35. The Company’s and each of its subsidiaries’, associate’s and joint venture’s financial statements are prepared as at and for the year ended 31 December 2011. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2. Basis of preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”).

The Company selected the presentation form of “function of expense” for the statement of comprehensive income in accordance with IAS 1 “Presentation of Financial Statements”.

The Company reports cash flows from operating activities by using the indirect method in accordance with IAS 7 “Statement of Cash Flows”, whereby profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

Authority for restatement and approval of consolidated financial statements belongs to the Board of Directors. Consolidated financial statements are approved by the Board of Directors by the recommendation of Audit Committee of the Company.

The Group’s audited consolidated financial statements prepared as at and for the year ended 31 December 2010 were approved by the Audit Committee and the Board of Directors (Board Resolution dated 23 February 2011 and numbered 797), however not approved by the General Assembly on 21 April 2011 and the Extraordinary General Assemblies of Shareholders held on 11 August 2011 and 12 October 2011.

The consolidated financial statements as of and for the year ended 31 December 2011 were authorized for issue on 22 February 2012 by the Board of Directors and updated by the management for any subsequent events up until 20 April 2012. 103 (b) Basis of measurement

The accompanying consolidated financial statements are based on the statutory records, with adjustments and reclassifications for the purpose of fair presentation in accordance with IFRSs as issued by the IASB. They are prepared on the historical cost basis adjusted for the effects of inflation during the hyperinflationary periods in accordance with International Accounting Standard No. 29. (”Financial Reporting in Hyperinflationary Economies”) (“IAS 29”), where applicable, except that the following assets and liabilities are stated at their fair value: put option liability, derivative financial instruments and financial instruments classified as available-for-sale. The methods used to measure fair value are further discussed in Note 4. Hyperinflationary period lasted by 31 December 2005 in Turkey and commenced on 1 January 2011 in Belarus. In the financial statements of subsidiaries operating in Belarus, restatement adjustments have been made to compensate the effect of changes in the general purchasing power of the Belarusian Ruble in accordance with IAS 29. IAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date. One characteristic that necessitates the application of IAS 29 is a cumulative three-year inflation rate approaching or exceeding 100%. Such cumulative rate in Belarus was 152% for the three years ended 31 December 2011 based upon the consumer price index (“CPI”) announced by the National Statistical Committee of the Republic of Belarus. Such index and the conversion factors used to adjust the financial statements of the subsidiaries operating in Belarus for the effect of inflation as at 31 December 2011 are given below: TURKCELL ANNUAL REPORT 2011

2. Basis of preparation (continued)

(b) Basis of measurement (continued)

Dates Index Conversion Factor 31 December 2008 1.3524 2.5221 31 December 2009 1.4856 2.2959 31 December 2010 1.6345 2.0867 31 December 2011 3.4109 1.0000

The annual change in the BYR exchange rate against USD and Euro can be compared with the rates of general price inflation in Belarus according to the CPI as set out below:

Years 2009 2010 2011 Currency change USD (%) 30% 5% 178% Currency change Euro (%) 33% (3)% 172% CPI inflation (%) 10% 10% 109%

As at 31 December 2011 the exchange rate announced by the National Bank of the Republic of Belarus was BYR 8,350 = USD 1, BYR 10,800 = Euro 1 (31 December 2010: BYR 3,000 = USD 1, BYR 3,973 = Euro 1).

The main guidelines for the IAS 29 restatement are as follows: 104 - All statement of financial of position items, except for the ones already presented at the current purchasing power level, are restated by applying a general price index.

- Monetary assets and liabilities of the subsidiaries operating in Belarus are not restated because they are already expressed in terms of the current measuring unit at the balance sheet date. Monetary items presents money held and items to be received or paid in money.

- Non-monetary assets and liabilities of the subsidiaries operating in Belarus are restated by applying, to the initial acquisition cost and any accumulated depreciation, the change in the general price index from the date of acquisition or initial recording to the balance sheet date. Hence, property, plant and equipment, investments and similar assets are restated from the date of their purchase, not to exceed their market value. Depreciation is similarly restated. The components of shareholders’ equity are restated by applying the applicable general price index from the dates the components were contributed or arose otherwise.

- All items in the statement of income of the subsidiaries operating in Belarus, except non-monetary items in the statement of financial position that have effect over statement of income, are restated by applying the relevant conversion factors from the dates when the income and expense items were initially recorded in the financial statements.

- The gain or loss on the net monetary position is the result of the effect of general inflation and is the difference resulting from the restatement of non- monetary assets, shareholders’ equity and statement of income items. The gain or loss on the net monetary position is included in net income. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2. Basis of preparation (continued)

(b) Basis of measurement (continued)

The comparative amounts relating to the subsidiaries operating in Belarus in the 2010 consolidated financial statements are not restated. Only the current period amounts reported in the consolidated financial statements are affected by the subsidiaries operating in Belarus. Since the carrying value of Belarusian Telecom as of 1 January 2011 is limited by the value in use determined in accordance with the impairment analysis as of the same date, the net effect amounting to $42,662 as a result of the inflation accounting effect on the carrying value of Best as of 1 January 2011 less reassessed corresponding additional impairment charge amounting to $87,341 is presented as “Effects of Hyperinflation” within the opening balance of retained earnings for the financial year 2011.

The consolidated financial statements are presented in US Dollars (“USD” or “$”), rounded to the nearest thousand. Moreover, all financial information expressed in Turkish Lira (“TL”), Euro (“EUR”), Ukranian Hryvnia (“HRV”) and Swedish Krona (“SEK”) has been rounded to the nearest thousand. The functional currency of the Company and its consolidated subsidiaries located in Turkey and Turkish Republic of Northern Cyprus is TL. The functional currency of Euroasia Telecommunications Holding BV (“Euroasia”) and Financell BV (“Financell”) is USD. The functional currency of East Asian Consortium BV (“Eastasia”), Beltur BV, Surtur BV and Turkcell Europe is EUR. The functional currency of LLC Astelit (“Astelit”), LLC Global Bilgi (“Global LLC”) and UkrTower LLC (“UkrTower”) is HRV. The functional currency of Belarusian Telecommunications Network (“Belarusian Telecom”) and FLLC Global Bilgi (“Global FLLC”) is Belarusian Ruble (“BYR”). The functional currency of Azerinteltek QSC (“Azerinteltek”) is Azerbaijan Manat.

(d) Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions 105 that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are described in Notes 4 and 33 and detailed analysis with respect to accounting estimates and critical judgments of allowance for doubtful receivables, useful lives or expected patterns of consumption of the future economic benefits embodied in depreciable assets, commission fees, revenue recognition, income taxes and impairment testing for cash-generating unit containing goodwill are provided below: TURKCELL ANNUAL REPORT 2011

2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued)

Key sources of estimation uncertainty

The economic environment in Belarus has deteriorated significantly since the second quarter of financial year 2011. Interest rates are linked to the prime refinance rate of the National Bank of Belarus, which has been gradually increased during 2011 and prices for goods and services denominated in BYR have been revisited several times in 2011 based on the change of market exchange rates. As of the balance sheet date cumulative inflation in the last three years exceeds 100% and therefore Belarus is considered a hyperinflationary economy. IAS 29 “Reporting in Hyperinflationary Economies” is applied by subsidiaries operating in Belarus in financial statements for the year ending 31 December 2011 as detailed Note 2(b).

While the National Bank of the Republic of Belarus has taken certain measures aimed at stabilizing the situation and preventing negative trends in the domestic foreign exchange market, including speculative pressure on the BYR, there exist the potential for economic uncertainties to continue in the foreseeable future.

Current and potential future political and economic changes in Belarus could have an adverse effect on the subsidiaries operating in this country. The economic stability of Belarus depends on the economic measures that will be taken by the government and the outcomes of the legal, administrative and political processes in the country. These processes are beyond the control of the subsidiaries established in the country.

Consequently, the subsidiaries operating within Belarus may subject to the risks, i.e. foreign currency and interest rate risks related to borrowings and the subscriber’s purchasing power and liquidity and increase in corporate and personal insolvencies, that may not necessarily be observable in other markets. The accompanying consolidated financial statements contain the Group management’s estimations on the economic and financial positions of its subsidiaries 106 operating in Belarus. The future economic situation of Belarus might differ from the Group’s expectations. As of 31 December 2011, the Group’s management believes that their approach is appropriate in taking all the necessary measures to support the sustainability of these subsidiaries’ businesses in the current circumstances.

Critical accounting judgments in applying the Group’s accounting policies

Certain critical accounting judgments in applying the Group’s accounting policies are described below: Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued)

Critical accounting judgments in applying the Group’s accounting policies (continued)

Allowance for doubtful receivables

The Group maintains an allowance for doubtful receivables for estimated losses resulting from the inability of the Group’s subscribers and customers to make required payments. The Group bases the allowance on the likelihood of recoverability of trade and other receivables based on the aging of the balances, historical collection trends and general economic conditions. The allowance is periodically reviewed. The allowance charged to expenses is determined in respect of receivable balances, calculated as a specified percentage of the outstanding balance in each aging group, with the percentage of the allowance increasing as the aging of the receivable becomes longer.

Useful lives of assets

The economic useful lives of the Group’s assets are determined by management at the time the asset is acquired and regularly reviewed for appropriateness. The Group defines useful life of its assets in terms of the assets’ expected utility to the Group. This judgment is based on the experience of the Group with similar assets. In determining the useful life of an asset, the Group also follows technical and/or commercial obsolescence arising on changes or improvements from a change in the market. The useful lives of the licenses are based on the duration of the license agreements.

In accordance with IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”, the residual value and the useful life of an asset shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”. As part of yearly review of useful lives of assets, the Group made 107 necessary evaluation by considering current technological and economic conditions and recent business plans. Based on the evaluation performed, changes in the useful lives caused the following prospective impacts on depreciation and amortization charges.

Previous accounting Current accounting estimate estimate Impact Depreciation and amortization charge for the year ended 31 December 2011 (893,203) (924,550) (30,347)

Due to the impracticability, the Group has not disclosed the effect of the change for the future periods.

Commission fees

Commission fees relate to services performed in relation to betting games in Turkey where the Group acts as an agent in the transaction rather than as a principal. In April 2009, the IASB issued amendments to the illustrative guidance in the appendix to IAS 18 “Revenue” in respect of identifying an agent versus a principal in a revenue-generating transaction. Based on this guidance; management considered the following factors in distinguishing between an agent and a principal:

• The Group does not take the responsibility for fulfillment of the games. • The Group does not collect the proceeds from the final customer and it does not bear the credit risk. • The Group earns a pre-determined percentage of the total turnover. TURKCELL ANNUAL REPORT 2011

2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued)

Critical accounting judgments in applying the Group’s accounting policies (continued)

Revenue recognition

In arrangements which include multiple elements, the Group considers the elements to be separate units of accounting in the arrangement. Total arrangement consideration relating to the bundled contracts is allocated among the different units according the following criteria:

• the component has standalone value to the customer; and • the fair value of the component can be measured reliably.

The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables. If a delivered element of a transaction is not a separately identifiable component, then it is accounted for as an integrated part of the remaining components of the transaction.

Income taxes

The calculation of income taxes involves a degree of estimation and judgment in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through formal legal process.

As part of the process of preparing the consolidated financial statements, the Group is required to estimate the income taxes in each of the jurisdictions and 108 countries in which they operate. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue and reserves for tax and accounting purposes. The Group management assesses the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent the recovery is not considered probable the deferred asset is adjusted accordingly.

The recognition of deferred tax assets is based upon whether it is probable that future taxable profits will be available, against which the temporary differences can be utilized. Recognition, therefore, involves judgment regarding the future financial performance of the particular legal entity in which the deferred tax asset has been recognized.

Impairment testing for cash-generating unit containing goodwill

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in Note 3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates as discussed in Notes 14 and 15.

Changes in accounting policies

Changes to the accounting policies are applied retrospectively and the prior period’s financial statements are restated accordingly. The Group did not make any major changes to accounting policies during the current year. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

2. Basis of preparation (continued)

(d) Use of estimates and judgments (continued)

Critical accounting judgments in applying the Group’s accounting policies (continued)

Changes in accounting estimates

If the application of changes in the accounting estimates affects the financial results of a specific period, the changes in the accounting estimates are applied in that specific period, if they affect the financial results of current and following periods; the accounting estimate is applied prospectively in the period in which such change is made. A change in the measurement basis applied is a change in an accounting policy, and is not a change in an accounting estimate. When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate.

The Group did not have any major changes in the accounting estimates during the current year, except for the useful lives of property, plant and equipment.

Comparative information and revision of prior period financial statements

The consolidated financial statements of the Group have been prepared with the prior periods on a comparable basis in order to give consistent information about the financial position and performance. If the presentation or classification of the financial statements is changed, in order to maintain consistency, the financial statements of the prior periods are also reclassified in line with the related changes.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Group entities. 109

(a) Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:

- the fair value of the consideration transferred; plus - the recognized amount of any non-controlling interests in the acquiree; plus - if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less - the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognized in profit or loss. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(i) Business combinations (continued)

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are changed as necessary to align them with the policies adopted by the Group.

(iii) Acquisition from entities under common control

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are excluded from the scope of IFRS 3 “Business Combinations”. In business combinations under common control, assets and liabilities subject to business combination 110 are accounted for at their carrying value in consolidated financial statements. Statements of income are consolidated starting from the beginning of the financial year in which the business combination is realized. Financial statements of previous financial years are restated in the same manner in order to maintain consistency and comparability. Any positive or negative goodwill arising from such business combinations is not recognized in the consolidated financial statements. Residual balance calculated by netting off investment in subsidiary and the share acquired in subsidiary’s equity accounted for as equity transactions (i.e. transactions with owners in their capacity as owners).

(iv) Associates and jointly controlled entities (equity accounted investees)

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating decisions. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with IAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(iv) Associates and jointly controlled entities (equity accounted investees) (continued)

Associates and jointly controlled entities (equity accounted investees) are accounted for using the equity method and are initially recognized at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The Group’s equity accounted investees as at 31 December 2011 are Fintur Holdings BV (“Fintur”) and A-Tel Pazarlama ve Servis Hizmetleri AS (“A-Tel”).

(v) Transactions eliminated on consolidation

Intragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(vi) Non-controlling interests 111 Where a put option is granted by the Group to the non-controlling interests shareholders in existing subsidiaries that provides for settlement in cash or in another financial asset, the Group recognizes a liability for the present value of the estimated exercise price of the option. The interests of the non-controlling shareholders that hold such put options are derecognized when the financial liability is recognized. The corresponding interests attributable to the holder of the puttable non-controlling interests are presented as attributable to the equity holders of the parent and not as attributable to those non-controlling interests’ shareholders. The difference between the put option liability recognized and the amount of non-controlling interests’ shareholders derecognized is recorded under equity. Subsequent changes in the fair value of the contingent consideration are recognized in profit or loss for the business combinations after 1 January 2009.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences arising on translation of foreign currency transactions are recognized in the statement of income. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(b) Foreign currency (continued)

(i) Foreign currency transactions (continued)

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in the statement of income, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized directly in equity.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD from the functional currency of the foreign operation at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to USD at monthly average exchange rates excluding foreign operations in hyperinflationary economies which are translated to USD at exchange rates at the reporting date.

The income and expenses of foreign operations in hyperinflationary economies are translated to USD at the exchange rate at the reporting date. Prior to translating the financial statements of foreign operations in hyperinflationary economies, their financial statements for the current period are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the reporting date.

Foreign currency differences arising on retranslation are recognized directly in the foreign currency translation reserve, as a separate component of equity. Since 1 January 2005, the Group’s date of transition to IFRSs, such differences have been recognized in the foreign currency translation reserve. When a 112 foreign operation is disposed of, partially or fully, the relevant amount in the foreign currency translation reserve is transferred to the statement of income.

Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized directly in equity in the foreign currency translation reserve.

(iii) Translation from functional to presentation currency

Items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the entities operate, normally under their local currencies.

The consolidated financial statements are presented in USD, which is the presentation currency of the Group. The Group uses USD as the presentation currency for the convenience of investor and analyst community.

Assets and liabilities for each statement of financial position presented (including comparatives) are translated to USD at exchange rates at the statement of financial position date. Income and expenses for each statement of income (including comparatives) are translated to USD at monthly average exchange rates excluding operations in hyperinflationary economies which are translated to USD at exchange rates at the reporting date.

Foreign currency differences arising on retranslation are recognized directly in a separate component of equity. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(b) Foreign currency (continued)

(iv)Net investment in foreign operations

Foreign currency differences arising from the translation of the net investment in foreign operations are recognized in the foreign currency translation reserve. They are transferred to the statement of income upon disposal of the foreign operations.

(i) Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments which are not recognized or designated as financial instruments at fair value through profit or loss are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured as described below:

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right 113 to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Accounting for finance income and costs is discussed in Note 3(m).

• Financial assets at fair value through profit or loss

An instrument is classified as financial asset at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s risk management or investment strategy. Upon initial recognition, attributable transaction costs are recognized in the statement of income when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in the statement of income.

• Held-to-maturity financial assets

If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. Held-to-maturity financial assets are held-to-maturity investments that are measured at amortized cost using the effective interest method, less any impairment losses.

Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(i) Non-derivative financial instruments (continued)

• Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the previous categories.

The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(h)(i)), and foreign exchange gains and losses on available- for-sale monetary items (see note 3(b)(i)), are recognized directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to the statement of income.

• Estimated exercise price of put options

Under the terms of certain agreements, the Group is committed to acquire the interests owned by non-controlling shareholders in consolidated subsidiaries, if these non-controlling interests wish to sell their share of interests.

As the Group has unconditional obligations to fulfill its liabilities under these agreements, IAS 32 “Financial instruments: Disclosure and Presentation”, requires the value of such put option to be presented as a financial liability on the statement of financial position for the present value of the estimated option 114 redemption amount. The Group accounts for such transactions under the anticipated acquisition method and the interests of non-controlling shareholders that hold such put option are derecognized when the financial liability is recognized. The Group accounts for the difference between the amounts recognized for the exercise price of the put option and the carrying amount of non-controlling interests in equity.

• Other

Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses.

(ii) Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency risk exposures arising from operational, financing and investing activities. In accordance with its treasury policy, the Group engages in forward and option contracts. However, these derivatives do not qualify for hedge accounting and are accounted for as trading derivatives.

Embedded derivatives are separated from the host contract and accounted for separately if a) the economic characteristics and risks of the host contract and the embedded derivative are not closely related, b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and c) the combined instrument is not measured at fair value through profit or loss.

Also the Group enters into derivative financial instruments to manage its exposure to interest rate, including interest rate collar. Further details of derivative financial instruments are disclosed in Note 25 and 30. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(ii) Derivative financial instruments (continued)

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is immediately recognized in statement of income unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in statement of income depends on the nature of the hedge relationship.

Hedge Accounting

The Group designates certain hedging instruments which include cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in statement of income, and is included in the “other gains and losses” line item. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, 115 or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in statement of income. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is immediately recognized in statement of income.

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are initially stated at cost less accumulated depreciation (see below) and accumulated impairment losses (see note 3(h)(ii)). Property, plant and equipment related to the parent and subsidiaries operating in Turkey are adjusted for the effects of inflation during the hyperinflationary period lasted by 31 December 2005. Since the inflation accounting commenced on 1 January 2011, property, plant and equipment related to the subsidiaries operating in Belarus are adjusted for the effects of inflation.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located, if any. Borrowing costs related to the acquisition or constructions of qualifying assets are capitalized as part of the cost of that asset. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(d) Property, plant and equipment (continued)

(i) Recognition and measurement (continued)

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Gains/losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within other income or other expenses in the statement of income.

Changes in the obligation to dismantle, remove assets on sites and to restore sites on which they are located, other than changes deriving from the passing of time, are added or deducted from the cost of the assets in the period in which they occur. The amount deducted from the cost of the asset shall not exceed the balance of the carrying amount on the date of change, and any excess balance is recognized immediately in the statement of income.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of income as incurred.

116 (iii) Depreciation Depreciation is recognized in the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term or their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

Buildings 21 – 50 years Mobile network infrastructure 4 – 8 years Fixed network infrastructure 3 – 25 years Call center equipment 4 – 8 years Equipment, fixtures and fittings 3 – 10 years Motor vehicles 4 – 6 years Central betting terminals 7 – 10 years Leasehold improvements 3 – 45 years

Depreciation methods, useful lives and residual values are reviewed at least annually unless there is a triggering event. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(e) Intangible assets

(i) GSM and other telecommunication operating licenses

GSM and other telecommunication operating licenses that are acquired by the Group are measured at cost adjusted for the effects of inflation during the hyperinflationary period, where applicable, less accumulated amortization (see below) and accumulated impairment losses (see note 3(h)(ii)). GSM and other telecommunication operating licenses related to the parent and subsidiaries operating in Turkey are adjusted for the effects of inflation during the hyperinflationary period lasted by 31 December 2005. Since the inflation accounting commenced on 1 January 2011, GSM and other telecommunication operating licenses related to the subsidiaries operating in Belarus are adjusted for the effects of inflation.

Amortization

Amortization is recognized in the statement of income on a straight line basis primarily by reference to the unexpired license period. The useful lives for the GSM and other telecommunication operating licenses are as follows:

GSM and other telecommunications licenses 3 – 25 years

(ii) Computer Software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software.

Costs associated with maintaining computer software programmes are recognized as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond 117 one year, are recognized as intangible assets. Costs include the software development employee costs and an appropriate portion of relevant overheads.

Amortization

Amortization is recognized in the statement of income on a straight-line basis over the estimated useful lives from the date the software is available for use. The useful lives for computer software are as follows:

Computer software 3 – 8 years

(iii) Other intangible assets

Other intangible assets that are acquired by the Group which have finite useful lives are measured at cost adjusted for the effects of inflation during the hyperinflationary period, where applicable, less accumulated amortization (see below) and accumulated impairment losses (see note 3(h)(ii)). Other intangible related to the parent and subsidiaries operating in Turkey are adjusted for the effects of inflation during the hyperinflationary periods lasted by 31 December 2005. Since the inflation accounting commenced on 1 January 2011, other intangible assets related to the subsidiaries operating in Belarus are adjusted for the effects of inflation. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(e) Intangible assets (continued)

(iii) Other intangible assets (continued)

Indefeasible Rights of Use (“IRU”) correspond to the right to use a portion of the capacity of an asset granted for a fixed period of time. IRUs are recognized as an intangible asset when the Group has specific indefeasible right to use an identified portion of the underlying asset and the duration of the right is the major part of the underlying asset’s economic life. IRUs are amortized over the shorter of the expected period of use and the life of the contract.

Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset (that is purchased from independent third parties) to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in the statement of income as incurred. Capitalized costs generally relate to the application of development stage; any other costs incurred during the pre and post- implementation stages, such as repair, maintenance or training, are expensed as incurred.

Amortization

Amortization is recognized in the statement of income on a straight line basis over the estimated useful lives of intangible assets unless such useful lives are indefinite from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

Transmission lines 5 – 10 years 118 Central betting system operating right 7 – 10 years Customer base 2 – 15 years Brand name 9 – 10 years Customs duty and VAT exemption right 4.4 years

Amortization methods, useful lives and residual values are reviewed at least annually unless there is a triggering event.

Goodwill

From 1 January 2010 the Group has applied IFRS 3 (2008) “Business Combinations” in accounting for business combinations.

For acquisitions on or after 1 January 2010, the Group measures goodwill as the fair value of the consideration transferred (including the fair value of any previously-held equity interest in the acquiree) and the recognized amount of any non-controlling interests in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

When the excess is negative, a bargain purchase gain is recognized immediately in the statement of income. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(e) Intangible assets (continued)

(iii) Other intangible assets (continued)

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset including goodwill, that forms part of the carrying amount of the equity accounted investees.

(iv) Internally generated intangible assets – research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:

• The technical feasibility of completing the intangible asset so that it will be available for use or sale; • The intention to complete the intangible asset and use or sell it; • The ability to use or sell the intangible asset; • How the intangible asset will generate probable future economic benefits; • The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and 119 • The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally generated intangible assets is the sum of expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is charged to the statement of income in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets acquired separately.

(f) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and the leased assets are not recognized on the Group’s statement of financial position.

(g) Inventories

Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less selling expenses. The cost of inventory is determined using the weighted average method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. As at 31 December 2011, inventories mainly consist of simcards, scratch cards, handsets and modems. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(h) Impairment

(i) Financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognized in the statement of income. Any cumulative loss in respect of an available-for-sale financial asset recognized previously in equity is transferred to the statement of income.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of income. For available- for-sale financial assets that are equity securities, the reversal is recognized directly in other comprehensive income. 120 (ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories, and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or group of assets (the “cash-generating unit”). The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate adjusted for the effects of tax cash outflows that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined from the cash-generating unit to which corporate asset belongs. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(h) Impairment (continued)

(ii) Non-financial assets (continued)

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in the statement of income. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, therefore, is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

(i) Employee benefits (i) Retirement pay liability 121 In accordance with existing labor law in Turkey, the Company and its subsidiaries in Turkey are required to make lump-sum payments to employees who have completed one year of service and whose employment is terminated without cause or who retire, are called up for military service or die. Such payments are calculated on the basis of 30 days’ pay maximum full TL 2,805 as at 31 December 2011 (equivalent to full $1,485 as at 31 December 2011), which is effective from 1 January 2012, per year of employment at the rate of pay applicable at the date of retirement or termination. Reserve for retirement pay is computed and reflected in the consolidated financial statements on a current basis. The reserve has been calculated by estimating the present value of future probable obligation of the Company and its subsidiaries in Turkey arising from the retirement of the employees.

(ii) Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in the statement of income when they are due.

The assets of the plan are held separately from the consolidated financial statements of the Group. The Company and other consolidated companies that initiated defined contribution retirement plan are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement plan is to make the specified contributions. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(j) Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

Onerous contracts

Present obligations arising under onerous contracts are recognized and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The Group did not recognize any provision for onerous contracts as at 31 December 2011 (31 December 2010: nil).

Dismantling, removal and restoring sites obligation

The Group is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Bonus 122 Provision for bonus is provided when the bonus is a legal obligation, or past practice would make the bonus a constructive obligation and the Group makes a reliable estimate of the obligation.

(k) Revenue

Revenues are recognized as the fair value of the consideration received or receivable, net of returns, trade discounts and rebates. Communication fees include postpaid revenues from incoming and outgoing calls, additional services, prepaid revenues, interconnect revenues and roaming revenues. Communication fees are recognized at the time the services are rendered.

With respect to prepaid revenues, the Group generally collects cash in advance by selling scratch cards to distributors. In such cases, the Group does not recognize revenue until the subscribers use the telecommunication services. Deferred income is recorded under current liabilities.

The Group offers free right of use to its subscribers, and recognizes any unused portion of these free granted right of use as at the balance sheet date as deferred revenue. The Group does not have any other customer loyalty program in the scope of IFRIC 13 “Customer Loyalty Programmes”.

In connection with campaigns, both postpaid and prepaid services may be bundled with handset or other goods/services and these bundled services and products involve consideration in the form of fixed fee or a fixed fee coupled with continuing payment stream. Loyalty programs for both postpaid and prepaid services may be bundled with other services. Total arrangement considerations relating to the bundled contract are allocated among the different units according the following criteria:

• the component has standalone value to the customer; and • the fair value of the component can be measured reliably. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(k) Revenue (continued)

The arrangement consideration is allocated to each deliverable in proportion to the fair value of the individual deliverables.

If a delivered element of a transaction is not a separately identifiable component, then it is accounted for as an integral part of the remaining components of the transactions.

Revenues allocated to handsets given in connection with campaigns, which is included in other revenue, is recognized when the significant risks and rewards of ownership have been transferred to the buyer, collection is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.

Monthly fixed fees represent a fixed amount charged to postpaid subscribers on a monthly basis without regard to the level of usage. Fixed fees are recognized on a monthly basis when billed.

Commission fees mainly comprised of net takings earned to a maximum of 1.4% of gross takings, as a head agent of fixed odds betting games starting from 1 March 2009. Commission revenues are recognized at the time all the services related with the games are fully rendered. Under the agreement signed with Spor Toto Teskilat Mudurlugu AS (“Spor Toto”), Inteltek Internet Teknoloji Yatirim ve Danismanlik AS (“Inteltek”) is obliged to undertake any excess payout, which is presented on net basis with the commission fees.

AzerInteltek received authorization from Azeridmanservis Limited Liability Company set under the Ministry of Youth and Sport of the Republic of Azerbaijan to organize, operate, manage and develop the fixed odds and paramutual sports betting business. Since AzerInteltek acts as principle, total consideration received from the player is recognized at the time all the services related with the games are fully rendered. 123

Simcard sales are recognized upfront upon delivery to distributors, net of returns, discounts and rebates. Simcard costs are also recognized upfront upon sale of the simcard to the distributors.

Call center revenues are recognized at the time services are rendered.

The revenue recognition policy for other revenues is to recognize revenue as services are provided.

Volume rebates or discounts and other contractual changes in the prices of roaming and other services are anticipated, as both the payer and the recipient, if it is probable that they have been earned or will take effect. Thus, contractual rebates and discounts are anticipated, but discretionary rebates and discounts are not anticipated because the definitions of asset and liability would not be met.

(l) Lease payments

Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(l) Lease payments (continued)

Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values.

(m) Finance income and costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), late payment interest income, interest income on contracted receivables, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss and gains on derivative instruments that are recognized in the statement of income. Interest income is recognized as it accrues, using the effective interest method.

Finance costs comprise interest expense on borrowings, litigation late payment interest expense, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or option premium expense.

Foreign currency gains and losses are reported on a net basis. 124 Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take considerable time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned by the temporary investment of the part of the borrowing not yet used is deducted against the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in the statement of income in the period in which they are incurred.

(n) Transactions with related parties

A related party is essentially any party that controls or can significantly influence the financial or operating decisions of the Group to the extent that the Group may be prevented from fully pursuing its own interests. For reporting purposes, investee companies and their shareholders, non-controlling shareholders at subsidiaries, key management personnel, shareholders of the Group and the companies that the shareholders have a relationship with are considered to be related parties. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(o) Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of income except to the extent that it relates to items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. 125

Interest and penalties assessed on income tax deficiencies are presented based on their nature.

(p) Earnings per share

The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is equal to basic EPS because the Group does not have any convertible notes or share options granted to employees.

In Turkey, companies can raise their share capital by distributing “Bonus Shares” to shareholders from retained earnings. In computing earnings per share, such “bonus share” distributions are treated as issued shares. Accordingly, the retrospective effect for such share distributions is taken into consideration in determining the weighted-average number of shares outstanding used in this computation.

(q) Operating segment

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

The Group identified Turkcell, Euroasia and Belarusian Telecom as operating segments. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(r) Subscriber acquisition costs

The Group capitalizes directly attributable subscriber acquisition costs when the following conditions are met:

• the capitalized costs can be measured reliably; • there is a contract binding the customer for a specific period of time; and • it is probable that the amount of the capitalized costs will be recovered through the revenues generated by the service contract, or, where the customer withdraws from the contract in advance, through the collection of the penalty.

Capitalized subscriber acquisition costs are amortized on a straight-line basis over the minimum period of the underlying contract. In all other cases, subscriber acquisition costs are expensed when incurred.

(s) Government grants

Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the statement of income over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the 126 statement of income on a straight-line basis over the expected useful lives of the related assets.

(t) New standards and interpretations

The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no material impact on the financial statements are set out in this section.

(i) New and Revised IFRSs do not affect presentation and disclosures

IAS 1 (Amendments), “Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010)”

The amendments to IAS 1 clarify that an entity may choose to present the required analysis of items of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. The amendments have been applied retrospectively.

(ii) New and Revised IFRSs affecting the reported financial performance and / or financial position

None. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(t) New standards and interpretations (continued)

(iii) New and Revised IFRSs applied with no material effect on the consolidated financial statements

IAS 24 (Revised 2009), “Related Party Disclosures”

In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government related entities with a partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1 January 2011.

IAS 32 (Amendments), “Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements”

The amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or after 1 February 2010. The amendments address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. Previously, such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated.

IFRS 1 (Amendments), “First-time Adoption of IFRS - Additional Exemptions”

Amendments to IFRS 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to present comparative IFRS 7 fair value disclosures.

IFRIC 14 (Amendments), “Pre-payment of a Minimum Funding Requirement” 127 Amendments to IFRIC 14 are effective for annual periods beginning on or after 1 January 2011. The amendments affect entities that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment requires an asset to be recognized for any surplus arising from voluntary pre-payments made.

IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”

IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. IFRIC 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or part, a financial liability.

Annual Improvements May 2010

Further to the above amendments and revised standards, the IASB has issued Annual Improvements to IFRSs in May 2010 that cover 7 main standards/ interpretations as follow: IFRS 1, “First-time Adoption of International Financial Reporting Standards”; IFRS 3, “Business Combinations”; IAS 27, “Consolidated and Separate Financial Statements”; IAS 34, “Interim Financial Reporting” and IFRIC 13, “Customer Loyalty Programmes”. With the exception of amendments to IFRS 3 and IAS 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January 2011.

The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(t) New standards and interpretations (continued)

(iv) New and Revised IFRSs in issue but not yet effective

IFRS 1 (amendments), “First-time Adoption of IFRS - Additional Exemptions”

On 20 December, IFRS 1 is amended to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs and to provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time. The amendment above will be effective for annual periods beginning on or after 1 July 2011.These amendments are not relevant to the Group, as it is an existing IFRS preparer.

IFRS 7, “Financial Instruments: Disclosures”

In October 2010, IFRS 7, “Financial Instruments: Disclosures” is amended by IASB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July 2011. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 9, “Financial Instruments: Classification and Measurement” 128 In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately replace IAS 39, “Financial Instruments: Recognition and Measurement”. The standard requires an entity to classify its financial assets on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2015. The Group has not had an opportunity to consider the potential impact of the adoption of this standard.

IAS 12, “Income Taxes”

In December 2010, IAS 12 is amended. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale.

It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, “Investment Property”. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally, be through sale. The amendment will be effective for annual periods beginning on or after 1 January 2012. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

3. Significant accounting policies (continued)

(t) New standards and interpretations (continued)

(iv) New and Revised IFRSs in issue but not yet effective (continued)

IFRS 10, “Consolidated Financial Statements”

IFRS 10 replaces the consolidation guidance in IAS 27, “Consolidated and Separate Financial Statements” and SIC 12, “Consolidation - Special Purpose Entities” by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e., whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in special purpose entities). Under IFRS 10, control is based on whether an investor has 1) power over the investee; 2) exposure, or rights, to variable returns from its involvement with the investee; and 3) the ability to use its power over the investee to affect the amount of the returns. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 11, “Joint Arrangements”

IFRS 11 introduces new accounting requirements for joint arrangements, replacing IAS 31, “Interests in Joint Ventures”. The option to apply the proportional consolidation method when accounting for jointly controlled entities is removed. Additionally, IFRS 11 eliminates jointly controlled assets to now only differentiate between joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities. A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. 129 IFRS 12, “Disclosure of Interest in Other Entities”

IFRS 12 requires extensive disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. An entity is required to disclose information that helps users of its financial statements evaluate the nature of and risks associated with its interests in other entities and the effects of those interests on its financial statements. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IAS 27 (2011), “Separate Financial Statements”

The requirements relating to separate financial statements are unchanged and are included in the amended IAS 27. The other portions of IAS 27 are replaced by IFRS 10.

IAS 28 (2011), “Investments in Associates and Joint Ventures”

IAS 28 is amended for conforming changes based on the issuance of IFRS 10, IFRS 11 and IFRS 12. TURKCELL ANNUAL REPORT 2011

3. Significant accounting policies (continued)

(t) New standards and interpretations (continued)

(iv) New and Revised IFRSs in issue but not yet effective (continued)

IAS 1 (2011), “Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 provide guidance on the presentation of items contained in other comprehensive income (“OCI”) and their classification within OCI. The new standard is mandatory for annual periods beginning on or after 1 July 2012. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IFRS 13, “Fair Value Measurements”

On 12 May 2011, IASB issued IFRS 13, “Fair Value Measurements”, which establishes a single source of guidance for fair value measurement under IFRSs. IFRS 13 defines fair value, provides guidance on its determination and introduces consistent requirements for disclosures on fair value measurements. The standard does not include requirements on when fair value measurements is required; it prescribes how fair value is to be measured if another standard requires it. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard.

IAS 19 (Amendments), “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The new standard is mandatory for annual periods 130 beginning on or after 1 January 2013. The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”

On 19 October 2011, IASB issued an Interpretation, IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine, clarifying the requirements for accounting for stripping costs in the production phase of a surface mine.

The Interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The Interpretation is effective for annual periods beginning on or after 1 January 2013 with earlier application permitted.

Amendments to IAS 32 “Financial Instruments: Presentation - Offsetting of Financial Assets and Financial Liabilities”

The amendments to IAS 32 are intended to clarify existing application issues relating to the offsetting rules and reduce the level of diversity in current practice. The amendments are effective for annual periods beginning on or after 1 January 2014.

4. Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

4. Determination of fair values (continued)

(i) Property, plant and equipment

The fair value of property, plant and equipment recognized as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, willingly. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items.

(ii) Intangible assets

The fair value of the brand acquired in the Superonline Uluslararası Elektronik Bilgilendirme Telekomunikasyon ve Haberlesme Hizmetleri AS (“Superonline Uluslararasi”) business combination is based on the discounted estimated royalty payments that have been avoided as a result of the brand being owned. The fair value of customer base acquired in the Superonline business combination are valued using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.

The fair value of the custom duty and VAT exemption agreement in the Belarusian Telecom business combination is based on the incremental cash flows method (cost saving approach) and this was used for the valuation analysis.

The fair value of mobile telephony licenses (GSM&UMTS) in the Belarusian Telecom business combination is based on the Greenfield (build-out) method, which is estimated to be appropriate and commonly used for the valuation of licenses, and this was used for the valuation analysis.

The fair value of customer base acquired in Global Iletisim Hizmetleri AS (“Global Iletisim”) business combination are valued using the cost approach where by the subject asset is valued by using the information on a cost per subscriber basis under current market conditions and rates. 131

The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

(iii) Investments in equity and debt securities

The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price or over the counter market price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only.

(iv) Trade and other receivables / due from related parties

The fair values of trade and other receivables and due from related parties are estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

(v) Derivatives

The fair value of forward exchange contracts and option contracts are based on their listed market price, if available. If a listed market price is not available, then fair values are derived from inputs other than quoted prices that are observable for the asset or liability or are derived by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds) or option pricing models. TURKCELL ANNUAL REPORT 2011

4. Determination of fair values (continued)

(vi) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

(vii) Exercise price of financial liability related to non-controlling share put option

The Group measures the estimated exercise price of the financial liability originating from put options granted to non-controlling interests as the present value of estimated option redemption amount. Present value of the estimated option redemption amount is based on the fair value of estimation for the company subject to the put option.

The Group has estimated a value based on multiple approaches in grant to share purchase agreement including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 August 2013, which is the exercise date of the put option, is then discounted back to 31 December 2011.

5. Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk • Liquidity risk 132 • Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

5. Financial risk management

Risk management framework

As at 31 December 2010, TL depreciated against USD by 2.7% and appreciated against EUR by 5.1%, HRV appreciated against USD by 0.3% and BYR depreciated against USD by 4.8% when compared to the exchange rates as at 31 December 2009. As at 31 December 2011, TL depreciated against USD and EUR by 22.2% and 19.3%, respectively, BYR depreciated against USD by 178.3% and HRV depreciated against USD by 0.4% when compared to the exchange rates as at 31 December 2010. Please refer to Note 30 for additional information on the Group’s exposure to risks.

Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group may require collateral in respect of financial assets. Also, the Group may demand letters of guarantee from third parties related to certain projects or contracts. The Group may also demand certain pledges from counterparties if necessary in return for the credit support it gives related to certain financings.

In monitoring customer credit risk, customers are grouped according to whether they are an individual or legal entity, aging profile, maturity and existence of previous financial difficulties. Trade receivables and accrued service income are mainly related to the Group’s subscribers. The Group’s exposure to credit risk on trade receivables is influenced mainly by the individual payment characteristics of postpaid subscribers. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables.

Investments are preferred to be in liquid securities and mostly with counterparties that have a credit rating equal or better than the Group. Some of the 133 collection banks have credit ratings that are lower than the Group’s, or they may not be rated at all, however, policies are in place to review the paid-in capital and rating of counterparties periodically to ensure credit worthiness.

Transactions involving derivatives are with counterparties with whom the Group has signed agreements and which have sound credit ratings.

At the reporting date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

The Group establishes an allowance for doubtful receivables that represents its estimate of incurred losses in respect of trade and other receivables. This allowance includes the specific loss component that relates to individual subscribers exposures, and adjusted for a general provision which is determined based on the age of the balances and historical collection trends.

The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. At 31 December 2011, $1,385,403 guarantees were outstanding (31 December 2010: $1,324,604). TURKCELL ANNUAL REPORT 2011

5. Financial risk management (continued)

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to manage liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.

The Group buys and sells derivatives in order to manage market risks. All such transactions are carried at within the guidelines set by the Group treasury and risk management.

Currency risk

The Group is exposed to currency risk on certain revenues such as roaming revenues, purchases and certain operating costs such as roaming expenses and network related costs and resulting receivables and payables, borrowings, deferred payments related to the acquisition of Belarusian Telecom and financial liability in relation to put option for the acquisition of non-controlling shares of Belarusian Telecom that are denominated in a currency other than the 134 respective functional currencies of Group entities, primarily TL for operations conducted in Turkey. The currencies in which these transactions are primarily denominated are EUR and USD.

Derivative financial instruments such as forward contracts and options are used to hedge exposure to fluctuations in foreign exchange rates. The Group uses forward exchange contracts to hedge its currency risk.

The Group’s investments in its equity accounted investee Fintur and its subsidiaries in Ukraine, Republic of Belarus, Azerbaijan and Germany are not hedged with respect to the currency risk arising from the net assets as those net investments are considered to be long-term in nature.

Interest rate risk

The Group’s exposure to interest rate risk is related to its financial assets and liabilities. The Group’s financial liabilities mostly consist of floating interest rate borrowings. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of financial derivatives consistent with the Group’s treasury and risk management strategy. The Group also closely monitored various hedging alternatives to hedge interest risk with a minimum cost. In June 2011, the Group engaged in forward start collar agreements for the half of the 5 year maturity portfolio that is exposed to interest rate risk. The collars hedge variable interest rate risk for the period between 2013 and 2015. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

6. Operating segments

The Group has three reportable segments, as described below, which are based on the dominant source and nature of the Group’s risk and returns as well as the Group’s internal reporting structure. These strategic segments offer the same types of services, however they are managed separately because they operate in different geographical locations and are affected by different economic conditions.

The Group comprises the following main operating segments: Turkcell, Euroasia and Belarusian Telecom, all of which are GSM operators in their countries.

Other operations mainly include companies operating in telecommunication and betting businesses and companies provide internet and broadband services, call center and value added services.

Information regarding the operations of each reportable segment is included below. Adjusted EBITDA is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Adjusted EBITDA definition includes revenue, direct cost of revenues excluding depreciation and amortization, selling and marketing expenses and administrative expenses. Adjusted EBITDA is not a financial measure defined by IFRS as a measurement of financial performance and may not be comparable to other similarly-titled indicators used by other companies.

The accounting policies of operating segments are the same as those described in the summary of significant accounting policies.

135 TURKCELL ANNUAL REPORT 2011 - - 2009 61,835 78,448 75,379 23,499 2010 328,011 317,146 126,257 122,839 406,401 383,608 1,111,683 (173,213) 1,946,071 1,834,880 1,996,640 (263,348) (596,802) (767,970) 5,789,972 5,982,093 Total 2010 Total 23,499 317,146 122,839 126,257 406,401 2011 1,111,683 (173,213) 31,361 1,996,640 15,844 52,971 (767,970) 5,982,093 144,813 136,907 358,176 431,687 894,945 (938,123) (391,287) 1,780,723 5,609,679 - 2009 4,451 - - - 78,448 75,783 304,118 291,020 144,989 246,466 (32,975) (67,920) 2010 4,373 60,213 386,119 122,839 213,655 386,404 305,065 (66,143) (92,034) Other - - - 2010 Other 4,373 60,213 386,119 122,839 213,655 2011 386,404 305,065 (66,143) 1,576 (92,034) 15,844 58,951 273,511 414,199 136,907 190,887 391,774 (111,260) (159,991) - 76 529 1,411 - - - 2009 61,835 17,356 63 87,938 396 753 (12,513) (38,318) (52,749) 2010 48,918 23,499 120,061 (80,826) (28,527) (32,564) - 63 753 396 - - 2010 93 48,918 23,499 120,061 2011 1,027 (28,527) (80,826) (32,564) Belarusian Telecom 52,971 15,520 55,026 47,893 144,813 (12,151) (224,527) (283,870) Belarusian Telecom 136 ------2009 1,033 2,093 4,874 20,150 763 216,445 2010 350,045 (54,921) (79,874) 5,252 66,727 (1,251) 64,455 334,006 (43,974) (120,407) - - 763 - - - - Euroasia 2010 5,252 Euroasia 381 66,727 64,455 (1,251) 690 2011 334,006 (43,974) 4,347 (120,407) 65,152 94,204 364,491 (56,287) (116,547) ------2009 65,525 22,784 2010 304,321 14,682 1,819,250 5,176,105 (162,939) 1,239,477 (396,259) 122,739 255,417 538,776 (34,569) 1,751,094 5,294,104 (474,703) Turkcell - - Turkcell - - - - 2010 2011 14,682 13,048 255,417 122,739 28,377 538,776 (34,569) 108,861 501,256 283,015 1,751,094 5,294,104 (474,703) 1,507,783 4,805,521 (485,789) Operating segments (continued) segments Operating inance income F inance cost F inance and amortization Depreciation of equity accounted of profit Share investees Capital expenditure non-cash items: Other material on goodwill Impairment expense Bad debt Intersegment revenue Intersegment EBITDA adjusted Reportable segment Impairment on equity accounted on equity accounted Impairment investees revenues external Total Bad debt expense Bad debt Other material non-cash items: Other material on goodwill Impairment Capital expenditure Share of profit of equity accounted of equity accounted of profit Share investees Depreciation and amortization Depreciation Monetary gain inance cost F inance inance income F inance Reportable segment adjusted EBITDA adjusted Reportable segment Intersegment revenue Intersegment Total external revenues external Total Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board 6. 2010 399,622 1,528,364 6,039,395 Total 2011 414,392 1,368,762 5,284,987 2010 198,780 399,622 1,045,535 Other 2011 414,392 242,085 1,086,949 - 2010 83,161 517,312 - 2011 88,127 160,277 Belarusian Telecom As at 31 December 2011 and 2010 31 December As at -

2010 137 153,927 616,375 - Euroasia 2011 116,132 544,578 - 2010 1,092,496 3,860,173 - Turkcell 2011 922,418 3,493,183 Reportable segment liabilities Reportable segment nvestment in associates I nvestment Reportable segment assets Reportable segment Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board (continued) segments 6. Operating TURKCELL ANNUAL REPORT 2011

6. Operating segments (continued)

Reconciliations of reportable segment revenues, adjusted EBITDA, assets and liabilities and other material items:

2011 2010 2009 Revenues Total revenue for reportable segments 5,235,393 5,697,025 5,567,399 Other revenue 805,973 691,469 550,584 Elimination of inter-segment revenue (431,687) (406,401) (328,011) Consolidated revenue 5,609,679 5,982,093 5,789,972

2011 2010 2009 Adjusted EBITDA Total adjusted EBITDA for reportable segments 1,589,836 1,782,985 1,801,082 Other adjusted EBITDA 190,887 213,655 144,989 Elimination of inter-segment adjusted EBITDA (32,580) (39,268) (20,738) Consolidated adjusted EBITDA 1,748,143 1,957,372 1,925,333 Finance income 330,277 277,130 329,550 Finance costs (289,648) (102,662) (187,514) Monetary gain 144,813 - - Other income 32,600 14,668 978 Other expense (161,236) (64,233) (111,220) 138 Share of profit of equity accounted investees 136,907 122,839 78,448 Depreciation and amortization (924,550) (757,354) (590,678) Consolidated profit before income tax 1,017,306 1,447,760 1,444,897

2011 2010 2009 Finance income Total finance income for reportable segments 299,225 256,933 307,825 Other finance income 58,951 60,213 75,783 Elimination of inter-segment finance income (27,899) (40,016) (54,058) Consolidated finance income 330,277 277,130 329,550

2011 2010 2009 Finance costs Total finance costs for reportable segments 231,296 107,070 230,373 Other finance costs 159,991 66,143 32,975 Elimination of inter-segment finance costs (101,639) (70,551) (75,834) Consolidated finance costs 289,648 102,662 187,514 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

6. Operating segments (continued)

2011 2010 2009 Depreciation and amortization Total depreciation and amortization for reportable segments 826,863 675,936 528,882 Other depreciation and amortization 111,260 92,034 67,920 Elimination of inter-segment depreciation and amortization (13,573) (10,616) (6,124) Consolidated depreciation and amortization 924,550 757,354 590,678

2011 2010 2009 Capital expenditure Total capital expenditure for reportable segments 621,434 725,564 1,543,860 Other capital expenditure 273,511 386,119 291,020 Elimination of inter-segment capital expenditure (28,754) (33,101) (65,606) Consolidated capital expenditure 866,191 1,078,582 1,769,274

2011 2010 Assets Total assets for reportable segments 4,198,038 4,993,860 Other assets 1,086,949 1,045,535 Investments in equity accounted investees 414,392 399,622 Other unallocated assets 3,399,422 3,355,545 Consolidated total assets 9,098,801 9,794,562 139

2011 2010 Liabilities Total liabilities for reportable segments 1,126,677 1,329,584 Other liabilities 242,085 198,780 Other unallocated liabilities 1,998,434 2,032,601 Consolidated total liabilities 3,367,196 3,560,965 TURKCELL ANNUAL REPORT 2011

Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts) (The Group’s audited consolidated financial statements prepared as at and for the year ended 31 December 2010 were approved by the Audit Committee and the Board of Directors (Board Resolution dated 23 February 2011 and numbered 797), however not approved by the General Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.)

6. Operating Segments (continued)

Geographical information

In presenting the information on the basis of geographical segments, segment revenue is based on the geographical location of operations and segment assets are based on the geographical location of the assets.

Revenues 2011 2010 2009

Turkey 5,106,536 5,522,387 5,348,500 Ukraine 365,968 334,006 350,045 Belarus 47,893 48,918 17,356 Turkish Republic of Northern Cyprus 63,857 76,782 74,071 Azerbaijan 12,426 - - Germany 12,999 - - 5,609,679 5,982,093 5,789,972

2011 2010 Non-current assets Turkey 3,443,530 3,746,557 Ukraine 548,746 607,704 140 Belarus 142,926 497,798 Turkish Republic of Northern Cyprus 51,433 65,222 Azerbaijan 5,043 3,379 Germany 4,855 - Unallocated non-current assets 438,634 436,364 4,635,167 5,357,024

7. Acquisitions of subsidiaries

Acquisition of Global Iletisim Hizmetleri AS

On 12 August 2011, Superonline Iletisim Hizmetleri AS (“Turkcell Superonline”) signed a Share Purchase Agreement (“SPA”) to acquire 100% stake in Global Iletisim, which is specialized in rendering of internet and telecommunications services. In November 2011, the control over Global Iletisim is acquired from Yildiz Holding AS for a consideration of $(456).

Subsequent to the acquisition, Global Iletisim reported a revenue of $3,209 and loss of $1,011. Since Global İletisim’s statement of income prepared in accordance with IFRS for the year ended 31 December 2011 is not available, the estimated consolidated revenue and profit or loss for the current reporting period if the acquisition had occurred on 1 January 2011 could not be disclosed. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

7. Acquisitions of subsidiaries (continued)

Acquisition of Global Iletisim Hizmetleri AS (continued)

The acquisition of Global Iletisim had the following effect on the Group’s assets and liabilities on the acquisition date:

Recognized Pre-acquisition Fair value values on carrying amounts adjustments acquisition

Property, plant and equipment 6,179 203 6,382 Intangible assets 1,490 2,600 4,090 Other assets 4,610 - 4,610 Cash and cash equivalents 122 - 122 Total liabilities (15,741) - (15,741) Net identifiable assets and liabilities (3,340) 2,803 (537)

Consideration received (456) Less: fair value of identifiable net assets acquired (537) Goodwill arising on acquisition 81

Consideration received in cash 456 Add: cash and cash equivalent balances acquired 122 141 Net cash and cash equivalent effect of the business combination 578

Pre-acquisition carrying amounts were determined based on applicable IFRSs immediately before the acquisition. The fair value of intangible assets and liabilities recognized on acquisition has been determined provisionally pending completion of an independent valuation.

The goodwill recognised on the acquisition is attributable mainly to the synergies expected to be achieved from integrating Global Iletisim into the Group’s broadband business.

The Group incurred acquisition-related costs of $67 related to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in administrative expenses in the Group’s consolidated statement of comprehensive income. TURKCELL ANNUAL REPORT 2011

8. Revenue

2011 2010 2009 Communication fees 5,225,441 5,670,215 5,557,335 Monthly fixed fees 62,977 75,420 42,493 Commission fees on betting business 51,376 31,195 42,652 Call center revenues 38,090 25,199 17,426 Simcard sales 21,152 22,900 22,855 Other revenues 210,643 157,164 107,211 5,609,679 5,982,093 5,789,972

9. Other income and expenses

Other income amounts to $32,600, $14,668 and $978 for the years ended 31 December 2011, 2010 and 2009, respectively. Other income mainly comprises of penalty amounting to $12,656 received back from ICTA which was imposed in 2010 as a result of investigation of ICTA on tariff plans.

Other expenses amount to $161,236, $64,233 and $111,220 for the years ended 31 December 2011, 2010 and 2009, respectively.

Other expenses for the years ended 31 December 2011 mainly comprises of impairment charge recognized on goodwill arising from the acquisition of Belarusian Telecom amounting to $52,971, impairment recognized on the Group’s investment in Atel and Aks TV amounting to $15,844 and $5,714, respectively. Besides, provision set for Special Communication Tax (“SCT”) on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007, as explained in Note 33 to consolidated financial statements amounting to $31,155, penalty regarding the fine applied for tariffs above upper limits amounting to $23,459, penalty imposed as a result of investigation on breaching confidentiality of personal data and relevant 142 legislation $5,374, penalty on compatibility of Company’s practices regarding the subscription annulment procedures amounting to $5,020, penalty imposed as a result of the investigation initiated by ICTA upon the complaint of a subscriber regarding the Company’s miss charging of data tariffs and international roaming campaigns amounting to $682 and $2,703, respectively, and penalty regarding number portability amounting to $1,225 are also recorded as other expense in the statement of comprehensive income.

Other expenses for the year ended 31 December 2010 comprises impairment charge recognized on goodwill arising from the acquisition of Belarusian Telecom amounting to $23,499, penalty imposed as a result of investigation of ICTA on tariff plans, VAS service subscriptions and charging applications of the Company amounting to $13,987, $4,957 and $2,090, respectively, Special Communication Tax (“SCT”) and VAT calculated on roaming services that had to be collected from subscribers as a result of tax settlement amounting to $12,900 and provision set for SCT on the discounts applied to distributors for prepaid scratch card sales between January 2005 and January 2007 amounting to $5,825 based on the previous settlement gains. Besides, provision set for the SCT on the discounts applied to distributors for prepaid scratch card sales in 2003 and 2004 was $14,539 as of 31 December 2009. However, it has been settled at $2,765 and the difference is reflected to “other expense” as income. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

10. Personnel expenses

2011 2010 2009 Wages and salaries (*) 493,777 485,214 400,880 Increase in liability for long-service leave 12,697 10,879 7,884 Contributions to defined contribution plans 9,054 5,243 3,694 515,528 501,336 412,458

(*) Wages and salaries include compulsory social security contributions and bonuses.

11. Finance income and costs

Recognized in the statement of income:

2011 2010 2009 Interest income on bank deposits 248,116 196,418 224,160 Late payment interest income 46,922 42,064 49,037 Discount interest income 24,607 886 1,052 Premium income on option contracts 6,081 12,147 10,549 Interest income on available-for-sale financial assets 113 1,121 6,308 Net gain on disposal of available-for-sale financial assets transferred from equity - 1,318 2,084 Other interest income 4,438 23,176 36,360 Finance income 330,277 277,130 329,550 143

Litigation late payment interest expense (8,772) (258) (97,016) Interest expense on financial liabilities measured at amortized cost (47,387) (66,086) (76,763) Option premium expense (1,267) (4,988) (1,150) Net foreign exchange loss (202,686) (13,778) (576) Other (29,536) (17,552) (12,009) Finance cost (289,648) (102,662) (187,514) Net finance income 40,629 174,468 142,036

Late payment interest income is interest received from subscribers who pay monthly invoices after the due date specified on the invoices.

Borrowings costs capitalized on fixed assets are $6,025, $11,127 and $1,602 for the years ended 31 December 2011, 2010 and 2009, respectively. Interest capitalization ratio is 11.5%, 17.6% and 5.6% for the year ended 31 December 2011, 2010 and 2009 respectively. TURKCELL ANNUAL REPORT 2011

12. Income tax expense

2011 2010 2009 Current tax expense Current period (303,968) (336,914) (353,389)

Deferred tax benefit Origination and reversal of temporary differences 8,646 13,321 9,574 Benefit of investment incentives recognized 942 1,187 1,892 Utilization of previously unrecognized tax losses 2,187 1,607 1,830 11,775 16,115 13,296 Total income tax expense (292,193) (320,799) (340,093)

Income tax recognized directly in equity Tax (expense)/ 2011 Before tax Benefit Net of tax Foreign currency translation differences (1,293,917) (4,430) (1,298,347) Change in cash flow hedge reserve (459) - (459) (1,294,376) (4,430) (1,298,806) 2010 Foreign currency translation differences (184,352) (754) (185,106) 144 Net change in fair value of available-for-sale securities (1,318) - (1,318) (185,670) (754) (186,424) 2009 Foreign currency translation differences 53,046 (1,091) 51,955 Net change in fair value of available-for-sale securities 1,197 - 1,197 54,243 (1,091) 53,152 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

12. Income tax expense (continued)

Reconciliation of effective tax rate

The reported income tax expense for the years ended 31 December 2011, 2010 and 2009 are different than the amounts computed by applying the statutory tax rate to profit before income tax of the Company, as shown in the following reconciliation:

2011 2010 2009 Profit for the year 725,113 1,126,961 1,104,804 Total income tax expense 292,193 320,799 340,093 Profit before income tax 1,017,306 1,447,760 1,444,897

Income tax using the Company’s domestic tax rate 20% (203,461) 20% (289,552) 20% (288,979) Effect of tax rates in foreign jurisdictions (1)% 14,221 (1)% 12,367 (1)% 10,041 Tax exempt income (1)% 8,050 - 676 - 1,041 Non-deductible expenses 3% (31,806) 1% (19,300) 2% (29,444) Tax incentives - 942 - 1,187 - 1,892 Utilization of previously unrecognized tax losses - 2,187 - 1,607 - 1,830 Unrecognized deferred tax assets 11% (112,192) 3% (47,623) 3% (48,963) Difference in effective tax rate of equity accounted investees (2)% 24,782 (2)% 22,893 (1)% 17,602 145 Other - 5,084 - (3,054) - (5,113) Total income tax expense (292,193) (320,799) (340,093)

The income taxes payable of $61,891 and $96,080 as at 31 December 2011 and 2010, respectively, represents the amount of income taxes payable in respect of related taxable profit for the years ended 31 December 2011 and 2010, respectively netted off with advance tax payments.

The Turkish entities within the Group are subject to corporate tax at the rate of 20%. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns at the end of April following the close of the accounting year to which they relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within five years. Advance tax returns are filed on a quarterly basis.

Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible expenses, and by deducting tax exempt income.

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation.

If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.

Since the Belarusian tax legislation does not allow carrying forward tax losses to future periods, no deferred tax asset is recognized on any loss incurred as a result of negative economic developments in Belarus. Additionally, since the recognition of goodwill and its impairment are not subject to taxation, the impairment recognized on goodwill allocated to Belarusian Telecom is not taken into consideration in the taxation. TURKCELL ANNUAL REPORT 2011 11,827 16,341 115,072 281,610 252,184 106,750 136,506 202,400 278,709 2,999,861 5,638,149 3,068,021 6,553,715 3,485,694 Balance at at Balance 2010 31 December (355) (426) (3,068) (2,779) (3,436) (6,755) (6,845) (10,742) (10,083) (85,994) (46,486) Effect of Effect (121,879) (102,938) (149,424) movements in movements exchange rates exchange ------63,673 (1,174) 63,673 (1,174) (64,847) Impairment ------1,308 12,710 18,229 14,018 (16,921) 986,357 (35,347) (936,992) Transfers - - (721) (968) (1,901) (1,686) (1,709) (3,592) (2,205) (8,607) (690,051) (694,108) (694,167) (702,774) Disposals 146 1,841 6,167 2,906 3,763 15,711 15,196 10,124 11,626 703,191 420,601 233,239 523,029 450,668 973,697 Additions 12,027 14,905 99,405 115,955 311,390 451,050 134,743 266,360 272,744 3,767,150 6,419,372 3,273,403 5,234,540 2,652,222 Balance at at Balance 1 January 2010

Total property, plant and equipment and equipment plant property, Total Total Motor vehicles Motor improvements Leasehold Equipment, fixtures and fittings fixtures Equipment, Land and buildings Accumulated depreciation depreciation Accumulated (All operational) infrastructure Network Total Construction in progress Construction Leasehold improvements Leasehold Motor vehicles Motor Equipment, fixtures and fittings fixtures Equipment, Land and buildings Network infrastructure (All operational) infrastructure Network 13. Property, plant and equipment and equipment plant 13. Property, or deemed cost Cost Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board 11,058 96,518 15,533 96,439 114,872 244,711 226,317 241,724 209,837 5,103,751 2,823,456 2,709,600 3,237,308 5,946,908 Balance as at as at Balance 2011 31 December (1,975) (2,676) (50,192) (19,484) (24,415) (48,081) (48,518) (20,936) (47,352) Effect of Effect (514,173) (431,184) (866,902) (606,760) (1,037,944) movements in movements hyperinflation exchange rates and rates exchange - - - - 44 395 680 608 1,399 8,155 2,749 6,382 3,824 10,206 through through business Acquisitions Acquisitions combinations ------7 12 22 (36) (36) 144,352 144,393 (144,429) Impairment - - 6 68 212 312 6,186 (265) 32,189 28,468 28,277 60,466 546,137 (492,381) Transfers

147 - - (640) (522) (884) (1,354) (1,688) (1,376) (2,034) (4,690) (310,323) (315,139) (306,767) (310,449) Disposals 1,824 9,106 9,167 3,266 3,337 2,752 5,433 11,419 88,535 183,311 564,164 468,966 492,329 675,640 Additions 11,827 16,341 115,072 281,610 252,184 106,750 136,506 202,400 278,709 2,999,861 5,638,149 3,068,021 6,553,715 3,485,694 Balance as at as at Balance 1 January 2011

Depreciation expenses for the years ended 31 December 2011, 2010 and 2009 are $636,758, $515,515 and $384,257, respectively including impairment losses and recognized in direct cost of revenues. cost in direct losses and recognized including impairment $636,758, $515,515 and $384,257, respectively 2011, 2010 and 2009 are ended 31 December the years for expenses Depreciation expense. in depreciation and recognized $144,429, $64,847 and $39,298, respectively 2011, 2010 and 2009 are ended 31 December the years for and equipment plant losses on property, The impairment Total property, plant and equipment plant property, Total Total Leasehold improvements Leasehold Motor vehicles Motor Equipment, fixtures and fittings fixtures Equipment, Land and buildings Accumulated depreciation depreciation Accumulated (All operational) infrastructure Network Total Construction in progress Construction Leasehold improvements Leasehold Motor vehicles Motor Equipment, fixtures and fittings fixtures Equipment, Land and buildings Network infrastructure (All operational) infrastructure Network Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board (continued) and equipment plant 13. Property, or deemed cost Cost TURKCELL ANNUAL REPORT 2011

13. Property, plant and equipment (continued)

Leased assets

The Group leases equipment under a number of finance lease agreements. At the end of each of the lease period, the Group has the option to purchase the equipment at a beneficial price. As at 31 December 2011, net carrying amount of fixed assets acquired under finance leases amounted to $64,856 (31 December 2010: $82,944).

Property, plant and equipment under construction

Construction in progress mainly consisted of capital expenditures in GSM network of the Company, Astelit, Kibris Mobile Telekomunikasyon Limited Sirketi (“Kibris Telekom”) and Belarusian Telecom and non-operational items as at 31 December 2011 and 2010.

A mortgage was placed on Izmir building in favor of Yapi ve Kredi Bankasi AS, Interbank AS and Pamukbank TAS founded at 25 August 1992 amounting to $970 and also on Davutpasa building in favour of Pamukbank TAS founded at 11 December 1997 amounting to $323 as at 31 December 2010 due to previous debts of BMC Sanayi ve Ticaret AS. These buildings were sold to the Company with their mortgages. The debts of BMC Sanayi ve Ticaret AS were paid and the Company has no liability to Savings Deposit Insurance Fund (“SDIF”). Therefore as at 31 December 2011, the mortgages on Izmir and Davutpasa buildings were released by SDIF on 17 August 2011 and 22 September 2011, respectively.

14. Intangible assets

In April 1998, the Company signed the License with the Turkish Ministry, under which it was granted a GSM license, which is amortized over 25 years with a carrying amount of $273,864 as at 31 December 2011 (31 December 2010: $364,349). The amortization period of the license will end in 2023. 148 On 30 April 2009, the Company signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and infrastructure. The Company acquired the A type license providing the widest frequency band for a consideration of EUR 358,000 (excluding VAT). The license is effective for duration of 20 years starting from 30 April 2009. The carrying amount is $353,034 as at 31 December 2011 (31 December 2010: $456,221).

Impairment testing for long-lived assets

The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Long-lived assets are tested for impairment as at 31 December 2011. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets, cash generating units. As at 31 December 2011, impairment test for long-lived assets of Astelit and A-Tel, is made on the assumption that Astelit and A-Tel are the cash generating unit.

Astelit: As the recoverable amounts based on the value in use of cash generating units is higher than the carrying amount of cash-generating units of Astelit, no impairment is recognized. The assumptions used in value in use calculation of Astelit as at 31 December 2011 are:

A 13.6% post-tax WACC rate for 2012, a 13.7% post-tax WACC rate for 2013, a 13.9% post-tax WACC rate for after 2013 and 2.5% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. Independent appraisal is obtained for fair value to determine recoverable amounts for Astelit. The pre-tax rate for disclosure purposes is 15.5%.

A-Tel: As the recoverable amounts based on the value in use of cash generating units is lower than the carrying amount of cash-generating units of A-Tel, an impairment loss of $15,655 has been recognized in consolidated financial statements for the year ended 31 December 2011. The impairment loss has been decreased from the carrying value of the asset and has been included in other expense of statement of comprehensive income. The assumptions used in value in use calculation of A-Tel as at 31 December 2011 are:

A 14.2% post-tax WACC rate and a 5.0% terminal growth rate were used to extrapolate cash flows beyond the 5-year forecasts based on the business plans. Independent appraisal is obtained for fair value to determine recoverable amounts for A-Tel. The pre-tax rate for disclosure purposes is 14.2%. 571 4,116 6,231 1,543 1,024 2,581 5,722 4,554 2,782 2,626 32,615 22,531 49,987 27,007 25,462 141,257 465,732 1,421,435 2,019,716 1,472,109 1,709,311 2,000,145 3,709,456 Balance as at as at Balance 2010 31 December - - 20 (48) (28) (69) (110) (144) (122) (167) (858) (928) (767) (686) (1,338) (12,915) (19,600) (38,140) (47,678) (47,792) (52,695) (65,980) (118,675) exchange rates exchange Effects of movements in of movements Effects ------(23,499) (23,499) (23,499) Impairment ------2,815 79,617 (1,307) (1,307) (14,017) (12,710) (96,449) Transfers ------Disposals 149 - - - - 74 210 400 284 339 532 468 654 1,734 1,543 36,831 22,531 94,441 10,595 70,847 155,714 155,358 241,839 (86,481) Additions - - 584 477 4,016 1,996 5,527 4,676 6,398 2,298 5,562 33,189 51,325 15,553 26,040 184,356 407,800 1,951,060 1,465,898 1,355,842 1,812,308 1,897,981 3,710,289 Balance as at as at Balance 1 January 2010

GSM and other telecommunication operating licenses operating telecommunication GSM and other Cost Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board assets (continued) 14. Intangible Computer software Computer Transmission lines Transmission Central betting system operating right operating betting system Central Indefeasible right of usage right Indefeasible Brand name Brand Customer base Customer Customs duty and VAT exemption right exemption dutyCustoms and VAT Goodwill Other Construction in progress Construction Total amortization Accumulated licenses operating telecommunication GSM and other Computer software Computer Transmission lines Transmission Central betting system operating right operating betting system Central Indefeasible right of usage right Indefeasible Brand name Brand Customer base Customer Customs duty and VAT exemption right exemption dutyCustoms and VAT Other Total Total intangible assets intangible Total TURKCELL ANNUAL REPORT 2011 - 913 1,211 7,511 3,401 5,024 3,727 2,348 2,660 2,490 18,441 26,861 17,378 42,710 46,747 23,497 501,130 1,314,571 1,193,025 1,892,441 1,817,545 3,138,749 1,246,308 Balance at Balance 31 December 2011 31 December 113 397 (827) (292) (934) (586) (235) (540) (1,039) (1,320) (1,367) (5,872) (4,090) (3,240) (4,739) (70,989) (83,766) (368,411) (338,550) (235,276) (276,357) (661,098) (292,687) Effects of Effects movements in movements hyperinflation exchange rates and rates exchange ------81 15 1,313 1,660 1,468 4,171 1,483 2,600 5,654 Acquisitions Acquisitions combinations through business through ------8,669 53,177 61,846 (52,971) (52,971) (114,817) Impairment ------82,719 (28,277) (32,189) (60,466) (28,277) (143,185) Transfers

------(291) (433) (291) (142) 150 (433) Disposals ------118 341 219 619 422 229 1,391 1,229 5,553 9,946 52,433 65,972 140,162 145,919 198,607 225,946 (27,339) Additions

571 4,116 6,231 1,543 1,024 2,581 5,722 4,554 2,782 2,626 32,615 22,531 49,987 27,007 25,462 141,257 465,732 1,421,435 2,019,716 1,472,109 1,709,311 2,000,145 3,709,456 Balance at at Balance 1 January 2011

Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board assets (continued) 14. Intangible Cost losses and including impairment $287,792, $241,839 and $206,421 respectively 2011, 2010 and 2009 are ended 31 December the years than goodwill for assets other Amortization on intangible expenses expenses in other recognized $52,971, $23,499 and $61,835, respectively 2011, 2010 and 2009 are ended 31 December the year losses on goodwill for The impairment of revenues. cost in direct recognized of income. statement in the consolidated for costs is $26,966 capitalized generated of internally asset. The amount meet the definition of an intangible that costs development software capitalized generated includes internally software Computer 2010: $29,142). 2011 (31 December ended 31 December the year GSM and other telecommunication operating operating telecommunication GSM and other licenses Transmission lines Transmission Computer software Computer Central betting system operating right operating betting system Central Indefeasible right of usage right Indefeasible Brand name Brand Customer base Customer Customs duty and VAT exemption right exemption dutyCustoms and VAT Goodwill Other Construction in progress Construction Total amortization Accumulated operating telecommunication GSM and other licenses Computer software Computer Transmission lines Transmission Central betting system operating right operating betting system Central Indefeasible right of usage right Indefeasible Brand name Brand Customer base Customer Customs duty and VAT exemption right exemption dutyCustoms and VAT Other Total Total intangible assets intangible Total Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

14. Intangible assets (continued)

Turkcell Superonline, a wholly owned subsidiary of the Group, won the tender of BOTAS for indefeasible right to use the capacity of the fiber optic cables already installed by BOTAS for 15 years, including the right to install additional fiber optic cables and the right to use the capacity of these fiber optic cables for the same period. Turkcell Superonline will pay EUR 20,900 to BOTAS for the right and this transaction has been considered as a finance lease as the lease term is for the major part of the remaining useful life of the fiber optic cables already installed by BOTAS and Superonline will make significant investment during the initial period of the lease agreement which is an indicator that the transaction is a finance lease. The Group recognized indefeasible right of use amounting to $22,531 as at 31 December 2010 which is calculated as the present value of payments to be made to BOTAS till the year 2024.

Impairment testing for cash-generating unit containing goodwill

Goodwill allocated to cash generating units and carrying values of all cash generating units are annually tested for impairment. The recoverable amounts (that is, higher of value in use and fair value less cost to sell) are normally determined on the basis of value in use, applying discounted cash flow calculation. Independent appraisals were obtained for fair values to determine recoverable amounts for Belarusian Telecom and Turkcell Superonline as at 31 December 2011.

In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management’s expectations of growth in EBITDA, calculated as results from operating activities before depreciation and amortization and other income/ (expenses), timing and quantum of future capital expenditure, long term growth rates, and the selection of discount rates to reflect the risks involved.

Belarusian Telecom

As at 31 December 2011, impairment test was performed for Belarusian Telecom and after tax impairment at the amount of $206,038 was calculated for the cash-generating unit. The aggregate carrying amount of goodwill arising from the acquisition of Belarusian Telecom was totally impaired by $52,971 and is 151 included in other expense of statement of comprehensive income. Remaining impairment amounting to $169,320 was allocated to the fixed assets of the cash- generating unit on a pro-rata basis based on the carrying amount of each asset in the cash-generating unit and is included in depreciation expense. Tax effect of the long-lived asset impairment of $16,253 is included in deferred taxation benefit. Value in use was determined by discounting the expected future cash flows to be generated by the cash-generating unit and the terminal value. The calculation of the value in use was based on the following key assumptions:

The projection period for the purposes of goodwill impairment testing is taken as 5 years between 1 January 2012 and 31 December 2016. Cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 3.0% which does not exceed the estimated average growth rate for Belarus.

A post-tax discount rate WACC of 15.7% was applied in determining the recoverable amount of the cash-generating unit. The post-tax rate was adjusted considering the tax cash outflows and other future tax cash flows and discrepancies between the cost of the assets and their tax bases. The pre-tax rate for disclosure purposes is 19.0%. TURKCELL ANNUAL REPORT 2011

14. Intangible assets (continued)

Impairment testing for cash-generating unit containing goodwill (continued)

Turkcell Superonline

As at 31 December 2011, the aggregate carrying amount of goodwill allocated to Superonline is $17,307. As the recoverable value based on the value in use of the cash generating units is estimated to be higher than carrying amount, no impairment was required for goodwill arising from the acquisition of Superonline as at 31 December 2011. The calculation of the value in use was based on the following key assumptions:

Values assigned to EBITDA for the periods forecasted include the expected synergies to be achieved from operating as a part of the Group. Values assigned to this key assumption reflect past experience except for efficiency improvements and synergies. Management believes that any reasonably possible change in the key assumptions on which Superonline recoverable amount is based would not cause Superonline’s carrying amount to exceed its recoverable amount.

The projection period for the purposes of goodwill impairment testing is taken as 8 years between 1 January 2012 and 31 December 2019.

Cash flows for further periods (perpetuity) were extrapolated using a constant growth rate of 2.8%. This growth rate does not exceed the long-term average growth rate for the market in which Superonline operates.

A post-tax discount rate WACC of 15.5% was applied in determining the recoverable amount of the unit. Discounting post-tax cash flows at a post-tax discount rate and discounting pre-tax cash flows at pre-tax discount rate give same results, since the pre-tax discount rate is the post-tax discount rate adjusted to reflect the specific amount and timing of the future tax cash flows. For disclosure purposes pre-tax discount rate is 17.6%. 152 After the acquisition of Superonline Uluslararasi in 2008, management merged Superonline Uluslararasi’s operations with its wholly owned subsidiary, Tellcom Iletisim Hizmetleri AS (“Tellcom”) in May 2009. With the merger, Superonline Uluslararasi and Tellcom seized to be separate cash generating units and merged as one cash generating unit under the brand name of Superonline. Therefore, the business plans used for the purpose of the impairment testing represents the merged entities operations. The registered name of the entity was changed from Tellcom Iletisim Hizmetleri AS to Superonline Iletisim Hizmetleri AS with General Assembly Meeting note dated 20 December 2010. 142,804 230,302 2,260,569 2,030,267 2,369,793 2,226,989 Total equity liabilities and 111,696 192,008 681,246 807,731 489,238 696,035 Equity Equity parent attributable to to attributable

- - 439,495 439,495 472,749 472,749 interest Non-controlling Non-controlling 37,216 28,287 811,749 848,965 853,527 825,240 liabilities Non-current Non-current 1,078 2,821 290,863 289,785 235,786 232,965 Current Current liabilities 2,923 366,911 369,516 372,439 398,688 (31,777) 142,804 230,302 2,260,569 2,030,267 2,369,793 2,226,989 Total assets Profit/Loss 153 181,414 108,499 1,760,083 1,578,669 1,844,296 1,735,797 (56,683) (53,063) assets (856,016) (749,440) (692,757) (802,953) Non-current Direct cost cost Direct of revenues 48,888 34,305 491,192 451,598 500,486 525,497 assets Current 56,512 63,235 1,791,725 2,014,416 1,854,960 1,957,904 41.45% 41.45% 50.00% 50.00% Revenues Ownership -Tel -Tel A 2010 Fintur** A 2011 Fintur A-Tel (joint venture)* A-Tel 31 December 2010 31 December (associate) Fintur A-Tel (joint venture)* A-Tel 31 December 2011 31 December (associate) Fintur Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board investees accounted 15. Equity for Summary financial information respectively. $136,907, $122,839 and $78,448, 2011, 2010 and 2009 are years ended 31 December for the investees in its equity accounted of profit share The Group’s is as follows: held by the Group ownership the percentage for adjusted and not under similar circumstances the same events for policy differences the accounting for adjusted investees equity accounted * Figures mentioned in the above table include fair value adjustments that arose during acquisition of A-Tel. during acquisition arose that adjustments value table include fair in the above mentioned * Figures commissions. distributors’ regarding of Fintur Expenses has been made in the financial statements and Selling Marketing Revenues between ** A reclassification TURKCELL ANNUAL REPORT 2011

15. Equity accounted investees (continued)

The Company’s investment in Fintur Holdings BV (“Fintur”) and A-Tel amounts to $358,544 and $55,848 respectively as at 31 December 2011 (31 December 2010: $303,618 and $96,004).

In 2011, Fintur has decided to distribute three dividends amounting to $50,000, $54,000 and $55,000. The Company reduced the carrying value of its investments in Fintur by the cash collected dividend of $20,725, $22,383 and $22,798 on 7 April 2011, 14 October 2011 and 16 December 2011, respectively.

In 2010, Fintur has decided to distribute two dividends amounting to $70,000 and $190,000. The Company reduced the carrying value of its investments in Fintur by the cash collected dividend of $29,015 and $78,755 on 5 May 2010 and 7 December 2010, respectively.

In April 2008, the privatization of the Republic of Azerbaijan’s 35.7% ownership in Azercell Telecom B.M. (“Azercell”), a 51% owned consolidated subsidiary of Fintur, was completed. The non-controlling shareholders in Azercell acquired the 35.7% shares of Republic of Azerbaijan increasing their effective ownership in Azercell to 49%. One of the non-controlling shareholders was also granted a put option, giving the shareholder the right to sell its 42.2% stake to Fintur at fair value in certain deadlock situations regarding significant decisions at the General Assembly. Fintur has initially accounted for the present value of the estimated option redemption amount as a provision and derecognized the non-controlling interest. The difference between the present value of the estimated option redemption amount and the derecognized non-controlling interest amounting to $744,199 is accounted under equity, in accordance with the Group’s accounting policy.

During March 2011 and April 2010 at the General Assembly meeting of A-Tel, it has been decided to distribute dividends amounting to TL 26,982 (equivalent to $14,285 as at 31 December 2011) and TL 2,482 (equivalent to $1,314 as at 31 December 2011), respectively. The Company reduced the carrying value of its investments in A-Tel by its dividend portion of TL 13,491 (equivalent to $7,142 as at 31 December 2011) and TL 1,241 (equivalent to $657 as at 31 December 154 2011) as at 31 December 2011 and 31 December 2010, respectively. 16. Other investments

Non-current investments:

2011 2010 Country of Ownership Carrying Ownership Carrying incorporation (%) Amount (%) Amount Aks Televizyon Reklamcilik ve Filmcilik Sanayi ve Ticaret AS (“Aks TV”) Turkey 4.57 12,792 6.24 21,905

T Medya Yatirim Sanayi ve Ticaret AS (“T-Medya”) Turkey 4.52 9,776 4.52 11,944

22,568 33,849 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

16. Other investments (continued)

Non-current investments: (continued)

On 2 February 2010, SDIF notified that lien was laid on “priority right to purchase back” regarding the shares of Aks TV of which 6.24% were held by Turktell Bilişim Hizmetleri AS. In case that, those shares are sold to third parties other than Cukurova Group, SDIF has the right to exercise its priority right to purchase back and the purchase price will be determined within the context of the past agreements signed between previous owners and Cukurova Group. On 14 March 2011, at Aks TV’s General Assembly Meeting, it has been decided to increase the share capital of Aks TV. However, the Group did not participate in the capital contribution, accordingly the ownership of the Group in Aks TV decreased to 4.57%.

Following the change in ownership ratio of the Group by not participating in capital contribution movements, a valuation study was performed by an independent valuation firm as of 30 June 2011. Based on the impairment analysis performed, the carrying value of Aks TV has been reduced by $3,229. As of 31 December 2011, the year-end impairment analysis was performed by an independent valuation firm and carrying value of Aks TV has been further reduced by $1,907. The impairment losses have been included in other expense of statement of comprehensive income.

There is no active market available for T-Medya and the Company measures this investment at cost. Based on the valuation study performed by an independent valuation firm, no impairment has been identified for T-Medya as of 31 December 2011.

Current investments:

2011 2010 Deposits maturing after 3 months or more Time deposits 844,982 8,201 155 As at 31 December 2011, TL denominated time deposits maturing after 3 months or more amounting to $689,831 (31 December 2010: nil) have stated effective interest rate of 12.2% (31 December 2010: nil), USD denominated time deposits maturing after 3 months or more amounting to $154,500 (31 December 2010: $8,000) have stated effective interest rate of 5.4% (31 December 2010: 7.0%) and BYR denominated time deposits maturing after 3 months or more amounting to $651 (31 December 2010: $201) have stated effective interest rate of 46.1% (31 December 2010: 10.5%).

The Group’s exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 30. TURKCELL ANNUAL REPORT 2011

17. Other non-current assets

2011 2010 VAT receivable 63,803 62,167 Prepaid expenses 38,716 29,717 Receivables from Tax Office 12,995 - Deposits and guarantees given 6,840 9,560 Advances given for fixed assets 1,014 4,654 Others 2,021 1,179 125,389 107,277

18. Deferred tax assets and liabilities

Unrecognized deferred tax liabilities

At 31 December 2011, a deferred tax liability of $15,838 (31 December 2010: $15,687) for temporary differences of $79,190 (31 December 2010: $78,433) related to investments in subsidiaries was not recognized because the Company controls whether the liability will be incurred and it is satisfied that it will not be incurred in the foreseeable future.

Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

156 2011 2010 Deductible temporary differences 162,903 109,356 Tax losses 115,798 110,506 Total unrecognized deferred tax assets 278,701 219,862

The deductible temporary differences do not expire under current tax legislation. Turkish tax legislation does not allow companies to file tax returns on a consolidated basis. Therefore, deferred tax assets have not been recognized in respect of these items resulting from certain consolidated subsidiaries because it is not probable that future taxable profit will be available against which the Group can utilize the benefits therefrom.

As at 31 December 2011, expiration of tax losses is as follows:

Year Originated Amount Expiration Date 2007 8,827 2012 2008 55,670 2013 2009 28,836 2014 2010 49,695 2015 2011 66,934 2016 209,962

As at 31 December 2011, tax losses which will be carried indefinitely are amounting to $295,358. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

18. Deferred tax assets and liabilities (continued)

Recognized deferred tax assets and liabilities

Deferred tax assets and liabilities as at 31 December 2011 and 2010 are attributable to the following:

Assets Liabilities Net 2011 2010 2011 2010 2011 2010 Property, plant & equipment and intangible assets 555 347 (104,481) (152,193) (103,926) (151,846) Investment - - (22,290) (15,096) (22,290) (15,096) Provisions 24,127 28,423 - - 24,127 28,423 Trade and other payables 436 23,460 (23,827) (16) (23,391) 23,444 Other items 62,078 25,940 (686) (1,094) 61,392 24,846 Tax assets / (liabilities) 87,196 78,170 (151,284) (168,399) (64,088) (90,229) Net off of tax (83,910) (75,294) 83,910 75,294 - - Net tax assets / (liabilities) 3,286 2,876 (67,374) (93,105) (64,088) (90,229) 157 TURKCELL ANNUAL REPORT 2011 61,392 24,127 24,846 23,444 28,423 (23,391) (15,096) (22,290) (64,088) (90,229) (151,846) (103,926) 2011 2010 Balance at Balance Balance at Balance 31 December 31 December 31 December 31 December 373 1,724 (380) (805) (740) 3,072 31,119 12,336 18,796 10,784 (5,000) (12,119) in in rates rates Effect of Effect Effect of Effect exchange exchange exchange exchange movements movements movements movements ------(754) (754) (4,430) (4,430) other other other other income income Recognized in Recognized Recognized in Recognized comprehensive comprehensive 704 6,131 1,689 (882) 16,801 24,161 16,115 11,775 33,474 (4,488) (34,716) (14,984) income income income income Recognized in Recognized Recognized in Recognized the statement of the statement the statement of the statement 158 1,065 24,846 23,444 28,423 39,233 27,474 (15,096) (13,833) (90,229) (151,846) (170,313) (116,374) 2011 2010 1 January 1 January at Balance at Balance

Total Other items Trade and other payables and other Trade Provisions I nvestment Total assets and intangible & equipment plant Property, Other items Trade and other payables and other Trade Provisions I nvestment Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board assets and liabilities (continued) tax 18. Deferred in temporary 2011 and 2010 differences 31 December Movement as at Property, plant & equipment and intangible assets and intangible & equipment plant Property, Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

19. Trade receivables and accrued income

2011 2010 Accrued service income 409,562 348,135 Receivables from subscribers 379,881 414,606 Accounts and checks receivable 52,003 52,111 Receivables from Turk Telekomunikasyon AS (“Turk Telekom”) 935 1,299 842,381 816,151

Trade receivables are shown net of allowance for doubtful debts amounting to $322,940 as at 31 December 2011 (31 December 2010: $367,913). The impairment loss recognized for the years ended 31 December 2011, 2010 and 2009 are $34,583, $117,362 and $75,379, respectively.

Letters of guarantee received with respect to the accounts and checks receivable are amounted to $98,086 and $181,366 as at 31 December 2011 and 2010, respectively.

The accrued service income represents revenues accrued for subscriber calls (air-time) and contracted receivables related to handset campaigns, which have not been billed and will be billed within one year. Due to the volume of subscribers, there are different billing cycles; accordingly, an accrual is made at each period end to accrue revenues for rendered but not yet billed. Contracted receivables related to handset campaigns, which will be invoiced after one year is presented under non-current trade receivables amounting to $113,327 (31 December 2010: $35,024).

The Group’s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 30.

20. Other current assets 159 2011 2010 Prepaid expenses 83,054 83,680 Interest income accruals 19,990 8,311 Advances to suppliers 10,263 12,131 Restricted cash 6,369 6,150 VAT receivable 5,022 25,702 Prepayment for subscriber acquisition cost 6,720 1,777 Receivables from personnel 3,776 3,262 Receivables from ICTA - 25,938 Receivables from Tax Office - 15,736 Other 63,264 15,053 198,458 197,740 TURKCELL ANNUAL REPORT 2011

20. Other current assets (continued)

As at 31 December 2011, restricted cash mainly represents amounts deposited at banks as guarantees in connection with the loan utilized by Azerinteltek and mature in 12 months.

Subscriber acquisition costs are subsidies paid to dealers for engaging a fixed term contract with the subscriber that require a minimum consideration.

21. Cash and cash equivalents

2011 2010 Cash in hand 124 7,957 Cheques received 168 172 Banks 2,507,028 3,293,257 -Demand deposits 154,228 193,358 -Time deposits 2,352,800 3,099,899 Bonds and bills 1,209 777 Cash and cash equivalents 2,508,529 3,302,163 Bank overdrafts (1,084) (5,896) Cash and cash equivalents in the statement of cash flows 2,507,445 3,296,267

As at 31 December 2011, cash and cash equivalents deposited in banks that are owned and/or controlled by Cukurova Group, a significant shareholder of the Company is amounting to $0.036 (31 December 2010: $90,000).

160 As at 31 December 2011, average maturity of time deposits is 83 days (31 December 2010: 60 days).

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 30.

22. Capital and reserves

Share capital

As at 31 December 2011, common stock represented 2,200,000,000 (31 December 2010: 2,200,000,000) authorized, issued and fully paid shares with a par value of TL 1 each. In accordance with the Law No. 5083 with respect to TL, on 9 May 2005, par value of each share is registered to be one TL.

In connection with the redenomination of the TL and as per the related amendments of Turkish Commercial Code, in order to increase the nominal value of the shares to TL 1, 1,000 units of shares, each having a nominal value of TL 0.001 shall be merged and each unit of share having a nominal value of TL 1 shall be issued to represent such shares. The Company is still in the process of merging 1,000 existing ordinary shares, each having a nominal value of TL 0.001 to one ordinary share having a nominal value of TL 1 each. After the share merger which appears as a provisional article in the Articles of Association to convert the value of each share with a nominal value of TL 0.001 to TL 1, all shares will have a value of TL 1. Although the merger process has not been finalized, the practical application is to state each share having a nominal value of TL 1 which is consented by Capital Markets Board of Turkey (“CMB”). Accordingly, number of shares data is adjusted for the effect of this merger. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

22. Capital and reserves (continued)

Share capital (continued)

The holders of shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company.

As at 31 December 2011, total number of pledged shares hold by various institutions is 1,132,709 (31 December 2010: 137,200).

Capital contribution

Capital contribution comprises the contributed assets and certain liabilities that the government settled on behalf of the Group that do not meet the definition of a government grant which the government is acting in its capacity as a shareholder.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign and domestic operations from their functional currencies to presentation currency of USD.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or the asset is impaired.

Legal reserve 161 Under the Turkish Commercial Code, Turkish companies are required to set aside first and second level legal reserves out of their profits. First level legal reserves are set aside 5% of the distributable income per statutory accounts each year. The ceiling on the first legal reserves is 20% of the paid-up capital. The reserve requirement ends when the 20% of paid-up capital level has been reached. Second legal reserves correspond to 10% of profits actually distributed after the deduction of the first legal reserves and the minimum obligatory dividend pay-out (5% of the paid-up capital). There is no ceiling for second legal reserves and they are accumulated every year.

Cash flow hedging reserve

The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the relevant accounting policy.

Reserve for non-controlling interest put option liability

The reserve for non-controlling interest put option liability includes the difference between the put option liability granted to the non-controlling shareholders in existing subsidiaries recognized and the amount of non-controlling interest derecognized. Subsequent changes in the fair value of the put option liability are also recognized in this reserve. TURKCELL ANNUAL REPORT 2011

22. Capital and reserves (continued)

Dividends

The Company has adopted a dividend policy, which is set out in its corporate governance guidance. As adopted, the Company’s general dividend policy is to pay dividends to shareholders with due regard to trends in the Company’s operating performance, financial condition and other factors.

The Board of Directors intends to distribute cash dividends in an amount of not less than 50% of the Company’s lower of distributable profit based on the financial statements prepared in accordance with the accounting principles accepted by the CMB or statutory records, for each fiscal year starting with profits for fiscal year 2004. However, the payment of dividends will still be subject to cash flow requirements of the Company, compliance with Turkish law and the approval of and amendment by the Board of Directors and the General Assembly of Shareholders.

On 23 March 2011, the Company’s Board of Directors has proposed a dividend distribution for the year ended 31 December 2010 amounting to TL 1,328,697 (equivalent to $703,424 as at 31 December 2011), which represented 75% of distributable income. This represents a net cash dividend of full TL 0.6039532 (equivalent to full $0.32 as at 31 December 2011) per share. This dividend proposal was discussed but not approved at the Ordinary General Assembly of Shareholders held on 21 April 2011 and the Extraordinary General Assemblies of Shareholders held on 11 August 2011 and 12 October 2011.

2011 2010 2009 TL USD TL USD* TL USD* Cash dividends 1,328,697 703,424 859,259 573,451 1,098,193 713,297

* USD equivalents of dividends are computed by using the Central Bank of the Republic of Turkey’s TL/USD exchange rate on 29 April 2010 and 8 May 2009 which are the dates 162 that the General Assembly of Shareholders approved the dividend distribution, respectively.

In the Ordinary General Assemblies of Shareholders Meeting of Inteltek Internet Teknoloji Yatirim ve Danismanlik AS (“Inteltek”) held on 4 April 2012 and 6 April 2011, it has been decided to distribute dividends amounting to TL 34,061 (equivalent to $18,032 as at 31 December 2011) and TL 16,744 (equivalent to $8,864 as at 31 December 2011), respectively. The 2010 dividend amounting to TL 16,744 was paid on 2 May 2011.

23. Earnings per share

The calculations of basic and diluted earnings per share as at 31 December 2011 were based on the profit attributable to ordinary shareholders for the years ended 31 December 2011, 2010 and 2009 of $751,709, $1,170,176 and $1,093,992 respectively and a weighted average number of shares outstanding during the years ended 31 December 2011, 2010 and 2009 of 2,200,000,000 calculated as follows:

2011 2010 2009 Numerator: Net profit for the period attributed to owners 751,709 1,170,176 1,093,992

Denominator: Weighted average number of shares 2,200,000,000 2,200,000,000 2,200,000,000 Basic and diluted earnings per share 0.34 0.53 0.50 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

24. Other non-current liabilities

2011 2010 Consideration payable in relation to acquisition of BeST 60,180 78,402 Deposits and guarantees taken from agents 16,803 16,310 Financial liability in relation to put option 10,094 53,435 Payables to other suppliers 1,149 7,391 Other 4,443 5,294 92,669 160,832

Consideration payable in relation to acquisition of Belarusian Telecom represents the present value of long-term deferred payment to the seller. Payment of $100,000 is contingent on financial performance of Belarusian Telecom, and based on management’s estimations, expected to be paid during the first quarter of 2020 (31 December 2010: first quarter of 2016). The present value of the contingent consideration is $60,180 as at 31 December 2011 (31 December 2010: $78,402).

Non-controlling shareholders in Belarusian Telecom were granted a put option, giving the shareholders the right to sell their entire stake to Beltel Telekomunikasyon Hizmetleri AS (“Beltel”) at fair value during a specified period. The Group accounted for the present value of the estimated option redemption amount as a provision and derecognized the non-controlling interest. The Company has estimated a value based on multiple approaches including income approach (discounted cash flows) and market approach (comparable market multiples). The average of the values determined as at 31 August 2013, which is the exercise date of the put option, is then discounted to 31 December 2011.

The difference between the present value of the estimated option redemption and derecognized non-controlling interests amounting to $66,253 has been presented as reserve for non-controlling interest put option under equity. 163 25. Loans and borrowings

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortized cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk and payment schedule for interest bearing loans, see Note 30.

2011 2010 Non-current liabilities Unsecured bank loans 1,030,081 1,366,207 Secured bank loans 9,557 21,850 Finance lease liabilities 17,742 19,259 1,057,380 1,407,316 Current liabilities Current portion of unsecured bank loans 589,251 357,637 Unsecured bank facility 210,996 57,355 Secured bank facility 6,414 6,399 Current portion of secured bank loans 1,895 4,378 Current portion of finance lease liabilities 2,149 4,436 Option contracts not used for hedging 380 - Option contracts used for hedging 868 - 811,953 430,205 TURKCELL ANNUAL REPORT 2011

25. Loans and borrowings (continued)

On 22 December 2011, the Group has signed loan agreements with China Development Bank for the potential purchase of products and services of up to $250,000 to be utilized as Group capital investments for 2012 and 2013. The financing, which is composed of two equal loans with respect tenors of 5 and 7 years, has an all-in cost of approximately Libor +3.00% per year.

Finance lease liabilities are payable as follows:

31 December 2011 31 December 2010 Present value of Present value of Future minimum lease minimum lease Future minimum minimum lease payments Interest payments lease payments Interest payments Less than one year 2,785 636 2,149 5,199 763 4,436 More than one year 21,836 4,094 17,742 24,107 4,848 19,259 24,621 4,730 19,891 29,306 5,611 23,695

Turkcell Superonline, a wholly owned subsidiary of the Group, acquired indefeasible right of use with BOTAS and will pay EUR 20,900 to BOTAS for the right. The Group recognized indefeasible right of use amounting to $22,531 in 2010 which is calculated as the present value of payments to be made to BOTAS till the year 2024. As of 31 December 2011, the carrying amount of lease liability related to BOTAS agreement is $17,623.

164 - - - 189 316 744 6,210 2,733 13,627 26,228 20,962 591,463 amount Carrying 1,175,049 1,837,521 - - - 150 250 744 6,150 2,819 21,389 13,280 26,487 601,375 1,176,686 1,849,330 Face value Face 31 December 2010 31 December - - - - 5.00% 4.64% 3.35% 18.00% 18.00% RR*+2% 2.24%-8.0% Libor+3.465% Libor+1.35%-3.75% Nominal interest rate Nominal interest - - - 160 6,414 8,818 2,108 5,479 2,634 19,680 17,623 amount 486,370 Carrying 1,318,799 1,868,085 - - - 160 2,116 6,300 6,939 5,479 2,578 19,358 22,345 493,979 1,314,680 1,873,934 Face value Face 31 December 2011 31 December 165 - - - 5.00% 3.35% 15.00% 10.24% RR*+2% 2.24%-8.0% 4.64%-7.0% Libor+3.465% Libor+1.35%-4.60% Libor+2.65%-3.465% Nominal interest rate Nominal interest - type Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed F loating F loating F loating F loating Interest rate rate Interest 2011 2011 2011 2012 2012 2013 2020 Year of Year maturity 2011-2018 2011-2016 2012-2013 2012-2014 2012-2015 2012-2024 R T L T L B Y E U R E U R E U R US D US D US D US D US D AZN AZN Currency Refinancing rate of the National Bank of the Republic of Belarus. Bank of the of the National rate Refinancing of Belarus Government. by Republic Secured (SCM). Limited Capital Management by System Secured Unsecured bank loans Unsecured Secured bank loans Secured Secured bank loans** Secured Unsecured bank loans Unsecured bank loans Unsecured bank loans Unsecured Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board (continued) and borrowings 25. Loans as follows: of outstanding loans are and conditions Terms Secured bank loans*** Secured (*) (**) (***) Finance lease liabilities Finance Finance lease liabilities Finance Finance lease liabilities Finance Unsecured bank loans Unsecured Unsecured bank loans Unsecured bank loans Secured TURKCELL ANNUAL REPORT 2011

26. Employee benefits

International Accounting Standard No. 19 (“IAS 19”) “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. The liability for this retirement pay obligation is recorded in the accompanying consolidated financial statements at its present value using a discount rate between 4.4% and 5.1% depending on the payout date (31 December 2010: 4.7%).

Movement in the reserve for employee termination benefits as at 31 December 2011 and 2010 are as follows:

2011 2010 Opening balance 29,742 27,776 Provision set/reversed during the period 11,665 9,990 Payments made during the period (7,874) (8,114) Unwind of discount 1,032 889 Acquisitions through business combination 39 - Effect of change in foreign exchange rate (6,345) (799) Closing balance 28,259 29,742

Obligations for contributions to defined contribution plans are recognized as an expense in the consolidated statement of income as incurred. The Group incurred $9,054, $5,243 and $3,694 in relation to defined contribution retirement plan for the years ended 31 December 2011, 2010 and 2009, respectively.

Total charge for the employee termination benefits is included in the statement of income.

The liability is not funded, as there is no funding requirement. 166 27. Deferred income

Deferred income primarily consists of right of use sold but not used by prepaid subscribers and it is classified as current as at 31 December 2011. The amount of deferred income is $118,376 and $164,186 as at 31 December 2011 and 2010, respectively.

28. Provisions

Non-current provisions:

Obligations for dismantling, removing and Legal site restoration Other Total Balance at 1 January 2010 95 5,114 467 5,676 Provision made/used during the year 627 50,473 223 51,323 Unwind of discount - 266 - 266 Effect of change in foreign exchange rate - (210) - (210) Balance at 31 December 2010 722 55,643 690 57,055 Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

28. Provisions (continued)

Non-current provisions: (continued)

Obligations for dismantling, removing and Legal site restoration Other Total Balance at 1 January 2011 722 55,643 690 57,055 Provision made/used during the year 447 9,256 172 9,875 Unwind of discount - 2,657 - 2,657 Acquisitions through business combination - - - - Effect of change in foreign exchange rate (184) (11,039) (145) (11,368) Balance at 31 December 2011 985 56,517 717 58,219

Legal provisions are set for the probable cash outflows related to legal disputes.

The above mentioned additions to obligations for dismantling, removing and site restoration during the period are non-cash transactions recorded against property, plant and equipment. 167 Current provisions:

Legal Bonus Total Balance at 1 January 2010 167,918 37,249 205,167 Provision made/(reversed) during the year 59,303 45,617 104,920 Provisions used during the year (115,004) (39,056) (154,060) Unwind of discount 1,885 (53) 1,832 Effect of change in foreign exchange rate (2,949) (1,098) (4,047) Balance at 31 December 2010 111,153 42,659 153,812

Legal Bonus Total Balance at 1 January 2011 111,153 42,659 153,812 Provision made/(reversed) during the year 73,765 48,562 122,327 Provisions used during the year (86,602) (39,498) (126,100) Unwind of discount 2,528 1,081 3,609 Acquisitions through business combination - 189 189 Effect of change in foreign exchange rate (18,982) (8,934) (27,916) Balance at 31 December 2011 81,862 44,059 125,921

Legal provisions are set for the probable cash outflows related to legal disputes. In Note 33, under legal proceedings section, detailed explanations are given with respect to legal provisions.

The bonus provision totaling to $44,059 comprises mainly the provision for the year ended 31 December 2011 and is planned to be paid in March 2012. TURKCELL ANNUAL REPORT 2011

29. Trade and other payables

The breakdown of trade and other payables as at 31 December 2011 and 2010 is as follows:

2011 2010 Payables to other suppliers 398,732 414,911 Taxes and withholdings payable 189,016 221,872 Payables to Ericsson companies 117,043 98,415 License fee accrual 61,394 53,474 Selling and marketing expense accrual 51,252 61,209 Roaming expense accrual 15,427 21,032 ICTA share accrual 13,903 17,319 Interconnection payables 4,260 11,992 Interconnection accrual 4,745 4,415 Other 73,716 47,337 929,488 951,976

Balances due to other suppliers are arising in the ordinary course of business.

Taxes and withholdings include VAT payable, special communications tax, frequency usage fees payable to ICTA and personnel income taxes.

Payables to Ericsson companies comprise due to Ericsson Turkey, Ericsson Sweden and Ericsson AB arising from fixed asset purchases, site preparation and other services. 168 In accordance with the license agreement, Turkcell pays 90% of the treasury share, which equals 15% of its gross revenue, to the Turkish Treasury and 10% of the treasury share as universal service fund to the Turkish Ministry.

Selling and marketing expense accrual is mainly resulted from services received from third parties related to marketing activities of the Group which are not yet invoiced.

Payables to interconnection suppliers arise from voice and SMS termination services rendered by other GSM operators.

Interconnection accrual represents net balance of uninvoiced call termination services received from other operators and interconnection services rendered to other operators.

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 30. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

30. Financial instruments

Credit risk

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Note 2011 2010 Due from related parties-non current 34 43 1,044 Other non-current assets* 17 20,235 15,258 Due from related parties-current 34 43,215 88,897 Trade receivables and accrued income 19 955,962 851,175 Other current assets* 20 70,599 56,170 Cash and cash equivalents** 21 2,508,405 3,294,206 Time deposits maturing in 3 months or more 16 844,982 8,201 4,443,441 4,314,951

* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets.

** Cash on hand is excluded from cash and cash equivalents. The maximum exposure to credit risk for trade receivables arising from sales transactions including those classified as due from related parties at the reporting 169 date by type of customer is:

2011 2010 Receivable from subscribers 848,428 798,404 Receivables from distributors and other operators 115,658 71,044 Other 12,368 3,199 976,454 872,647 TURKCELL ANNUAL REPORT 2011

30. Financial instruments (continued)

Credit risk (continued)

Exposure to credit risk: (continued)

The aging of trade receivables and due from related parties as at 31 December 2011 and 2010:

2011 2010 Not past due 820,857 738,697 1-30 days past due 69,874 74,665 1-3 months past due 54,150 56,004 3-12 months past due 54,339 71,750 999,220 941,116

Impairment losses

The movement in the allowance for impairment in respect of trade receivables and due from related parties as at 31 December 2011 and 2010 is as follows:

2011 2010 Opening balance 376,808 268,157 Impairment loss recognized 31,361 126,257 Write-off (6,776) (9,976) 170 Acquisitions through business combination 784 - Effect of change in foreign exchange rate (74,742) (7,630) Closing balance 327,435 376,808

The impairment loss recognized of $31,361 for the year ended 31 December 2011 relates to its estimate of incurred losses in respect of trade receivables and due from related parties (31 December 2010: $126,257).

The allowance accounts in respect of trade receivables and due from related parties is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable and is written off against the trade receivables and due from related parties directly.

Liquidity risk

Current cash debt coverage ratio as at 31 December 2011 and 2010 is as follows:

2011 2010

Cash and cash equivalents 2,508,529 3,302,163 Current liabilities 2,063,295 1,812,915 Current cash debt coverage ratio 122% 182% - - - - - (10,155) (16,622) (17,887) (100,000) Years (144,664) More than 5 More - - - - - (5,576) (58,541) (13,852) 2-5 years (960,660) (1,038,629) ------1-2 (1,909) (5,150) years (523,026) (530,085) ------(1,993) (9,165) 6-12 months (218,000) (229,158) - - - 31 December 2010 31 December (5,896) (3,206) (2,273) (10,787) or less (681,669) (912,194) (208,363) 6 months - (5,896) (58,541) (10,787) (29,306) (48,327) (100,000) (681,669) (1,920,204) (2,854,730) cash flows Contractual - 5,896 10,760 53,435 78,402 23,695 32,627 676,187 1,781,199 2,662,201 Amount Carrying - - - - (5,856) (4,954) (13,569) (100,000) (124,379) Years More than 5 More - - - - - 171 (5,614) (4,697) 2-5 (439,954) years (450,265) - - - - (4,512) (2,655) (11,850) 1-2 years (663,979) (682,996) ------(478) (7,468) (391,279) (383,333) 6-12 M onths - - 31 December 2011 31 December (1,248) (1,084) (1,202) (2,307) (14,645) (475,791) (663,749) or less (1,160,026) 6 months (1,248) (1,084) (11,850) (14,645) (24,623) (22,833) (100,000) (663,749) (1,968,913) (2,808,945) cash flows Contractual 1,248 1,084 19,891 10,094 60,180 14,582 17,866 656,256 2,611,529 1,830,328 Amount Carrying TOTAL Derivative financial Derivative liabilities contract Option Financial liability in relation Financial liability in relation put option to Consideration payable in Consideration of acquisition to relation Belarusian Telecom Due to related parties related Due to Bank overdraft Trade and other payables* and other Trade Finance lease liabilities Finance Unsecured bank loans Unsecured Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Turkcell 2011 ended 31 December the year and for As at Financial Statements The Consolidated To Notes amounts) share except in thousands of US Dollars unless otherwise indicated expressed (Amounts of Directors and the Board Committee by the Audit approved were year ended 31 December 2010 for the at and as prepared financial statements consolidated audited (The Group’s Assemblies on 21 April 2011, 11 August 2011 and 12 October 2011.) the General by approved not 797), however 2011 and numbered 23 February dated Resolution (Board (continued) 30. Financial instruments Liquidity risk (continued) payments: interest of financial liabilities, including estimated maturities the contractual are The following payables. and other trade from excluded and withholding payable are taxes fees, license taken, * Advances Non-derivative financial Non-derivative Liabilities bank loans Secured TURKCELL ANNUAL REPORT 2011

30. Financial instruments (continued)

Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts is as follows:

31 December 2010 USD EUR Foreign currency denominated assets Other non-current assets 1 - Other investments 8,000 - Due from related parties-current 17,969 148 Trade receivables and accrued income 33,566 20,482 Other current assets 4,579 1,086 Cash and cash equivalents 1,494,743 52,842 1,558,858 74,558 Foreign currency denominated liabilities Loans and borrowings-non current (1,405,907) (28,132) Other non-current liabilities (179,865) - Loans and borrowings-current (350,172) (1,872) Trade and other payables (161,901) (42,849) Due to related parties (754) (808) 172 (2,098,599) (73,661) Net exposure (539,741) 897

31 December 2011 USD EUR Foreign currency denominated assets Other non-current assets 26 - Other investments 154,500 - Due from related parties-current 8,580 3,820 Trade receivables and accrued income 52,422 39,141 Other current assets 6,861 1,153 Cash and cash equivalents 893,477 3,833 1,115,866 47,947 Foreign currency denominated liabilities Loans and borrowings-non current (1,060,159) (28,015) Other non-current liabilities (138,497) - Loans and borrowings-current (660,290) (1,211) Trade and other payables (154,869) (48,168) Due to related parties (1,137) (478) (2,014,952) (77,872) Net exposure (899,086) (29,925) Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

30. Financial instruments (continued)

Exposure to currency risk (continued)

The following significant exchange rates are applied during the period:

Average Rate Reporting Date Closing Rate 31 December 31 December 31 December 31 December 2011 2010 2011 2010

USD/TL 1.6698 1.5050 1.8889 1.5460 EUR/TL 2.3343 1.9931 2.4438 2.0491 SEK/TL 0.2572 0.2074 0.2722 0.2262 USD/BYR 5,038.2 2,978.8 8,350.0 3,000.0 USD/HRV 7.9663 7.9325 7.9898 7.9617

Sensitivity analysis

The basis for the sensitivity analysis to measure foreign exchange risk is an aggregate corporate-level currency exposure. The aggregate foreign exchange exposure is composed of all assets and liabilities denominated in foreign currencies. The analysis excludes net foreign currency investments. 10% strengthening of the TL, HRV, BYR against the following currencies as at 31 December 2011 and 2010 would have increased/(decreased) profit or loss 173 before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Profit or loss 2011 2010

USD 89,909 53,974 EUR 3,872 (119)

10% weakening of the TL, HRV, BYR against the following currencies as at 31 December 2011 and 2010 would have increased/(decreased) profit or loss before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Profit or loss 2011 2010

USD (89,909) (53,974) EUR (3,872) 119 TURKCELL ANNUAL REPORT 2011

30. Financial instruments (continued)

Interest rate risk

As at 31 December 2011 and 2010 the interest rate profile of the Group’s interest-bearing financial instruments was:

31 December 2011 31 December 2010 Effective Effective Interest Carrying interest Carrying Note Rate Amount rate Amount Fixed rate instruments Time deposits 21 USD 5.4% 899,318 3.5% 1,469,797 EUR 4.7% 2,805 3.8% 68,640 TL 12.3% 1,450,629 9.1% 1,561,282 Other 60.0% 48 8.7% 180 Time deposits maturing after 3 months or more 16 USD 5.4% 154,500 7.0% 8,000 BYR 46.1% 651 10.5% 201 TL 12.2% 689,831 - - Finance lease obligations 25 USD 6.8% (2,108) 4.6% (2,733) 174 EUR 3.4% (17,623) 3.4% (20,962) TL 10.2% (160) - - Unsecured bank loans 25 USD fixed rate loans 4.6% (486,370) 4.2% (591,463) TL fixed rate loans 15.00% (5,479) - - Secured bank loans 25 USD fixed rate loans 5.0% (6,414) 5.2% (6,210) AZN fixed rate loans - - 22.5% (189)

Variable rate instruments Secured bank loans 25 BYR floating rate loans 10.9% (8,818) 10.9% (26,228) EUR floating rate loans 7.9% (2,634) - - Unsecured bank loans 25 USD floating rate loans 3.8% (1,318,799) 3.6% (1,175,049) EUR floating rate loans 6.6% (19,680) 7.8% (13,627) AZN fixed rate loans - - 22.5% (316) Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

30. Financial instruments (continued)

Sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments:

A change of 1% in interest rates for time deposits maturing after 3 months or more would have increased/(decreased) profit or loss by $2,213 (31 December 2010: $65).

Cash flow sensitivity analysis for variable rate instruments:

A change of 100 basis points in interest rates as at 31 December 2011 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. The analysis is performed on the same basis as at 31 December 2011 and 2010.

Profit or loss Equity 100 bp 100 bp 100 bp 100 bp increase decrease increase decrease 31 December 2011 Variable rate instruments (10,529) 10,529 - - Cash flow sensitivity (net) (10,529) 10,529 - - 31 December 2010 Variable rate instruments (9,262) 9,262 - - Cash flow sensitivity (net) (9,262) 9,262 - - 175 TURKCELL ANNUAL REPORT 2011

30. Financial instruments (continued)

Fair values

The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows:

31 December 2011 31 December 2010 Carrying Fair Carrying Fair Note Amount Value Amount Value

Assets carried at amortized cost Due from related parties-long term 34 43 43 1,044 1,044 Other non-current assets* 17 20,235 20,235 15,258 15,258 Due from related parties-short term 34 43,215 43,215 88,897 88,897 Trade receivables and accrued income*** 19 955,962 955,962 851,175 851,175 Other current assets* 20 70,599 70,599 56,170 56,170 Cash and cash equivalents 21 2,508,529 2,508,529 3,302,163 3,302,163 Time deposits maturing after 3 months or more 16 844,982 844,982 8,201 8,201 4,443,565 4,443,565 4,322,908 4,322,908

Liabilities carried at fair value Put option for Best acquisition 24 (10,094) (10,094) (53,435) (53,435) (10,094) (10,094) (53,435) (53,435) 176 Liabilities carried at amortized cost Loans and borrowings-long term 25 (1,057,380) (1,057,380) (1,407,316) (1,407,316) Bank overdrafts 21 (1,084) (1,084) (5,896) (5,896) Option contracts 25 (1,248) (1,248) - - Loans and borrowings-short term 25 (810,705) (810,705) (430,205) (430,205) Trade and other payables** 29 (656,256) (656,256) (676,187) (676,187) Due to related parties 34 (14,582) (14,582) (10,760) (10,760) Deferred payments 24-29 (60,180) (60,180) (78,402) (78,402) (2,601,435) (2,601,435) (2,608,766) (2,608,766)

* Non-financial instruments such as prepaid expenses and advances given are excluded from other current assets and other non-current assets.

** Advances taken, taxes and withholdings payable are excluded from trade and other payables.

*** Includes non-current trade receivables amounting to $113,581.

The methods used in determining the fair values of financial instruments are discussed in Note 4.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method:

The different levels have been identified as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets and liability, either directly or indirectly.

Level 3: inputs for the asset or liability that are not based on observable market. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

30. Financial instruments (continued)

Fair values (continued)

Fair value hierarchy (continued)

Level 1 Level 2 Level 3 Total 31 December 2011

Financial Assets Option contracts not used for hedging ------Financial Liabilities Financial liability in relation to put option - - 10,094 10,094 Option contracts not used for hedging - 380 - 380 Option contracts used for hedging - 868 - 868 - 1,248 10,094 11,342 31 December 2010 Financial Liabilities Financial liability in relation to put option - - 53,435 53,435 - - 53,435 53,435

Available-for sale Financial liability in financial assets relation to put option Total 177 Balance as at 1 January 2011 - (53,435) (53,435) Total gains or losses: in profit or loss - (1,194) (1,194) Total recognition in equity - 44,535 44,535 Balance as at 31 December 2011 - (10,094) (10,094)

The table above shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy. TURKCELL ANNUAL REPORT 2011

30. Financial instruments (continued)

Fair values (continued)

Fair value hierarchy (continued)

Total gains or losses included in profit or loss for the period in the following table are presented in the statement of comprehensive income as follows:

Available-for sale Financial liability in financial assets relation to put option Total Total gains or losses included in profit or loss for the period: Net financing costs - (1,194) (1,194)

Total gains or losses for the period included in profit or loss for asset and liabilities held at the end of the reporting period: Net financing costs - (1,194) (1,194)

31. Operating leases

The Company entered into various operating lease agreements. For the years ended 31 December 2011 2010 and 2009, total rent expenses for operating leases were $271,347, $301,309 and $287,259 respectively. 178 The future minimum lease payments under non-cancellable leases are as follows: 2011 2010 Less than one year 20,812 18,024 Between one and five years 25,655 16,107 More than five years 6,499 7,221 52,966 41,352

32. Guarantees and purchase obligations

As at 31 December 2011, outstanding purchase commitments with respect to the acquisition of property, plant and equipment, inventory and purchase of sponsorship and advertisement services amount to $780,179 (31 December 2010: $594,910).

As at 31 December 2011, the Group is contingently liable in respect of bank letters of guarantee obtained from banks given to customs authorities, private companies and other public organizations and provided financial guarantees to subsidiaries totaling to TL 2,983,689 (equivalent to $1,579,591 as at 31 December 2011) (31 December 2010: TL 2,413,062 equivalent to $1,560,842 as at 31 December 2010). Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies

License Agreements

Turkcell:

On 27 April 1998, the Company signed the License Agreement with the Turkish Ministry. In accordance with the License Agreement, the Company was granted a 25 year GSM license for a license fee of $500,000. The License Agreement permits the Company to operate as a stand-alone GSM operator. Under the License, the Company collects all of the revenue generated from the operations of its GSM network and pays the Turkish Treasury and Turkish Ministry a treasury share and universal service fund, respectively, equal to 15% of its gross revenues from Turkish GSM operations. On 25 June 2005, the Turkish government declared that GSM operators are required to pay 10% of their existing monthly treasury share to the Turkish Ministry as a universal service fund contribution in accordance with Law No: 5369. As a result, starting from 30 June 2005, the Company pays 90% of the treasury share to the Turkish Treasury and 10% to the Turkish Ministry as universal service fund. Moreover, the Company is obliged to pay 0.35% of its yearly gross revenue once a year as ICTA Fee. The Company is authorized to, among other things, set its own tariffs within certain limits, charge peak and off-peak rates, offer a variety of service and pricing packages, issue invoices directly to subscribers, collect payments and deal directly with subscribers.

In February 2002, the Company renewed its License with the ICTA, and became subject to a number of new requirements, including those regarding the build-out, operation, quality and coverage of the Company’s GSM network, prohibitions on anti-competitive behaviour and compliance with national and international GSM standards. Failure to meet any requirement in the renewed License, or the occurrence of extraordinary unforeseen circumstances, can also result in revocation of the renewed License, including the surrender of the GSM network without compensation, or limitation of the Company’s rights thereunder, or could otherwise adversely affect the Company’s regulatory status. Certain conditions of the renewed License Agreement include the following: Coverage: The Company had to attain geographical coverage of 50% and 90% of the population of Turkey with certain exceptions within three years and five 179 years, respectively, of the License’s effective date.

Service offerings: The Company must provide certain services in addition to general GSM services, including free emergency calls and technical assistance for subscribers, free call forwarding to police and other public emergency services, receiver-optional short messages, video text access, fax capability, calling and connected number identification and restrictions, call forwarding, call waiting, call hold, multi-party and third-party conference calls, billing information and barring of a range of outgoing and incoming calls.

Service quality: In general, the Company must meet all the technical standards determined and updated by the European Telecommunications Standards Institute and Secretariat of the GSM MoU. Service quality requirements include that call blockage cannot exceed 5% and unsuccessful calls cannot exceed 2%.

Tariffs: ICTA sets the initial maximum tariffs in TL and USD. Thereafter, the revised License provides that the ICTA will adjust the maximum tariffs at most every six months or, if necessary, more frequently. The Company is free to set its own tariffs up to the maximum tariffs. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

License Agreements (continued)

Turkcell (continued):

Rights of the ICTA, Suspension and Termination:

The revised License is not transferable without the approval of the ICTA. In addition, the License Agreement gives the ICTA certain monitoring rights and access to the Company’s technical and financial information and allows for inspection rights, and gives certain rights to suspend operations under certain circumstances. Also, the Company is obliged to submit financial statements, contracts and investment plans to the ICTA.

The ICTA may suspend the Company’s operations for a limited or an unlimited period if necessary for the purpose of public security and national defence. During period of suspension, the ICTA may operate the Company’s GSM network.

The Company is entitled to any revenues collected during such period and the Licensee’s term will be extended by the period of any suspension. The revised License may also be terminated upon a bankruptcy ruling against the Company or for other license violations, such as operating outside of its allocated frequency ranges, and the penalties for such violations can include fines, loss of frequency rights, revocation of the license and confiscation of the network management centre, the gateway exchanges and central subscription system, including related technical equipment, immovables and installations essential for the operation of the network.

Based on the enacted law on 3 July 2005 with respect to the regulation of privatization, gross revenue description based for the calculation of treasury share and universal service fund has been changed. According to this new regulation, interest charges for late collections, and indirect taxes such as VAT, and other 180 expenses are excluded from the description of gross revenue. Calculation of gross revenue for treasury share and universal service fund according to the new regulation is effective after Council of State’s approval on 10 March 2006.

3G License

On 30 April 2009, the Company signed a license agreement with ICTA which provides authorization for providing IMT 2000/UMTS services and infrastructure. Turkcell acquired the A type license providing the widest frequency band for a consideration of EUR 358,000 (excluding VAT). The license is effective for duration of 20 years starting from 30 April 2009. According to the agreement, operators have provided IMT 2000/UMTS services starting from 30 July 2009.

In accordance with the 3G License Agreement, the Company had to cover 100% of the population within the borders of all metropolitan municipalities and borders of all cities and municipalities in three and six years, respectively. Moreover, the Company had to cover 100% of the population in all settlement areas with a population higher than 5,000 and 1,000 within eight and ten years, respectively following the effective date of the agreement. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

License Agreements (continued)

Belarusian Telecom:

Belarusian Telecom owns a license issued on 28 August 2008 for a period of 10 years and is valid till 28 August 2018. According to the Sale and Purchase Agreement signed, the State Property Committee of the Republic of Belarus committed to grant the license from the acquisition date of 26 August 2008 for a period of 10 years and such license shall be extended for an additional 10 years for an insignificant consideration. State Property Committee of the Republic of Belarus has fulfilled its obligations stated in Sale and Purchase Agreement and submitted the related official documents in December 2009. According to the current legislation of the Republic of Belarus, the license extension will be made upon the expiration of its validity period. Therefore, Belarusian Telecom shall apply for extension in August 2018. In the consolidated financial statements, amortization charge is recorded on the assumption that the license will be extended.

Under its license, Belarusian Telecom has several coverage requirements to increase its geographical coverage gradually starting from the date of the license until 2018. However, Belarusian Telecom’s period of execution in relation to coverage requirements are extended for three years starting from the acquisition date.

Astelit:

Astelit owns two GSM activity licenses, one is for GSM–900, the other is for DCS–1800. As at 31 December 2011, Astelit owns twenty four GSM–900, DCS 1800, D-AMPS and microwave Radiorelay frequency licenses which are regional or national. In addition to the above GSM licenses, Astelit owns three licenses for local fixed line phone connection with wireless access using D-AMPS standard, one license for international and long distance calls and eight PSTN licenses for seven regions of Ukraine. Also, Astelit holds number range – two NDC codes for mobile network and local ranges for PSTN and D-AMPS licenses. 181

According to licenses, Astelit should adhere to state sanitary regulations to ensure that equipment used does not injure the population by means of harmful electro-magnetic emissions. Licenses require Astelit to inform authorities about start/end of operations in three months; about changes in incorporation address in 30 days. Also, Astelit must present all the required documents for inspection by Ukrainian Telecommunications Authority at their request. The Ukrainian Telecommunications Authority may suspend the operations of Astelit for a limited or an unlimited period if necessary because of the expiration of licenses, upon mutual consent, or in case of violation of terms of radio frequencies use. If such a violation is determined, Ukrainian Telecommunications Authority notifies Astelit of provisions violated and sets deadline for recovery. If the deadline is not met, licenses may be terminated.

Inteltek:

Inteltek signed a contract on 30 July 2002 which provides for the installation, support and operation of an on-line central betting system as well as maintenance and support for the provision of football games. The Central Betting System Contract was scheduled to expire on 30 March 2008. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

License Agreements (continued)

Inteltek: (continued)

Inteltek signed another contract with General Directorate of Youth and Sports (“GDYS”) on 2 October 2003 which authorized Inteltek to establish and operate a risk management center and become head agent for fixed odds betting. The Fixed Odds Betting Contract was scheduled to expire in October 2011. However, in relation to the lawsuits related to the operations of Inteltek, GDYS ceased the implementation of the Fixed Odds Betting Contract starting from March 2007. Following this annulment decision, Spor Toto and Inteltek signed a new Fixed Odds Betting Contract on 15 March 2007, with less-advantageous conditions compared to previous contract signed in 2003, which expired on 1 March 2008.

Inteltek signed a new Fixed Odds Betting Contract with Spor Toto, having the same terms and conditions with the latest contracts signed with Spor Toto which took effect on 1 March 2008. At the same time, Inteltek signed a new Central Betting System Contract with Spor Toto, which took effect on 31 March 2008 as having the same conditions with the current contract and both contracts were to be valid for one year atmost until the operation started as a result of the new tender.

On 12 August 2008, Spor Toto conducted a tender which allowed private companies to organize fixed odds and paramutual betting in sports games. Inteltek gave the best offer for the tender. On 29 August 2008, Inteltek signed a contract with Spor Toto, receiving the rights to run the sport betting business for the next ten years. New commission rate, which is 1.4% of gross takings (until 1 March 2009, commission rate was 7% of gross takings), is applicable starting from March 2009. Under the terms of this contract, Inteltek guaranteed TL 1,500,000 (equivalent to $794,113 as of 31 December 2011) turnover for the first year of the contract, and has given similar guarantees for future years.

182 At 31 December 2011, the total amount of guarantee obtained from banks and provided to Spor Toto amounted to TL 163,530 (equivalent to $86,574 as at 31 December 2011) (31 December 2010: TL 161,298 equivalent to $104,332 as at 31 December 2010). The targeted payout is 50% of the turnover balance. The fact that Inteltek is obliged to pay the difference between the realized and the targeted payout balances, whenever the pool balance falls negative, creates an excess payment risk.

Kibris Telekom:

On 27 April 2007, Kibris Telekom signed the License Agreement for Installation and Operation of a Digital, Cellular, Mobile Telecommunication System (“Mobile Communication License Agreement”) with the Ministry of Communications and Public Works of the Turkish Republic of Northern Cyprus which is effective from 1 August 2007, replacing the previous GSM-Mobile Telephony System Agreement dated 25 March 1999. In accordance with the Mobile Communication License Agreement, Kibris Telekom was granted an 18 year GSM 900, GSM 1800 and IMT 2000/UMTS license for GSM 900, GSM 1800 frequencies while the usage of IMT 2000/UMTS frequency bands is subject to the fulfillment of certain conditions.

On 14 March 2008, Kibris Telekom was awarded a 3G infrastructure license at a cost of $10,000 including VAT, which was paid at the end of March 2008. Under the terms of the license, the system had to be operational by mid-October 2008. In 2010, Kibris Telekom has completed the radio transmission (air link) project providing direct international voice and data connection with mainland and started using it from the third quarter of 2010. The Project is the only direct connection in Turkish Republic of Northern Cyprus besides Telecommunication Authority. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

License Agreements (continued)

Kibris Telekom (continued):

Under the Mobile Communication License Agreement, Kibris Telekom also pays the tax authorities of Turkish Republic of Northern Cyprus a treasury share on monthly basis equal to 15% of gross revenues excluding accrued interest charges for the late payments, indirect taxes and accrued revenues for reporting purposes, payments made to third parties for value added services, interconnection revenues, roaming income from own subscribers after the related payment made to other operators.

Superonline:

Superonline was authorized to Fixed Telephony, Satellite Communication Service, Infrastructure, Internet Service Provider and Mobile Virtual Network Operator.

Authorization By-Law for Telecommunication Services and Infrastructure published in Official Gazette on dated 26 August 2004 has been abrogated By-Law on Authorization for Electronic Communications Sector dated 28 May 2009. According to this abrogation, Superonline’s “License” on, Infrastructure Operating Service, Internet Service Provision, Satellite Communication Service has been changed to “Authority” on, Infrastructure Operating Service, Internet Service Provision, Satellite Communication Service, Cable Broadcast Service and Superonline’s “License” on Long Distance Telephony Services License has been changed to “Authority” relevant to the Fixed Telephony Services.

In accordance with the new legislation issued by ICTA, the infrastructure operator authorization right of Superonline has become infinite. As a result, Superonline revised the expected useful lives of its operating license and related fixed network equipment from 15 years to 25 years. 183

Azerinteltek:

Azerinteltek, in which Inteltek’s shareholding is 51%, was established on 19 January 2010, and authorized to organize, operate, manage and develop the fixed-odds and para-mutual sports betting games by the Ministry of Youth and Sports of Azerbaijan for a period of 10 years. The agreement signed with Azeridmanservis which is founded by the Ministry of Youth and Sports of Azerbaijan is renewed with the same terms and conditions in accordance with the new legislation enforced in Azerbaijan regarding the betting games based on sports on 30 September 2010.

Azerinteltek officially commenced to conduct sports betting games on 18 January 2011.

Interconnection Agreements

The Company has entered into interconnection agreements with a number of operators in Turkey and overseas including Turk Telekom, Telsim Mobil Telekomunikasyon Hizmetleri AS (“Telsim”), Vodafone Telekomunikasyon AS (“Vodafone”), Avea Iletisim Hizmetleri AS (“Avea”), Milleni.com GMbH and Globalstar Avrasya Uydu Ses ve Data Iletisim AS (“Globalstar”).

The Access and Interconnection Regulation (the “Regulation”) became effective when it was issued by the ICTA on 23 May 2003.

TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Interconnection Agreements (continued)

The Regulation is driven largely by a goal to improve the competitive environment. Under the Regulation, the ICTA may compel all telecommunications operators to accept another operator’s request for use of and access to its network. All telecommunications operators in Turkey may be required to provide access to other operators on the same terms and qualifications provided to their shareholders, subsidiaries and affiliates.

In accordance with the Regulation, the telecommunications providers in Turkey (including Turk Telekom) were obliged to renew their interconnection agreements within two months following the issuance of the Regulation. As a result of intervention by the ICTA, the Company entered into supplemental agreements with Turk Telekom on 10 November 2003, Telsim on 21 November 2003, and Globalstar on 11 December 2003, with amended tariffs and tariff adoption procedures. The interconnection agreement with Avea(formerly TT&TIM) was last renewed on 20 January 2006. On 24 May 2006, shares of Telsim were transferred to Vodafone and a new interconnection agreement was signed between the Company and Vodafone at the end of July 2006.

On 21 February 2005, Superonline and Milleni.com GMbH have signed an agreement to provide telecommunications services to each other whereby Milleni.com GMbH may convey calls to the Company’s switch and the Company may convey calls to Milleni.com GMbH’s switch, in both cases, for onward transmission to their destinations.

In addition, the ICTA has required operators holding significant market power, as well as Turk Telekom, to share certain facilities with other operators under certain conditions and to provide co-location on their premises for the equipment of other operators at a reasonable price. The ICTA has also required telecommunications operators to provide number portability, which means allowing users to keep the same phone numbers even after they switch from one network to another starting from 9 November 2008.

184 Under a typical interconnection agreement, each party agrees, among other things to permit the interconnection of its network with the Company’s network to enable calls to be transmitted to, and received from, the GSM system operated by each party in accordance with technical specifications set out in the interconnection agreement. Typical interconnection agreements also establish understandings between the parties relating to a number of key operational areas, including call traffic management, quality and performance standards, interconnection interfaces and other technical, operational and procedural aspects of interconnection.

The Company’s interconnection agreements usually provide that each party will assume responsibility for the safe operation of its own network. Each party is also typically responsible for ensuring that its network does not endanger the safety or health of employees, contractors, agents or customers of the other party or damage interfere with or cause any deterioration in the operation of the other party’s network.

Interconnection agreements also specify the amount of the payments that each party will make to the other for traffic originated on one network but switched to the other. These payments vary by contract, and in some cases, may require the Company to pay the counterparty less, the same amount, or a greater amount per minute, for traffic originating on the Company’s network but switching to the counterparty’s network, than it receives for a similar call originating on another network and switched to the Company’s network.

There are no minimum payment obligations under the interconnection agreements; however, failure to carry the counterparty’s traffic may expose the Company to financial and other penalties or loss of interconnection privileges for its own traffic. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Interconnection Agreements (continued)

On 10 February 2010, ICTA decreased “Standard Interconnection Tariffs” for the Company from full TL 0.0655 (equivalent to $0.0424 as at 31 December 2010) to full TL 0.0313 (equivalent to $0.0202 as at 31 December 2010) for voice calls and left the tariff unchanged at full TL 0.0775 (equivalent to full $0.0501 as at 31 December 2010) for video calls, effective from 1 April 2010. The Company started to recognize interconnection revenues and cost in accordance with “Standard Interconnection Reference Tariffs” starting from 1 April 2010.

As at 31 December 2010, the management believes that the Group is in compliance with the above mentioned license and interconnection agreements’ conditions and requirements in all material respects.

Legal Proceedings

The Group is involved in various claims and legal actions arising in the ordinary course of business described below.

Dispute with Turk Telekom with respect to call termination fees

Upon application of Turk Telekom, the ICTA has set temporary (and after final) call termination fees for calls to be applied between Turk Telekom and the Company starting from 10 August 2005. However, Turk Telekom did not apply these termination fees for the international calls.

Therefore, on 22 December 2005, the Company filed a lawsuit against Turk Telekom to cease this practice and requested collection of its damages amounting to TL 11,274 (equivalent to $5,969 as at 31 December 2011) with overdue interest amounting TL 521 (equivalent to $276 as at 31 December 2011) and late payment fee amounting TL 175 (equivalent to $93 as at 31 December 2011) totaling to TL 11,970 (equivalent to $6,338 as at 31 December 2011) covering the 185 period from August 2005 until October 2005. Expert reports and supplementary expert reports which are obtained for the lawsuit, affirm justification of the Company.

On 19 December 2006, the Company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termination tariffs for international calls set by ICTA for the period between November 2005 and October 2006 amounting to TL 23,726 (equivalent to $12,561 as at 31 December 2011) including principal, interest and penalty on late payment. The Court decided to consolidate this lawsuit with the first lawsuit dated 22 December 2005.

On 2 November 2007, the Company initiated another lawsuit against Turk Telekom claiming that Turk Telekom has not applied call termination tariffs for international calls set by ICTA for the period between November 2006 and March 2007 amounting to TL 6,836 (equivalent to $3,619 as at 31 December 2011) including principal, interest and penalty on late payment. The Court also decided to consolidate this lawsuit with the first lawsuit dated 22 December 2005.

On 28 September 2011, the Court decided in favor of the Company for all consolidated cases. The Court decided that Turk Telekom should pay to the Company in total TL 42,597 (equivalent to $22,551 as at 31 December 2011) plus VAT and Special Communication Tax (“SCT”) composed of principle amounting to TL 36,502 (equivalent to $19,324 as at 31 December 2011), interest and penalty amounting to TL 6,095 (equivalent to $3,227 as at 31 December 2011). The court also decided that Turk Telekom should pay interest, penalty, VAT and SCT calculated for the principal from date of case to the payment date. Turk Telekom appealed the decision. The Company replied this appeal request. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute with Turk Telekom with respect to call termination fees (continued)

Dispute on Turk Telekom Transmission Lines Leases

Effective from 1 July 2000, Turk Telekom annulled the discount of 60% that it provided to the Company based on its regular ratio, which had been provided for several years, and, at the same time, Turk Telekom started to provide a discount of 25% being subject to certain conditions. The Company filed a lawsuit against Turk Telekom for the application of the agreed 60% discount. However, on 30 July 2001, the Company had been notified that the court of appeal upheld the decision made by the commercial court allowing Turk Telekom to terminate the 60% discount. Differences in the total nominal rent for the concerned period amounting to TL 29,125 (equivalent to $15,419 as at 31 December 2011) have been accrued by Turk Telekom and deducted from the receivables of the Company. Accordingly, the Company paid and continues to pay transmission fees to Turk Telekom based on the 25% discount. Although Turk Telekom did not charge any interest on late payments at the time of such payments, the Company recorded an accrual amounting to a nominal amount of TL 3,023 (equivalent to $1,600 as at 31 December 2011) for possible interest charges as at 31 December 2000. On 9 May 2002, Turk Telekom requested an interest amounting to a nominal amount of TL 30,068 (equivalent to $15,918 as at 31 December 2011).

The Company did not agree with Turk Telekom’s interest calculation and, accordingly, obtained an injunction from the commercial court to prevent Turk 186 Telekom from collecting any amounts relating to this interest charge. Also, the Company initiated a lawsuit against Turk Telekom on the legality of such interest. On 25 December 2008, the Court rejected the case. The Company appealed the decision. The Supreme Court rejected the appeal. The Company applied for the correction of the decision. The Supreme Court rejected the correction of the decision request and the decision is finalized.

Based on the management opinion, the Company accrued provision of TL 91,864 (equivalent to $48,634 as at 31 December 2011) and the Company netted off the whole amount from the receivables from Turk Telekom as at 31 December 2011.

Additionally, a lawsuit is commenced against Turk Telekom on 28 October 2010 to collect the receivable amounting to principal of TL 23,378 (equivalent to $12,377 as at 31 December 2011), overdue interest of TL 3,092 (equivalent to $1,637 as at 31 December 2011) and delay fee of TL 1,925 (equivalent to $1,019 as at 31 December 2011), with the contractual default interest until payment date on the ground that the above mentioned exercise is contrary to the term of the contract which is effective for the year 2000, Turk Telekom has already collected the whole amount which is subjected to the related court decision as of 31 October 2009 and Turk Telekom collected additional receivable. The court decided to obtain an expert report. The lawsuit is still pending.

Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: none). Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute regarding the Fine Applied by the Competition Board

The Competition Board commenced an investigation of business dealings between the Company and the mobile phone distributors in October 1999. The Competition Board decided that the Company disrupted the competitive environment through an abuse of a dominant position in the Turkish mobile market and infringements of certain provisions of the Law on the Protection of Competition. As a result, the Company was fined a nominal amount of approximately TL 6,973 (equivalent to $3,692 as at 31 December 2011) and was enjoined to cease these infringements. The Company initiated a lawsuit before Council of State for the injunction and cancellation of the decision. On 15 November 2005, the Court cancelled the Competition Board’s decision.

After the cancellation of the Competition Board’s decision, the Competition Board has given the same decision again on 29 December 2005. On 10 March 2006, the Company initiated a lawsuit before Council of State for the injunction and cancellation of the Competition Board’s decision dated 29 December 2005. On 13 May 2008, Council of State dismissed the lawsuit. The Company appealed the decision. Appeal process is still pending.

Based on the decision of Competition Board, Ankara Tax Office requested the Company to pay TL 6,973 (equivalent to $3,692 as at 31 December 2011) through the payment order dated 4 August 2006. On 25 September 2006, the Company made the related payment and initiated a lawsuit for the cancellation of this payment order. The Court dismissed the lawsuit, and the Company appealed this decision. On 17 March 2009, Council of State reversed the judgment of the Local Court. Local Court decided in line with the decision of Council of State. On 18 December 2009, the Court rejected the case and the Company also appealed this decision. Council of State reversed the judgment of the Instance Court. Local Court decided in line with the decision of Council of State. On 15 June 2011, the Court rejected the case again. The Company also appealed this decision. Council of State accepted the Company’s stay of order requests at appeal phase. Appeal process is still pending. 187 Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

Dispute regarding the Fine Applied by the Competition Board regarding Mobile Marketing Activities

The Competition Board decided to initiate an investigation in order to identify whether the Company maintains exclusive activities on mobile marketing and their appropriateness with respect to competition rules. On 23 December 2009, Competition Board decided that the Company violates competition rules in GSM and mobile marketing services and fined the Company amounting to TL 36,072 (equivalent to $19,097 as at 31 December 2011). The payment was made within 1 month following the notification of the decision of the Competition Board. Therefore, 25% discount was applied and TL 27,054 (equivalent to $14,323 as at 31 December 2011) is paid as the monetary fine on 25 May 2010. The Company filed a legal case on 25 June 2010 for the stay of execution and cancellation of the aforementioned decision. The Court rejected the Company’s stay of execution request. The Company objected to the decision. The objection was rejected. The lawsuit is still pending. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute regarding the Fine Applied by the Competition Board regarding Mobile Marketing Activities (continued)

Avea, depending on the Competition Board decision, initiated a lawsuit against the Company claiming a compensation from the Company for its damages amounting to TL 1,000 (equivalent to $529 as at 31 December 2011), with reservation of further claims, on the ground that the Company violated the competition. During the judgment, Avea increased its request to TL 5,000 (equivalent to $2,647 as at 31 December 2011) and in addition requested TL 1,000 (equivalent to $529 as at 31 December 2011) for non-pecuniary damages. The court decided to separate these requests. At the hearing on 9 April 2012, the court rejected all claims of Avea in both lawsuits.

Dispute on National Roaming Agreement

The Company conducted roaming negotiations in 2001 with Is-Tim Telekomunikasyon Hizmetleri AS (“Is-Tim”) which was a GSM operator, performing since March 2001. On 19 October 2001, upon unsuccessful negotiations, ICTA granted time for the Company until 15 November 2001 to sign the roaming agreement with the determined conditions and requested parties to come to an agreement until 15 November 2001. The Company initiated a lawsuit on the ground that ICTA has no power of intervention; its proposals are impossible from technical aspects and unacceptable from economic reasons. Council of State gave a decision on non-necessity of a new decision on the ground that action which is subjected to the lawsuit is cancelled by another state council decision. This decision was appealed by ICTA. Council of State, Plenary Session of the Chamber for Administrative Divisions decided to approve the court decision. 188 In a letter dated 14 March 2002, the ICTA subjected Is-Tim’s request for national roaming to the condition that it is reasonable, economically proportional and technically possible. Nevertheless, the ICTA declared that the Company is under an obligation to enter a national roaming agreement with Is-Tim within a 30 day period. The Company initiated a lawsuit against ICTA. On 14 March 2006, Council of State decided to cancel the process dated 14 March 2002 but rejected the Company’s request for cancellation of the regulation on procedures and policies with respect to national roaming. ICTA appealed the decision. Plenary Session of Administrative Law Divisions of the Council of State has decided to approve the decision of the Council of State.

The ICTA decided that the Company has not complied with its responsibility under Turkish regulations to provide national roaming and fined the Company by nominal amount of approximately TL 21,822 (equivalent to $11,553 as at 31 December 2011). On 7 April 2004, the Company made the related payment with its accrued interest. On 27 May 2004, the Company filed a lawsuit. On 3 January 2005, with respect to the Council of State’s injunction, ICTA paid back nominal amount of TL 21,822 (equivalent to $11,553 as at 31 December 2011). Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on National Roaming Agreement (continued)

On 13 December 2005, Council of State decided the cancellation of the administrative fine but rejected the Company’s request for cancellation of the regulation on procedures and policies with respect to national roaming. ICTA appealed the decision. Plenary Session of Administrative Law Divisions of the Council of State has decided to approve the decision of the Council of State. On 22 July 2010, the Company initiated a lawsuit against ICTA for the compensation of TL 7,111 (equivalent to $3,765 as at 31 December 2011), the total amount of the damage of the Company accrued interest between the period when the Company made the payment and ICTA returned the same to the Company as the result of the stay of execution decision.

On 27 October 2006, Telecom Italia SPA and TIM International NV initiated a lawsuit against the Company claiming that the Company violated competition law since demand of roaming has not been met. Telecom Italia SPA and TIM International NV requested $2,000 with respect to this claim. The Court rejected the case. Such decision has been appealed by Telecom Italia SPA and TIM International NV The Court of Appeal rejected the appeal and approved the decision in favor of the Company. Telecom Italia SPA and TIM International NV applied for the correction of the decision. The Court of Appeal rejected the correction of the decision. The decision has been finalized in favor of the Company.

Based on the finalized court decision which is in favor of the Company, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None). 189 Dispute regarding of the Fine Applied by ICTA on pricing applications of the Company

On 7 April 2010, ICTA decided to impose administrative fine to the Company amounting to TL 4,008 (equivalent to $2,122 as at 31 December 2011) for misinforming the Authority and TL 374 (equivalent to $198 as at 31 December 2011) for making some subscribers suffer. The payment was made within 1 month following the notification of the decision of the ICTA. Therefore, 25% discount was applied and TL 3,287 (equivalent to $1,740 as at 31 December 2011) is paid in total as the administrative fine on 9 June 2010. The Company filed two lawsuits on 22 September 2010 for the stay of execution and cancellation of the aforementioned decision. The Court rejected the Company’s stay of execution requests and the Company objected to the decisions but the objections are rejected. On 28 April 2011, the Court rejected the cases. The Company appealed the decisions. Council of State rejected the Company’s stay of execution requests at appeal phase. Appeal processes are pending.

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute regarding the Fine applied by ICTA on tariffs above upper limits

On 21 April 2010, ICTA decided to impose administrative fine to the Company amounting to TL 53,467 (equivalent to $28,306 as at 31 December 2011) by claiming that the Company applied tariffs above the upper limits of GSM-GSM in GSM Upper Limits Table approved by ICTA on 25 March 2009. The payment was made within 1 month following the notification of the decision of the ICTA. Therefore, 25% discount was applied and TL 40,100 (equivalent to $21,229 as at 31 December 2011) is paid as the administrative fine on 3 June 2010. The Company filed a lawsuit on 28 June 2010, for the cancellation of the aforementioned decision. The Court overruled the stay of execution claim, the Company objected to the decision and the Court accepted this objection and decided for the stay of the execution. Accordingly, ICTA paid back TL 40,100 (equivalent to $21,229 as at 31 December 2011) on 27 January 2011. On 3 May 2011, the Court rejected the case. The Company appealed the decision and paid back TL 40,100 to ICTA on 6 October 2011. Appeal process is pending.

Amount to be reimbursed to the subscribers was calculated as TL 46,228 (equivalent to $24,474 as at 31 December 2011) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made in January 2010.

ICTA, notified the Company on 23 November 2011, to pay the amount of TL 13,367 (equivalent to $7,077 as at 31 December 2011) which is the unpaid portion arising from the 25% cash discount of the administrative fine amounting to TL 53,467 (equivalent to $28,306 as at 31 December 2011) that was imposed for applying tariffs above the upper limits. The Company filed a lawsuit on 23 December 2011 for stay of execution and for the annulment of this process. The case is pending. On 20 February 2012, payment order has been sent to the Company by the Tax Office. On 24 February 2012, the Company filed a lawsuit for cancellation of the payment order.

190 Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the additional request regarding unpaid portion arising from the 25% discount of the administrative fine is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

Dispute on Deposits at Banks

The Company, in 2001, initiated an enforcement proceeding to collect receivables arising from deposits in a bank. The bank has been objected to the enforcement proceeding and the Company filed a lawsuit for the cancellation of the objection. The Court decided in favor of the Company on 1 March 2005. The bank appealed the decision and the Company replied the same. On 3 April 2006, Supreme Court of Appeals decided the reversal of the Court’s decision in favor of the defendant. The Court abided by the decision of the Supreme Court of Appeals. The lawsuit is pending.

Since it is not virtually certain that an inflow of economic benefits will arise, no contingent asset is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None). Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on Special Communication Taxation Regarding Prepaid Card Sales

Tax Office imposed tax penalty in the total amount of TL 47,130 (equivalent to $24,951 as at 31 December 2011) and TL 89,694 (equivalent to $47,485 as at 31 December 2011) based on the ground that the Company had to pay special communication tax over the discounts applied to the distributors for the wholesales for the years 2003 and 2004, respectively. On 31 December 2008 and 18 December 2009, the Company initiated lawsuits before the court. The Company requested to wait until the completion of settlement procedure in the lawsuit initiated on 31 December 2008. Since the Company and the Ministry of Finance Settlement Commission have settled on the amounts subjected to the lawsuits as explained in the following paragraph, the Company has withdrawn from the lawsuits.

According to the settlement made with the Ministry of Finance Settlement Commission on 1 June 2010, special communication tax and penalty was settled at TL 1,489 (equivalent to $788 as at 31 December 2011) and TL 2,834 (equivalent to $1,500 as at 31 December 2011) for the years 2003 and 2004, respectively. In addition, late payment interest was settled at TL 3,570 (equivalent to $1,890 as at 31 December 2011) and TL 5,295 (equivalent to $2,803 as at 31 December 2011) for the years 2003 and 2004, respectively. The aforementioned amounts were paid on 27 July 2010.

Provision set for the above mentioned special communication taxes, penalty and late payment interest was TL 64,653 (equivalent to $34,228 as at 31 December 2011) in the consolidated financial statements as at and for the year ended 31 December 2009 and the difference between the provision amount and settled amount was recognized as income in the consolidated financial statements as at and for the year ended 31 December 2010.

Tax Office imposed tax penalty, including actual tax and penalty for loss of tax, in the total amount of TL 133,617 (equivalent to $70,738 as at 31 December 2011) and TL 139,101 (equivalent to $73,641 as at 31 December 2011) based on the ground that the Company had to pay special communication tax over the 191 discounts applied to the distributors for the wholesales for the years 2005 and 2006, respectively. The Company initiated lawsuits for the cancellation of assessments and penalties mentioned above.

On 28 February 2011, Tax Amnesty Law has been approved by the President of Republic of Turkey. The Company applied to the Ministry of Finance related to the Tax Amnesty Law on 27 April 2011. According to Tax Amnesty Law, special communication tax and penalty was calculated as TL 26,723 (equivalent to $14,147 as at 31 December 2011) and TL 27,820 (equivalent to $14,728 as at 31 December 2011) for the years 2005 and 2006, respectively. In addition, late payment interest was calculated as TL 11,164 (equivalent to $5,910 as at 31 December 2011) and TL 8,900 (equivalent to $4,712 as at 31 December 2011) for the years 2005 and 2006, respectively. The aforementioned amounts were paid on 30 June 2011. The Company applied to the Tax Court to withdraw from the lawsuits according to Tax Amnesty Law due to the aforementioned payment. The courts decided that it is not necessary to declare a judgment on merits for the lawsuit.

On 24 June 2011, Tax Office imposed tax penalty, including actual tax and penalty for loss of tax, in the total amount of TL 11,238 (equivalent to $5,949 as at 31 December 2011) based on the ground that the Company had to pay special communication tax over the discounts applied to the distributors for the wholesales for the period of January-February 2007. The Company applied to the Ministry of Finance on 13 July 2011 in order to benefit from the Tax Amnesty. According to Tax Amnesty Law, special communication tax and interest was calculated as TL 2,248 (equivalent to $1,190 as at 31 December 2011) and TL 842 (equivalent to $446 as at 31 December 2011) respectively. The aforementioned amounts were paid on 29 July 2011. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Carrying International Voice Traffic

In May 2003, the Company was informed that the ICTA had initiated an investigation against the Company claiming that the Company has violated Turkish laws by carrying some of its international voice traffic through an operator other than Turk Telekom. The Company is disputing whether Turk Telekom should be the sole carrier of international voice traffic. On 5 March 2004, ICTA fined the Company a nominal amount of approximately TL 31,731 (equivalent to $16,799 as at 31 December 2011).

The Company has initiated a lawsuit with the claim of annulment of the related processes and decisions of ICTA, however, paid the administrative fine on 9 April 2004. On 5 November 2004, Council of State gave a decision, which is served to the Company, for stay of execution. With respect to that decision, ICTA paid back TL 18,000 (equivalent to $9,529 as at 31 December 2011) on 26 January 2005 and deduct a sum of TL 13,731 (equivalent to $7,269 as at 31 December 2011) from the December frequency usage fee payment. On 26 December 2006, Council of State decided to accept the Company’s claim and annul the decision of and the fine imposed by the ICTA. ICTA appealed the decision. The decision has been approved by the Council of State, Plenary Session of the Chamber for Administrative Divisions.

Turk Telekom initiated a lawsuit against the Company with respect to the same issue requesting an amount of TL 450,931 (equivalent to $238,727 as at 31 December 2011) of which TL 219,149 (equivalent to $116,019 as at 31 December 2011) is principal and TL 231,782 (equivalent to $122,707 as at 31 December 2011) is interest charged until 30 June 2005 and requesting a temporary injunction.

Considering the progresses at the court case, provision is set for the principal amounting to TL 47,965 (equivalent to $25,393 as at 31 December 2011) and 192 accrued interest amounting to a nominal amount of TL 89,351 (equivalent to $47,303 as at 31 December 2011) in the consolidated financial statements as at and for the year ended 31 December 2011.

In deciding upon the amount of the provision taking, the Company has taken the Turkish law into consideration, not the amounts requested by Turk Telekom and reflected in the expert report. Specifically, under Turkish Law, a person who is alleging that he has suffered a loss cannot claim the whole of his possible revenues but only the damages may only be sought in respect of lost profit. For this reason, the provision set by the Company is calculated by taking Turk Telekom’s estimated loss of profit into consideration rather than the amounts requested by Turk Telekom and amounts reflected in the expert report. Moreover, the Company obtained an independent opinion dated 23 October 2007 which supports the management opinion from an expert who is not designated by the Court.

On 5 November 2009, the Court rejected the Turk Telekom’s request amounting to TL 171,704 (equivalent to $90,902 as at 31 December 2011) and accepted the request amounting to TL 279,227 (equivalent to $147,825 as at 31 December 2011). The Company appealed the decision. Also, Turk Telekom appealed the decision. The Court of Cassation cancelled the decision. The Company and Turk Telekom applied for the correction of the decision. Supreme Court decided to reject both sides’ correction of the decision requests. The lawsuit is still pending in the Court of First Instance. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Disputes with Spor Toto

On 9 November 2005, Spor Toto sent a notification letter to Inteltek claiming that Inteltek is obliged to pay nominal amount of TL 3,292 (equivalent to $1,743 as at 31 December 2011) due to the difference in the reconciliation methods. Spor Toto claims that the reconciliation periods should be six-month independent periods whereas Inteltek management believes that those periods should be cumulative as stated in the agreement. Inteltek has not paid the requested amount.

Spor Toto, on behalf of General Directorate of Youth and Sport (“GDYS”), initiated a declaratory lawsuit against Inteltek. On 22 February 2007, the Court rejected the case and decided that the collection risk is with GDYS and Inteltek is not responsible for the uncollected amount of TL 1,527 (equivalent to $808 as at 31 December 2011) and also rejected the demand that the reconciliation period should be six-month independent periods. GDYS appealed the Court’s decision. Supreme Court rejected the appeal request of GDYS. Following the Supreme Court’s decision, GDYS applied for the correction of the decision. GDYS’s correction of decision request was rejected by the Court and the decision was finalized.

Based on the decision of Supreme Court, Inteltek reversed the previously accrued principal amount of TL 3,292 (equivalent to $1,743 as at 31 December 2011) and its overdue interest accrual amount of TL 1,894 (equivalent to $1,003 as at 31 December 2011) in September 2007. Furthermore, Inteltek reclaimed TL 2,345 (equivalent to $1,241 as at 31 December 2011) principal and TL 977 (equivalent to $517 as at 31 December 2011) accrued interest which was paid in the 1st and 3rd reconciliation periods. Inteltek has initiated a lawsuit on 21 February 2008 to collect this amount. On 19 March 2009, the court decided in favor of Inteltek. Spor Toto appealed the decision. The Supreme Court ruled to reverse the judgment of the local court. Inteltek applied for the correction of the decision. The Supreme Court rejected the correction of the decision process and the file has been returned to the Court. The Court decided to resist on the 193 former decision on 29 June 2011. Spor Toto appealed the decision. The appeal process is pending.

Dispute on over assessment following the settlement on VAT fine pertaining to International Roaming Agreements

On 9 February 2009, the Company initiated a lawsuit claiming cancellation of interest charges amounting TL 6,609 (equivalent to $3,499 as at 31 December 2011) which are erroneously calculated after settlement with the Tax Office regarding the VAT and tax penalties accrued due to roaming agreement for years 2000, 2001 and 2002. The Court rejected the Company’s injunction request. The Company objected to the decision. The Court rejected the objection of the Company. The lawsuit is pending.

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on Iranian GSM tender process

The Company has initiated an arbitration case against Islamic Republic of Iran for not abiding by the provisions of the Agreement on Reciprocal Promotion and Protection of Investments and demanded its sustained loss, on 11 January 2008 at the arbitration court which is established pursuant to the UNCITRAL arbitration rules. The arbitration process is still pending.

Besides, related with GSM tender process, Eastasia one of the partners of the consortium established to participate the tender and a wholly owned subsidiary of the Company, initiated an arbitration process against Iran Economic Development Company (“IEDC”), another partner of the consortium, on 29 April 2008 claiming that IEDC violated the shareholder’s agreement and seeking compensation for damages for the aforementioned breach. The arbitration process is still pending.

Dispute on Turk Telekom Transmission Tariffs

On 19 January 2007, the Company initiated a lawsuit against Turk Telekom claiming that Turk Telekom charged transmission on erroneous tariffs between 1 June 2004 and 1 July 2005. The Company requested a nominal amount of TL 8,137 (equivalent to $4,308 as at 31 December 2011) including interest. The expert report given to Court is in favor of the Company. The Court ruled to obtain supplementary expert report. Supplementary expert report is also in favor of the Company. The Court ruled to obtain a new expert report. The case is still pending.

Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements 194 as at and for the year ended 31 December 2011 (31 December 2010: None).

Dispute on the decision of CMB regarding Audit Committee Member

On 21 July 2006, Alexey Khudyakov was appointed to the audit committee as an observer member. On 26 January 2007 the CMB informed the Company that Alexey Khudyakov’s current status, as an observer member on the audit committee does not satisfy the requirements under Article 25 “Committees Responsible for Auditing” of the CMB. The CMB has stated that steps must be taken urgently in order to comply with Article 25. On 21 March 2007, the Company commenced a lawsuit to suspend the execution and to annul the decision of the CMB.

On 18 January 2008, Ankara 14th Administrative Court rejected the case. The Company appealed the decision with an injunction request. However; Council of State rejected the appeal request and consequently the Company’s correction of the decision request.

On 15 October 2008, the CMB decided on an administrative fine amounting to TL 12 (equivalent to $6 as at 31 December 2011) since the Company did not fulfill the decision of CMB dated 26 January 2007 and required the Company to inform its shareholders at the next General Assembly Meeting. The Company commenced a lawsuit before the Administrative Court. The Court rejected the Company’s stay of execution request and the Company’s objection to this decision has been rejected. On 27 May 2011, the Court rejected the case. The Company appealed the decision. Council of State rejected the injunction request of the First Instance Court’s decision. Council of State rejected the stay of execution request of the Company. The appeal process is still pending. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on Mobile Number Portability

On 29 March 2007, the Company initiated a lawsuit against the ICTA claiming stay of order for and the annulment of the Regulation on Mobile Number Portability issued by the ICTA on 1 February 2007 on the ground that vested rights of the Company arising out the concession agreement were violated by the said regulation. On 1 June 2009, the Court rejected the case. The Company appealed the decision. The appeal process is still pending.

Dispute on Turk Telekom Interconnection Costs

On 8 April 2009, Turk Telekom initiated a lawsuit for damages against the Company claiming that the Company is violating the legislation by applying higher call termination fees to operators than the fees applied to the Company’s subscribers for on-net calls and requesting for the time being TL 10 (equivalent to $5 as at 31 December 2011) with its accrued interest starting from 2001 and TL 10 (equivalent to $5 as at 31 December 2011) with its accrued interest starting from the lawsuit date for the sustained loss as a result of decreasing traffic volume of Turk Telekom and subscriber lost derived from this action. On 6 April 2011, the Court decided to reject the case. Turk Telekom appealed the decision. The Company replied the appeal request. The appeal process is still pending.

On 22 August 2011, Turk Telekom initiated a lawsuit on the ground that on-net tariffs of the Company are under the interconnection fees notwithstanding ICTA’s decision regarding, on-net tariffs of the Company cannot be under the interconnection fees which are applied by the Company to other operators and requested TL 1,000 (equivalent to $529 as at 31 December 2011) monetary compensation by reserving its right for surpluses. The lawsuit is pending.

Dispute on Avea Interconnection Costs

On 4 November 2010, Avea initiated a lawsuit on the ground that on-net tariffs of the Company are under the interconnection fees notwithstanding ICTA’s decision regarding, on-net tariffs of the Company cannot be under the interconnection fees which are applied by the Company to other operators and requested TL 1,000 (equivalent to $529 as at 31 December 2011) monetary compensation by reserving its right for surpluses. During the judgment, Avea increased its request to TL 47,000 (equivalent to $24,882 as at 31 December 2011). An expert report from committee of experts appointed by the court has been submitted to the court which is in favor of the Company. The Court has decided to have an additional expert report from the same committee of experts. The lawsuit is pending. The Company has accrued provision amounting to TL 1,000 (equivalent to $529 as at 31 December 2011) which is the amount of initial request of Avea.

On 25 April 2011, Avea initiated another lawsuit with the same grounds mentioned above claiming compensation for its losses between November 2009 and January 2010. Avea claimed TL 40,000 (equivalent to $21,176 as at 31 December 2011) material compensation by reserving its rights for surpluses. The lawsuit is still pending.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no additional provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2011. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on Campaigns

On 21 May 2008, ICTA decided that the Company damaged the subscribers’ financial interests related to the campaigns in which free minutes or counters are given and requested TL 32,088 (equivalent to $16,988 as at 31 December 2011). On 10 July 2008, the Company filed a lawsuit for the injunction and cancellation of the ICTA’s decision. However, the Company benefited from the early payment option with a 25% early payment discount and paid TL 24,066 (equivalent to $12,741 as at 31 December 2011) on 1 August 2008. On 10 November 2010, the court decided to reject the case. The Company appealed the decision. The State of Council rejected the injunction request of the First Instance Court’s decision. The appeal process is still pending.

Dispute on Payment Request of Savings Deposits Insurance Fund

On 26 July 2007, Savings Deposits Insurance Fund (“SDIF”) requested TL 15,149 (equivalent to $8,020 as at 31 December 2011) to be paid in one month period on the ground that the stated amount is recorded as receivable from the Company in the accounting records of Telsim, which is taken over by SDIF. On 20 September 2007, the Company filed a lawsuit for the injunction and cancellation of the SDIF’s request. Council of State accepted the injunction request of the Company. On 19 January 2010, the Court accepted the Company’s claim and cancelled the aforementioned request of SDIF. SDIF appealed the decision. Appeal process is still pending.

196 SDIF issued payment orders for the aforementioned amount and, on 19 October 2007, the Company initiated a lawsuit for the cancellation of the payment request of SDIF. On 29 March 2010, the Court decided on the cancellation of the payment order. SDIF appealed such decision. The appeal process is pending.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is uncertain, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None). Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on the Discounts which are paid over the Treasury Share and ICTA Fee

At the end of 2006, Tax Auditors of the Company claimed that gross revenue in the statutory accounts should include discounts granted to distributors although the Company recorded these discounts in a separate line item as sales discounts.

Starting from 1 January 2007, the Company started to deduct discounts granted to distributors from gross revenue and present them on a net basis. Accordingly, the Company decided that, it has paid excess treasury share and universal service fund for the year 2006 totaling TL 51,254 (equivalent to $27,134 as at 31 December 2011).

Through the letter dated 23 February 2007, the Company requested treasury share amounting to TL 46,129 (equivalent to $24,421 as at 31 December 2011) and interest accrued amounting to TL 5,020 (equivalent to $2,658 as at 31 December 2011) from Turkish Treasury and universal service fund amounting to TL 5,125 (equivalent to $2,713 as at 31 December 2011) and interest accrued amounting to TL 558 (equivalent to $295 as at 31 December 2011) from Turkish Ministry to be paid in 10 days. Since Turkish Treasury and Turkish Ministry have not made any payment, the Company started to deduct these amounts from ongoing monthly payments. As at 31 December 2007, the Company deducted TL 51,254 (equivalent to $27,134 as at 31 December 2011) from monthly treasury share and universal service fund payments.

Turkish Treasury sent a letter to the Company dated 17 July 2007 and objected the deduction of the discounts granted to the distributors from the treasury share payments. Accordingly, the Company is asked to return TL 2,960 (equivalent to $1,567 as at 31 December 2011) that is deducted from treasury share payment for May 2007. The Company has not made the related payment and continued to deduct such discounts treasury share and universal service fee amount related to discounts granted to distributors for the year 2006. 197

Management believes that the Company has the legal right to make deductions with respect to this issue. Accordingly, the Company has not recorded any provisions with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

The Company filed two lawsuits before ICC claiming that the Company is not obliged to pay treasury share and ICTA Fee in accordance with the th8 and 9th Articles of the Concession Agreement, respectively, on discounts granted to distributors. On the both lawsuits, ICC has decided in favor of the Company. As stated in both of the Final Awards, the Company is not under obligation of paying Treasury Share and the Contribution to the expenses of Authority pursuant to Article of 8 and 9 of the Concession Agreement dated March 10, 2006. ICTA filed lawsuits for cancellation of these Final Awards. In both lawsuits, the Court decided in favor of the Company. ICTA appealed the decisions. The Company replied appeal requests. Appeal processes are still pending. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on payments of additional treasury share payment for the period between 1 June 2004 and 9 March 2006

Turkish Treasury, through a letter which is based on the Report of the Treasury Controller’s Board following the examinations covering the period between 1 June 2004 and 9 March 2006, requested additional treasury share payment regarding the mentioned period. The Company initiated a lawsuit before ICC on 18 December 2009 in order to obtain a declaratory judgment on the Company is not obliged to pay TL 3,320 (equivalent to $1,758 as at 31 December 2011) of the requested amount and treasury share over the exchange differences arising from roaming revenue. The arbitral tribunal partially accepted the Company’sclaims and decided that the Company is not obliged to pay TL 885.

ICTA, through a letter dated 14 May 2010 which is based on the Report of the Treasury Controller’s Board following the examinations covering the period between 1 June 2004 to 9 March 2006, requested additional treasury share payment of TL 4,909 (equivalent to $2,599 as at 31 December 2011) together with the penalty of TL 12,171 (equivalent to $6,443 as at 31 December 2011) on the ground that the treasury share and treasury share over the exchange differences arising from roaming revenue are not paid entirely.

On 26 May 2010, the Company, in order to provide the suspension of the payment, requested a preliminary injunction from the Civil Court of First Instance based on the grounds that the payment of additional treasury share payment of TL 4,909 (equivalent to $2,599 as at 31 December 2011) together with the penalty of TL 12,171 (equivalent to $6,443 as at 31 December 2011) is a pending case before ICC Arbitration Court. The Civil Court of First Instance accepted the Company’s request. ICTA raised an objection to the preliminary injunction and this objection has been rejected.

The Company filed a lawsuit before ICC on 27 January 2012 claiming the contradiction to law of the penalty of TL 12,171 (equivalent to $6,443 as at 31 198 December 2011) calculated over allegedly unpaid TL 4,909 (equivalent to $2,599 as at 31 December 2011) treasury share. The lawsuit is still pending.

ICTA, through a letter dated 19 October 2010 which is based on the Report of the Treasury Controller’s Board following the examinations covering the period between 10 March 2006 and 31 December 2008, requested treasury share of TL 72,527 (equivalent to $38,396 as at 31 December 2011) and conventional penalty of TL 205,594 (equivalent to $108,843 as at 31 December 2011). The Company paid TL 1,535 (equivalent to $813 as at 31 December 2011) of the aforementioned amount.

On 13 December 2010, the Company, in order to provide the suspension of the payment, requested a preliminary injunction from the Civil Court of First Instance based on the grounds that the payment of treasury share of TL 70,992 (equivalent to $37,584 as at 31 December 2011) and conventional penalty of TL 205,594 (equivalent to $108,843 as at 31 December 2011) is a pending case before ICC Arbitration Court. The Court accepted the Company’s request. ICTA’s objection against the decision has been rejected.

The Company filed a lawsuit before ICC on 12 January 2011 regarding the part of treasury share which is not covered in the lawsuits previously finalized in favor of the Company and the conventional penalty of TL 205,594 (equivalent to $108,843 as at 31 December 2011). The lawsuit is still pending. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on treasury share amounts which are absorbed due to retrospective board decisions taken by ICTA

In consequence of collection of treasury share from the Company without considering its payments to the other operators and some subscribers due to the retrospective procedure amendments of ICTA on both interconnection fees and some tariffs; the Company commenced a lawsuit on 5 August 2010 before ICC on the ground that treasury share which collected from diminishing returns are unlawful and deductions committed by the Company between the years 2006 - 2010 from the treasury share are rightful and claimed payment of TL 1,600 (equivalent to $847 as at 31 December 2011) and its interest to the overpayment amount which is paid under the name of treasury share, against ICTA due to its administrative act leading to this case and against Turkish Treasury and Ministry of Transport, Maritime Affairs and Communications due to making benefit from aforementioned amount. ICC decided in favor of the Company in March 2012.

Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements prepared as at and for the year ended 31 December 2011 (31 December 2010: None).

Dispute with the Ministry of Industry and Trade

Ministry of Industry and Trade notified the Company that the Company is not informing the subscribers properly before service subscriptions and content sales and charged administrative fine of TL 68,201 (equivalent to $36,106 as at 31 December 2011). On 24 August 2009, the Company initiated a lawsuit for the cancellation of the payment order and related decision of the Ministry of Industry and Trade. The Court rejected the Company’s injunction request. The Court cancelled the payment order on 8 June 2010. Ministry of Industry and Trade appealed the decision. Appeal process is still pending. 199 On 14 December 2009, the Company filed a lawsuit for the injunction and cancellation of the payment order of TL 68,201 (equivalent to $36,106 as at 31 December 2011) with respect to the decision of Ministry of Industry and Trade. The Court decided to accept the case. Tax Administration appealed the decision. Appeal process is still pending.

Penalty of ICTA on Value Added Services

On 1 March 2010, ICTA decided to initiate an investigation against the Company upon administrative fine of 31,822 TL (equivalent to $16,847 as at 31 December 2011) is revoked by the Ministry of Industry and Trade on the ground that the Company did not refund the subscribers who are unsubscribed in the period and did not demand content and this is contrary to the article 11/A of the law numbered 4077. The investigation report has been sent to the Company and the Company has submitted its written defense to ICTA.

On 13 January 2011, ICTA decided to apply administrative fine of TL 748 (equivalent to $396 as at 31 December 2011). Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and payment amounting to TL 561 (equivalent to $297 as at 31 December 2011) was made on 17 February 2011. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute of Astelit with its Distributor

Astelit and one of its distributors had an agreement for the sale of Astelit’s inventory to third parties. Under this agreement, the sale of products had to be performed within 30 days after delivery and proceeds from such sale had to be transferred to Astelit excluding commissions due to the distributor for performing the assignment. At a certain stage of the relationship under this agreement, the distributor began to violate its obligations for indebtedness for received, due but unpaid products.

Despite the distributor is factually a debtor under the agreement, the distributor filed a lawsuit against Astelit on recovery of HRV 106,443 (equivalent to $13,322 as at 31 December 2011), which is allegedly the sum of advance payment for undelivered goods. In the course of court proceedings, Astelit made a counterclaim on recovery of indebtedness in the amount of HRV 35,292 (equivalent to $4,417 as at 31 December 2011).

As a result of consideration of two claims, the Court of First Instance in Kiev dismissed the claim of the distributor and sustained the counterclaim of Astelit. Subsequently, The Kiev Economic Court of Appeal repealed the decision of the Court of First Instance and dismissed the claim of Astelit and sustained the claim of the distributor on recovery of HRV 106,443 (equivalent to $13,322 as at 31 December 2011). The resolution of The Higher Economic Court of Ukraine dated 20 October 2009 remained unaltered the appellate court’s ruling. Thereafter, Astelit management has filed a lawsuit against this conclusion in the Supreme Court of Ukraine, which is the supreme and final degree of jurisdiction against the resolution of the Higher Economic Court of Ukraine.

In December 2009 the Supreme Court of Ukraine has revoked the previous court decisions and forwarded the court file to the Court of First Instance in Kiev to other judges for new legal proceedings. New legal proceedings started in February 2010. It was decided by the court to conduct judicial expertise by specially 200 authorized Kiev research institute of judicial expertise in order to define real indebtedness. After the expertise the court of first instance made the decision in favor of Astelit. The court decision was appealed to Appeal Court by the distributor. Appeal proceeding was appointed on 1 November 2011. Kiev Appeal Court upheld the above judgment on 24 November 2011. Thus the decision became effective. One of the banks in Ukraine (as a third party in the case) filed a cassation to Higher Economic Court of Ukraine. Having filed the cassation, the bank used its right to prevent any possible negative consequences to it, as former Guarantor and Creditor to the distributor of Astelit. On 26 March 2012, Higher Economic Court of Ukraine affirmed the previous court decisions. The distributor or the bank has a right to appeal court decision to Supreme Court of Ukraine.

Management believes that such conclusion of the courts has proper legal basis. Accordingly, the Company has not recorded any accruals with respect to this matter in its consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

Dispute of Astelit related to Withholding Tax on Interest Expense

Ukrainian Tax Administration sent a tax notice to Astelit stating that withholding tax rate on interest expense for the loan agreement with Euroasia should be 10% for the year 2009. According to Ukrainian legislation and Convention on avoiding double taxation, Astelit paid withholding tax at 2%. Astelit filed the suit to cancel tax notice, which imposed Astelit to pay additional HRV 11,651 (equivalent to $1,458 as at 31 December 2011). On 10 March 2011, Kiev Appeal Administrative Court has upheld the decision of the Administrative Court of First Instance which decided in favor of Astelit on 30 November 2010. Ukrainian Tax Administration appealed the case. The date of hearing in Supreme Administrative Court has not been appointed yet.

Based on the management opinion, provision amounting to $2,702 is set for the risks belonging to years 2009 and 2010 in the consolidated financial statements as at and for the year ended 31 December 2011. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on VAT and SCT on Roaming Services

On 21 October 2009, based on the Tax Investigation Reports dated 2 October 2009, Presidency of Large Taxpayers Office, Audit Group Management notified the Company that VAT and SCT should be calculated on charges paid to international GSM operators for the calls initiated by the Company’s subscribers abroad and collect from the subscribers and requested TL 255,298 (equivalent to $135,157 as at 31 December 2011) for the period from April 2005 to July 2009, and for an interest to be calculated until the payment date. The Company filed a lawsuit for the cancellation of the aforementioned request. Based on the settlement between the Company and Ministry of Finance, the Company has withdrawn from the lawsuits.

As a result of the settlement made with Ministry of Finance Settlement Commission on 1 June 2010, penalty fee has been settled at TL 20,163 (equivalent to $10,674 as at 31 December 2011) and late payment interest expense was settled at TL 15,998 (equivalent to $8,469 as at 31 December 2011) and related payment was made on 27 July 2010.

Dispute on VAT and SCT regarding Shell & Turcas Petrol AS Campaign

The Company and Shell&Turcas Petrol A.S. signed an agreement on 27 November 2007 where eligible subscribers can get free counters and minutes from the Company or free oil from Shell&Turcas Petrol AS.

As a result of the tax investigation, Tax Controllers notified that VAT and special communication tax are not calculated over the free counters and minutes and imposed special communication tax amounting to TL 1,214 (equivalent to $643 as at 31 December 2011) and tax penalty of TL 1,822 (equivalent to $965 as at 31 December 2011) and VAT amounting to TL 874 (equivalent to $463 as at 31 December 2011) and tax penalty of TL 1,315 (equivalent to $696 as at 201 31 December 2011). On 16 September 2009, the Company filed lawsuits for the cancellation of the tax penalty. The court decided to accept the case. Tax Administration appealed the decisions. The appeal process is still pending.

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Lawsuit initiated by Mep Iletisim AS

On 31 December 2008, Mep Iletisim AS, which is former distributor of the Company and whose agreement is no longer valid, initiated a lawsuit against the Company claiming that it has a loss of TL 64,000 (equivalent to $33,882 as at 31 December 2011) due to the applications of the Company and requested TL 1,000 (equivalent to $529 as at 31 December 2011) and remaining amount to be reserved. An expert report from committee of experts appointed by the court has been submitted to the court. The Court decided to obtain a supplementary report from the same committee. The lawsuit is still pending.

Investigation of ICTA on the wrongful declarations of the Company and the Company’s refrain from signing the minutes

ICTA decided to initiate an investigation based on the reason that the information provided by the Company within the frame of another investigation of ICTA is inconsistent and wrong, the Company is not in a helpful approach regarding the conduction of the investigation and refraining from signing the minutes drafted by the Audit Committee of ICTA. Investigation report has been sent to the Company. The Company submitted its defense within the due time. In accordance with the decision of ICTA dated 10 February 2011, no penalty has been charged for the Company.

Decisions of ICTA on tariff plans 202 On 15 November 2009, ICTA notified that the Company has changed the conditions of a tariff plan after the launch and shall reimburse overcharged amounts to the subscribers. On 1 February 2010, the Company initiated a lawsuit for stay of execution and the cancellation of the decision of ICTA. The Court rejected the Company’s stay of execution request. The Company objected to this decision. The Court rejected the objection request of the Company. The case is still pending.

Amount to be reimbursed to the subscribers is calculated as TL 15,660 (equivalent to $8,291 as at 31 December 2011) and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2009. Reimbursement to subscribers was made in January 2010.

On 17 May 2010, ICTA decided to impose TL 802 (equivalent to $425 as at 31 December 2011) administrative fine against the Company on the ground that one of the tariff option of the Company contradicts the board decision which sets lower limit to the on-net tariffs. The payment was made within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and TL 601 (equivalent to $318 as at 31 December 2011) as fine on 21 June 2010. Besides, the Company filed a lawsuit on 21 July 2010 in request for the cancellation of fine. The Court overruled the stay of execution request and the Company objected to this decision. The Court rejected the objection request of the Company. The Court rejected the lawsuit. The Company appealed the decision. The state of Council rejected the stay of execution request of the First Instance Court’s decision. The appeal process is still pending. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Decisions of ICTA on tariff plans (continued)

On 8 March 2010, ICTA informed the Company that an investigation took place on another tariff plan. As a result of the investigation, ICTA decided to apply administrative penalty amounted TL 26,483 (equivalent to $14,020 as at 31 December 2011) to the Company on 22 September 2010. Administrative fine was paid within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and TL 19,862 (equivalent to $10,515 as at 31 December 2011) is paid as a fine on 7 December 2010. The Company initiated a lawsuit to suspend the execution of administrative fine and cancellation, on 10 December 2010. The Court overruled the stay of execution request and the Company objected to this decision. On 17 February 2011, the Regional Ankara Administrative Court accepted the objection and decided to suspend the execution. ICTA reimbursed the paid amount on 30 March 2011. The lawsuit is still pending.

Amount to be reimbursed to the subscribers is calculated as TL 13,432 (equivalent to $7,111 as at 31 December 2011) for the year 2010 and deducted from revenues in the consolidated financial statements as at and for the year ended 31 December 2010. Reimbursement to subscribers was made in February 2011 amounting to TL 7,137 (equivalent to $3,778 as at 31 December 2011). As a result of the aforementioned court decision for the stay of execution dated 17 February 2011, the Company decided not to reimburse remaining TL 6,295 (equivalent to $3,333 as at 31 December 2011).

Decision of ICTA regarding telephone directory and unknown numbers service

On 7 July 2010, ICTA decided to fine the Company by TL 401 (equivalent to $212 as at 31 December 2011) and transfer back all kinds of software, hardware, infrastructure and equipment which make available the telephone directory and unknown numbers service to the ownership of the Company from its wholly owned subsidiary on the ground that ownership of the whole system related to telephone directory and unknown number service is not pertain to the 203 Company. Administrative fine was paid within 1 month following the notification of the decision of ICTA. Therefore, 25% discount was applied and TL 301 (equivalent to $159 as at 31 December 2011) as fine on 7 September 2010.

The Company filed a lawsuit on 22 September 2010 for the stay of execution and cancellation of the administrative fine. The Court overruled the stay of execution request of the Company and the Company objected to this decision. The Court rejected the lawsuit. The Company appealed the decision. The State of Council rejected the stay of execution request of the First Instance Court’s decision. The appeal process is still pending.

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute regarding the Fine Applied by the Competition Board regarding applications to the distributors

On 11 November 2009, Competition Board decided to initiate an investigation against the Company on the ground that the Company, through its applications to its distributors, violates the related clauses of the Competition Act numbered 4054. Within the context of the investigation, the Company submitted its statement of defense. The investigation took place as an on-site examination and inspection in March 2010. The Competition Board decided to examine the claims of Vodafone regarding this investigation within the context of this file. Besides, the Company’s action concerning abuse of dominant position in the wholesale or retail market of simcard, unit card, digital unit, activation and other subscriber services by obstructing the activity of Avea is examined in the context of this investigation and Avea is accepted as a complainant. Investigation report is submitted to the Company in August 2010 and the Company submitted its defense statement to the Board. Additional Written Opinion is submitted to the Company in February 2011 and the Company submitted its written defense to Additional Written Opinion within the due date. The Company submitted its verbal defense to Competition Board on 31 May 2011.

On 9 June 2011 Competition Board clarified its decision that the Company violates competition rules in GSM market and fined the Company amounting to TL 91,942 (equivalent to $48,675 as at 31 December 2011). On 8 December 2011, the Company filed a lawsuit for annulment of the decision. On 9 March 2012, payment order has been sent to the Company by the Tax Office. The Company filed a lawsuit for cancellation of the payment order. The Court accepted the Company’s stay of execution request until the Tax Office’s legal argument is submitted to the court.

Pamuk Elektronik, a former dealer of the Company whose contract have been terminated, initiated a lawsuit against the Company on 19 December 2011 claiming TL 2,100 (equivalent to $1,112 as at 31 December 2011) by reserving its rights for surpluses on the ground that the Company caused that damage 204 by unjust termination of the contract and actions which are stated in the Competition Board decision in which the Board imposed TL 91,942 (equivalent to $48,675 as at 31 December 2011) administrative fine to the Company. The Company replied in due time.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle both of the obligations are less than probable, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

Investigation of ICTA based on the complaint of a subscriber

ICTA decided to initiate an investigation through its decision dated 12 May 2010 based on the complaint of Ozalp Insaat Pazarlama Tic. Ltd. Sti., and requested certain information and documents from the Company. The Company provided its response related to the matter to ICTA. Investigation report is notified to the Company and the Company has submitted its defense statement to ICTA within the due date.

On 13 January 2011, ICTA decided to impose administrative fine to the Company amounting to TL 8,016 (equivalent to $4,244 as at 31 December 2011) for making some subscribers suffer and TL 2,004 (equivalent to $1,061 as at 31 December 2011) for misinforming the Authority. Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and payment totaling to TL 7,515 (equivalent to $3,979 as at 31 December 2011) is made on 17 February 2011. The Company filed two lawsuits on 14 March 2011 for the stay of execution and cancellation of the administrative fine. The stay of execution requests have been rejected in the lawsuits. The Company objected to the decisions. The objections were rejected. The cases are still pending.

Dispute regarding the Fine Applied by ICTA regarding breaching confidentiality of personal data and relevant legislation which is launched by ICTA

ICTA decided to launch preliminary investigation on breaching confidentiality of personal data and relevant legislation, within the context of the news in the press regarding unlawful wiretapping. ICTA authorities made an on-site inspection in July 2010. On 22 September 2010, ICTA decided to launch an investigation against the Company for detailed examination of the matter. Information and documents demanded by ICTA were submitted to the ICTA. In January 2011, investigation report was sent to the Company. The Company submitted its written defense within the due date. ICTA, with its decision which was delivered to the Company on 6 June 2011, decided to impose an administrative fine to the Company amounting to TL 11,225 (equivalent to $5,943 as at 31 December 2011). Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and TL 8,418 (equivalent to $4,457 as at 31 December 2011) was paid on 5 July 2011. On 24 August 2011, the Company filed a lawsuit for the annulment of the decision with stay of execution request. The stay of execution request and the Company’s objection to this decision has been rejected. The case is still pending. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute on treasury share in accordance with the amended license agreement

Based on the law enacted on 3 July 2005 with respect to the regulation of privatization, gross revenue description used for the calculation of treasury share has been changed. According to this new regulation, accrued interest charges for the late payments, taxes such as indirect taxes, and accrued revenues are excluded from the description of gross revenue. Calculation method of gross revenue for treasury share stipulated in the law according to the new regulation shall be valid as of the application date of the Company with the claim of amendment of its license agreement in compliance with the said Law. In the meanwhile, the Company realized the payments including above-mentioned items between 21 July 2005 and 10 March 2006, when the amendment in license agreement was effective.

On 9 June 2008, the Company filed a lawsuit before Administrative Court for the difference between the aforementioned period amounting to TL 102,649 (equivalent to $54,343 as at 31 December 2011) and interest amounting to TL 68,276 (equivalent to $36,146 as at 31 December 2011) till to the date the case is filed. The Administrative Court rejected the case and the Company appealed the decision. The appeal process is still pending.

Based on the 9th article of the license agreement dated 10 March 2006, the Company has been obliged to pay 0.35% of its yearly gross revenue once a year as ICTA Fee. However, in the previous license agreement, the Company was obliged to pay 0.35% of its yearly gross revenue after deducting treasury share, universal service fund and other indirect taxes from the calculation base whereas in the new agreement, these aforementioned payments are not deducted from the base of the calculation. Therefore, on 12 April 2006, the Company has initiated a lawsuit for the cancellation of the 9th article of the new license 205 agreement. On 10 March 2009, the Court rejected the case. The Company appealed the decision. Appeal process is still pending.

Dispute on ICTA fee payment based on the amended license agreement

On 21 June 2006, ICTA notified the Company that the ICTA fee for the year 2005 which had been already paid in April 2006 should have been calculated according to the new license agreement dated 10 March 2006 instead of the previous license agreement which was effective in the year 2005. Therefore, ICTA requested the Company to pay additional TL 4,011 (equivalent to $2,123 as at 31 December 2011) and its accrued interest. The Company made the payment and initiated a lawsuit for the injunction and cancellation of the aforesaid decision of ICTA on 28 August 2006. On 24 July 2009, the Court decided in favor of the Company and annulled additional payment request of ICTA. The ICTA appealed the decision. Appeal process is still pending. The Company received the related principal amount of TL 4,011 (equivalent to $2,123 as at 31 December 2011) on 8 February 2010 and recorded income in the consolidated financial statements as at and for the year ended 31 December 2009. On 17 March 2010, the Company initiated a lawsuit for the accrued interest amounting to TL 3,942 (equivalent to $2,087 as at 31 December 2011). The Court decided in favor of the Company for the part of TL 1,392 (equivalent to $737 as at 31 December 2011) of the compensation request. ICTA appealed the decision. The Company also appealed the decision’s rejected part. The appeal process is still pending. The Company received the aforementioned amount on 18 May 2011 and recorded as income in the consolidated financial statements as at and for the year ended 31 December 2011.

Since it is not virtually certain that an inflow of additional economic benefits will arise concerning the accrued interests, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None). TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Penalty issued to Turkcell Superonline regarding trenching activities

On 13 January 2011 and 28 October 2011 Ankara Municipality issued penalties of TL 8,863 (equivalent to $4,692 as at 31 December 2011) and TL 235 (equivalent to $124 as at 31 December 2011) to Turkcell Superonline related to trenching activities. The penalty issued on 13 January 2011 is related to four transactions.

Turkcell Superonline filed a lawsuit against Ankara Municipality in order to cancel penalties. Request of Turkcell Superonline regarding execution of suspension was rejected. Turkcell Superonline objected the decision. The objections related to penalties of two transactions which were issued on 13 January 2011 amounting to TL 251 (equivalent to $133 as at 31 December 2011) and TL 514 (equivalent to $272 as at 31 December 2011) has been rejected by Ankara Administrative Court. Regional Administrative Court has not decided on the objections related to penalties of other two transactions which were issued on 13 January 2011 amounting to TL 5,766 (equivalent to $3,053 as at 31 December 2011) and TL 2,332 (equivalent to $1,236 as at 31 December 2011). In addition, Turkcell Superonline filed a lawsuit against Ankara Municipality in order to cancel penalty which was issued on 28 October 2011 amounting to TL 235 (equivalent to $124 as at 31 December 2011); request of Turkcell Superonline regarding execution of suspension was rejected. Ankara Municipality has not sent payment orders for the penalties yet.

Based on the management opinion, the probability of an outflow of resources embodying economic benefits to settle the obligation is less than probable, thus, no provision is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

Order of Payment Notified to Turkcell Superonline According to Universal Service Fund 206 On 24 October 2011, Beykoz Tax Administration notified Turkcell Superonline with an order of payment amounting to TL 1,192 (equivalent to $631 as at 31 December 2011) for insufficient payments made by Superonline Uluslararasi for universal service fund related to years of 2005, 2006, 2007 and 2008. Four legal cases have been filed as of 31 October 2011 to revoke payment orders. Based on the management decision, TL 1,203 (equivalent to $637 as at 31 December 2011) was paid on 7 December 2011 with its accumulated interest. On 21 December 2011, based on the scope of Share Purchase Agreement, Turkcell Superonline sent a notice in order to receive payment from Demir Toprak İth.İhr. ve Tic. AS, Sınai ve Mali Yatrımlar Holding AS and Endüstri Holding AS. No payment has been received as of 31 December 2011.

Said payment shall be reimbursed in case of execution of suspension or the Court’s decision in favor of Turkcell Superonline. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute with Avea on SMS interconnection termination fees

On 22 December 2006, Avea initiated a lawsuit against the Company claiming that although there was an agreement between the Company and Avea stating that both parties would not charge any SMS interconnection termination fees, the Company has charged SMS interconnection fees for the messages terminating on its own network and also assumed liabilities for the SMS terminating on Avea’s network and made interconnection payments to Avea after deducting the net balance of those SMS charges and accruals. Avea requested provisions of Interconnection Agreement regarding SMS pricing to be applied and requested collection of its losses amounting to nominal amount of TL 6,480 (equivalent to $3,431 as at 31 December 2011) for the period between January 2006 and August 2006 with its accrued interest till payment. On 25 November 2008, the Court decided in favor of Avea. The Company has appealed the decision. Supreme Court of Appeal reversed the judgment of the Local Court. The Company has applied for the correction in terms of justification of the decision for the Supreme Court’s reversal decision. Avea has also applied for the correction of the decision. Supreme Court rejected the request for correction of the decision of Avea, and partially accepted the Company’s demand. On 13 December 2011, the Local Court decided to accept the lawsuit again. The Company appealed the decision.

The Company has paid the principal of TL 6,480 (equivalent to $3,431 as at 31 December 2011), late payment interest of TL 5,103 (equivalent to $2,702 as at 31 December 2011) and related fees of TL 524 (equivalent to $277 as at 31 December 2011) on 30 March 2009.

In line with the court decision stating that charging SMS interconnection termination fees violates the agreement between the Company and Avea, neither SMS interconnection revenue nor SMS interconnection expense has been recognized from February 2005 to 23 March 2007.

Moreover, the Company applied to ICTA for the determination SMS interconnection termination fees and starting from 23 March 2007, the Company has 207 applied the SMS interconnection termination fees announced by ICTA until January 2009. ICTA determined new SMS termination rate in January 2009 upon the application of Avea.

Dispute with T-Medya

Arbitration procedures regarding three real estates which are in the ownership of the Company in Izmir, Adana and Ankara, are commenced with the letter dated 13 August 2010 against T-Medya who is the lessee of the real estates and delinquent for the period between 2003-2010 rental period, to collect the unpaid rentals and its accrued interest in the amount of TL 8,914 (equivalent to $4,719 as at 31 December 2011). The arbitration processes are still pending. The arbitral tribunal decided to extend arbitration process until 8 October 2012.

A bad debt reserve for the receivable amount of 7,520 TL (equivalent to $3,981 as at 31 December 2011) for T-Medya has been recognized in the financial statements of the Company as at and for the year ended 31 December 2011 in accordance with the bad debt policy of the Company.

Investigation initiated by ICTA upon a complaint of subscriber on international roaming campaigns

On 30 December 2010, ICTA launched an investigation upon a complaint of a consumer regarding the Company’s billing and pricing practices. ICTA looks over the pricing and billing problems stem from the international roaming campaigns within 2009 and 2010. ICTA requested information about the campaigns and the Company submitted its explanations on the issue to ICTA.

On 5 July 2011, Investigation Report is submitted to the Company. The Company submitted its defense statement to ICTA within the due date.

ICTA notified the Company on 26 January 2012, to impose an administrative fine amounting to TL 6,847 (equivalent to $3,625 as at 31 December 2011). Since the administrative fine was paid on 24 February 2012 within 1 month following the notification of the decision of ICTA, 25% discount was applied. Provision totaling to TL 5,135 (equivalent to $2,719 as at 31 December 2011) was recognized in the consolidated financial statements as at and for the year ended 31 December 2011. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Investigation initiated by ICTA regarding Number Portability

On 26 January 2011, ICTA opened an investigation regarding “rejection of number portability requests” and “compatibility of reasons to those rejections with Number Portability Regulation”. On 23 May 2011, Investigation Report is submitted to the Company. The Company submitted its defense statement to ICTA within due the date.

On 27 October 2011, ICTA decided to impose administrative fine to the Company amounting to TL 981 (equivalent to $519 as at 31 December 2011) for acting incompatibility to the “rejection of number portability requests” and TL 2,004 (equivalent to $1,061 as at 31 December 2011) for giving false information the Authority. Since the administrative fine was paid on 25 January 2012 within 1 month following the notification of the decision of ICTA, 25% discount was applied. Provision amounting to TL 2,221 (equivalent to $1,176 as at 31 December 2011) was recognized in the consolidated financial statements as at and for the year ended 31 December 2011.

Investigation initiated by ICTA upon complaint of subscriber of data tariffs’ charging

On 9 March 2011, ICTA opened an investigation upon a complaint of a consumer regarding the Company’s miss charging of data tariffs. On 6 June 2011, Investigation Report is submitted to the Company. The Company submitted its defense statement to ICTA within the due date.

ICTA notified the Company on 3 October 2011, to impose an administrative fine amounting to TL 1,645 (equivalent to $871 as at 31 December 2011). Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount was applied and payment totaling to TL 1,234 208 (equivalent to $653 as at 31 December 2011) was made on 1 November 2011. The Company filed a lawsuit on 2 December 2011 for the stay of execution and cancellation of the administrative fine. The stay of execution request has been rejected. The Company objected to the decision.

Investigation initiated by ICTA regarding the Company’s compatibility to ICTA’s regulations and decisions

On 17 February 2011, ICTA opened an investigation on compatibility of the Company to the regulation: “Terms and Conditions on Updating Subscribers Records and Subscription Processes of End Users”, and ICTA’s decision on limitation of number of subscriptions, dated 27 October 2009. On 23 March 2011, ICTA carried out an inspection in the Company. On 26 September 2011, Investigation Report is submitted to the Company. The Company submitted its defense statement to ICTA within the due date. According to the decision taken by ICTA on 21 March 2012, the Company was fined a total amount of TL 8,173 (equivalent to $4,327 as at 31 December 2011) for not complying with afore mentioned and relevant regulations.

Investigation of ICTA on the implementation of article 18 of “By-law on Consumer Rights in the Electronic Communications Sector”

On 22 February 2011, ICTA decided to investigate compatibility of Company’s practices regarding the “cancellation procedure” which is regulated at article 18 of the By-law on Consumer Rights in the Electronic Communications Sector. Investigation Report is submitted to the Company and the Company submitted its defense statement to ICTA within the due date.

ICTA, with its decision which was notified to the Company on 19 August 2011, decided to impose an administrative fine amounting to TL 11,442 (equivalent to $6,057 as at 31 December 2011). Since the administrative fine paid within 1 month following the notification of the decision of ICTA, 25% discount applied and TL 8,581 (equivalent to $4,543 as at 31 December 2011) is paid in total on 15 September 2011. On 18 October 2011, the Company filed a lawsuit for the annulment of the decision with stay of execution request. The case is still pending.

Investigation of ICTA regarding access failures on emergency call services

On 16 June 2011, ICTA decided to initiate an investigation in order to evaluate the Company’s access failures realized on emergency call services which are deemed as critically important for end-users. Investigation Report is submitted to the Company on 28 December 2011 and the Company submitted its defense statement to ICTA within the due date. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Investigation of ICTA regarding 3G advertisements

On 7 July 2011, ICTA decided to initiate an investigation in order to evaluate whether 3G related advertisements of the Company violates ICTA’s decision prohibiting GSM operators not to make comparative 3G advertisement. On 16 August 2011, Investigation Report is submitted to the Company. The Company submitted its defense statement to ICTA within the due date.

On 27 October 2011, ICTA decided to impose administrative fine to the Company amounting to TL 106 (equivalent to $56 as at 31 December 2011) for violating ICTA’s decision prohibiting GSM operators not to make comparative 3G advertisement. Since the administrative fine was paid within 1 month following the notification of the decision of ICTA, 25% discount applied and TL 80 (equivalent to $42 as at 31 December 2011) was paid on 20 December 2011.

Investigation of ICTA regarding “Atlas of Places Only Turkcell Covers” distributed with Tempo magazine

On 2 November 2011, ICTA decided to initiate an investigation regarding “Atlas of Places Only Turkcell Covers” which locations marked on the map of Turkey with “only” Turkcell coverage. ICTA decided to evaluate the advertisement whether the public and consumers are being misinformed or not.

Dispute with Turk Telekom with respect to numbers beginning with 444

The Company filed a lawsuit on 25 April 2008 against Turk Telekom to collect TL 1,777 (equivalent to $941 as at 31 December 2011) including principal, overdue interest and delay fee which has been collected by Turk Telekom within the period of March 2007 - February 2008 by pricing the calls started from the Company’s network and terminated at the numbers in form of “444 XX XX” which are assigned to the Company’s subscribers in accordance with special 209 service call termination tariff. The Court decided in favor of the Company on 23 March 2011. Turk Telekom appealed the decision and the Company replied the appeal request. Appeal process is pending.

The Company filed an enforcement proceeding on 12 May 2011 against Turk Telekom to collect TL 11,511 (equivalent to $6,094 as at 31 December 2011) including principal amounting to TL 8,024 (equivalent of $4,248), overdue interest amounting to TL 2,343 (equivalent of $1,240 as at 31 December 2011) and late payment fee amounting to TL 1,144 (equivalent to $606 as at 31 December 2011) which has been collected by Turk Telekom within the period of March 2008 - March 2010 by pricing the calls started from the Company’s network and terminated at the numbers in form of “444 XX XX” which are assigned to the Company’s subscribers in accordance with special service call termination tariff. Turk Telekom objected the enforcement proceeding and the enforcement proceeding has been held. The Company filed a lawsuit for cancellation of objection on 13 September 2011 against Turk Telekom. The case is still pending.

Turk Telekom, filed thirteen enforcement proceedings to collect the total amount of TL 31,682 (equivalent to $15,900 as at 31 December 2011) composed of principle, overdue interest and delay fee which was unpaid by the Company because of the overly accrue by Turk Telekom for the calls terminated at the numbers in form of “444 XX XX” and videocall, data reconciliation and 118-32 service invoice costs for periods of April 2010-November 2011. The Company objected the enforcement proceedings. Turk Telekom filed six nullity of objection lawsuits for the six enforcement proceedings which were initiated for the period April 2010-April 2011, claiming the total amount of TL 17,752 (equivalent to $9,398 as at 31 December 2011) composed of principle, overdue interest and delay fee with enforcement proceeding denial compensation which is 40% of the receivable balance. The lawsuits are still pending.

On 7 December 2011, Turk Telekom initiated a lawsuit on the ground that the Company did not direct the calls in form of “444 XX XX” to Turk Telekom and terminated at its own network and requested TL 1,000 (equivalent to $529 as at 31 December 2011) monetary compensation by reserving its right for surpluses. The lawsuit is pending. TURKCELL ANNUAL REPORT 2011

33. Commitments and Contingencies (continued)

Legal Proceedings (continued)

Dispute with Turk Telekom with respect to Volume-Based Discount Agreement

The Company and Turk Telekom have signed the “Volume-Based Discount Promotion for User with Low-Use Commitment Agreement”. However, Turk Telekom did not apply the discount for the period between January-April 2011. The Company filed a lawsuit on 23 February 2012 to collect TL 4,530 (equivalent to $2,398 as at 31 December 2011) including principal, overdue interest and delay fee which has been overly collected by Turk Telekom within the period of January-April 2011 in contravention of the rules of “Volume-Based Discount Promotion for User with Low-Use Commitment Agreement”. The case is still pending.

Dispute with MTN

In 2004, the Company was awarded Iran’s first private GSM license through an international tender. Subsequently the Company was barred from concluding its license arrangement, and Iran entered into a license agreement with the South Africa based operator MTN, instead of the Company. With respect to newly received information by the Company indicating that the signing of the license agreement with MTN instead of the Company was a consequence of MTN’s actions at that time. In light of the harm caused by MTN’s actions to both the Company and to its shareholders, the Company filed a lawsuit against MTN on 28 March 2012 seeking the compensation of such damages.

210 Considering extensive business dealings of both companies in the United States and due to the allegations that MTN breached rules of international law, the lawsuit has been filed in United States District Court for the District of Columbia.

Dispute with ICTA regarding annual radio utilization fees

The Company is obliged, in the name of ICTA, to collect from the subscribers for their radio devices, the radio license and annual utilization fee that should be paid to the ICTA by the subscribers and to transfer such amount to the ICTA. The Company collects annual utilization fee from its postpaid subscribers by the invoices prepared for telecommunication services served to these subscribers. The Company is not obliged to pay treasury share over such amounts. In this context, the Company executed the Protocols dated 21 May 1998 and 19 February 2001 with the (abrogated) Radio General Directorate and the Proto- col dated 8 June 2010 with the Authority, which amends the preceding Protocols. The Protocols set forth the principles and procedures for the collection of the radio license and annual utilization fees.

For the Company’s postpaid and prepaid subscribers, collection method of the annual utilization fee differs for postpaid and prepaid subscribers. The radio annual utilization fees paid to the Authority on behalf of the postpaid subscribers are collected from the postpaid subscribers by the monthly invoices and paid to the ICTA on a monthly basis. On the other hand for prepaid subscribers, at the beginning of each year the ICTA calculates a total estimated radio annual utilization fee by multiplying the number of previous year’s prepaid subscribers by the relevant year’s fee per subscriber. The only way to collect such amounts from the prepaid subscribers is to deduct from the TL credits that have been purchased by the subscribers. However this cause unfair additional treasury share burden for the Company as the Company already pays treasury share over the TL credits purchased by the subscribers.

After correspondence with the ICTA the Company filed a lawsuit before ICC in April 2012, claiming that the Company is not obliged to pay treasury share and ICTA Fee in accordance with the 8th and 9th Articles of the Concession Agreement, respectively, on annual utilization fees deducted from the prepaid subscribers and return of overpaid TL 5,852 (equivalent to $3,098 as at 31 December 2011) treasury share. The lawsuit is still pending. Since it is not virtually certain that an inflow of economic benefits will arise, no asset or related income is recognized in the consolidated financial statements as at and for the year ended 31 December 2011 (31 December 2010: None).

34. Related parties

Transactions with key management personnel:

Key management personnel comprise the Group’s directors and key management executive officers.

As at 31 December 2011 and 2010, none of the Group’s directors and executive officers has outstanding personnel loans from the Group.

In addition to their salaries, the Group also provides non-cash benefits to directors and executive officers and contributes to a post-employment defined plan on their behalf. The Group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.

Total compensation provided to key management personnel is $14,353, $11,395 and $8,044 for the years ended 31 December 2011, 2010 and 2009, respectively.

The Company has agreements or protocols with several of its shareholders, consolidated subsidiaries and affiliates of the shareholders.

Other related party transactions:

31 December 31 December Due from related parties – long term 2011 2010 T-Medya 43 1,044

Receivables from T-Medya consists of receivables based on rent agreements, accrued interests for outstanding balance and unpaid building expenses. Long term due from related parties is shown net of allowance for doubtful debts amounting to $4,432 as at 31 December 2011 (31 December 2010: $5,897). 211 Due from related parties – short term 31 December 2011 31 December 2010 A-Tel 19,246 13,260 Digital Platform Teknoloji Hizmetleri AS (“Digital Platform”) 12,225 21,307 Megafon OJSC 1,728 531 KVK Teknoloji Urunleri AS (“KVK Teknoloji”) 1,246 8,212 Kyivstar GSM JSC (“Kyivstar”) 910 1,225 Vimpelcom OJSC (“Vimpelcom”) 495 126 System Capital Management (“SCM”) - 38,202 Other 7,365 6,034 43,215 88,897

Due from related parties short term is shown net of allowance for doubtful debts amounting to $63 as at 31 December 2011 (31 December 2010: $2,998). TURKCELL ANNUAL REPORT 2011

34. Related parties (continued)

Due to related parties – short term 31 December 2011 31 December 2010 Hobim Bilgi Islem Hizmetleri AS (“Hobim”) 4,908 2,766 Intralot SA (“Intralot”) 1,946 910 KVK Teknoloji Urunleri AS (“KVK Teknoloji”) 482 909 Megafon OJSC 480 256 Mapfre Genel Yasam Sigorta AS (“Mapfre”) 227 473 Other 6,539 5,446 14,582 10,760

Substantially, majority of the significant due from related party balances is from Cukurova Group companies.

Due from A-Tel, a 50-50 joint venture of the Company and SDIF mainly, resulted from simcard and scratch card sales to this company.

Due from Digital Platform, an investment of Cukurova Group, mainly resulted from receivables from call center revenues as of 31 December 2011.

Due from Megafon, whose shares are owned by one of the shareholders of the Company, resulted from interconnection services.

Due from KVK Teknoloji, a company whose majority shares are owned by Cukurova Group, mainly resulted from simcard and scratch card sales to this company.

Due from Kyivstar, whose shares are owned by one of the shareholders of the Company, mainly resulted from call termination and international traffic carriage 212 services rendered to this company. Due from Vimpelcom, whose shares are owned by one of the shareholders of the Company, resulted from interconnection services.

Due from SCM, non-controlling shareholder of Euroasia, resulted from the loan that SCM utilized from Financell BV (“Financell”) with maturity of 31 December 2011.

Due to Hobim, a company whose majority shares are owned by Cukurova Group resulted from the invoice printing services rendered by this company.

Due to Intralot, a company incorporated under the laws of Greece and is the shareholder of Inteltek, a subsidiary of the Group. The Group purchases game software and maintenance services.

Due to KVK Teknoloji, a company whose majority shares are owned by Cukurova Group resulted from the payables for sales commissions and terminal purchases.

Due to Megafon, a company owned by one of the shareholders of the Group, resulted from interconnection services.

Due to Mapfre, a company owned by one of the shareholders of the Group, comprises of insurance services to the Group.

The Group’s exposure to currency risk related to due from / (due to) related parties is disclosed in Note 30. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

34. Related parties (continued)

Transactions with related parties

Intragroup transactions that have been eliminated are not recognized as related party transaction in the following table:

Revenues from related parties 2011 2010 2009 Sales to KVK Teknoloji Simcard and prepaid card sales 463,485 507,963 640,312 Sales to Kyivstar Telecommunications services 44,629 42,413 44,195 Sales to Digital Platform Call center revenues and interest charges 25,073 22,223 18,766 Sales to A-Tel Simcard and prepaid card sales 17,695 30,838 67,558 Sales to Millenicom Telekomunikasyon AS (“Millenicom”) Telecommunications services 2,949 2,979 5,497 Sales to Teliasonera International Telecommunications services 2,271 4,793 8,328 Sales to CJSC Ukrainian Radiosystems Telecommunications services 1,783 2,321 3,388 Finance income from SCM Interest income 2,564 14,863 5,213 213

Related party expenses 2011 2010 2009 Charges from Kyivstar Telecommunications services 34,238 36,039 53,466 Charges from A-Tel (*) Dealer activation fees and others 28,501 31,618 36,971 Charges from KVK Teknoloji Dealer activation fees and others 19,688 27,706 41,360 Charges from Hobim Invoicing and archieving services 23,581 19,446 21,985 Charges from Digital Platform Digital television broadcasting services 7,421 4,449 2,979 Charges from Teliasonera International Telecommunications services 6,182 9,162 12,261 Charges from Millenicom Telecommunications services 2,325 3,194 5,171 Charges from CJSC Ukrainian Radiosystems Telecommunications services 1,472 2,211 4,208 Charges from ADD Advertisement and sponsorship services 70 65,957 127,014

(*) Charges from A-Tel have been eliminated to the extent of the Company’s interest in A-Tel for the years ended 31 December 2011, 2010 and 2009 amounting to $28,501, $31,618 and $36,971, respectively. TURKCELL ANNUAL REPORT 2011

34. Related parties (continued)

Transactions with related parties (continued)

The significant agreements are as follows:

Agreements with KVK Teknoloji:

KVK Teknoloji, incorporated on 23 October 2002, one of the Company’s principal simcard distributors, is a Turkish company, which is affiliated with some of the Company’s shareholders. In addition to sales of simcards and scratch cards, the Company has entered into several agreements with KVK Teknoloji, in the form of advertisement support protocols, each lasting for different periods pursuant to which KVK Teknoloji must place advertisements for the Company’s services in newspapers. The objective of these agreements is to promote and increase handset sales with the Company’s prepaid and postpaid brand simcards, thereby supporting the protection of the Company’s market share in the prevailing market conditions. The prices of the contracts were determined according to the cost of advertising for KVK Teknoloji and the total advertisement benefit received, reflected in the Company’s market share in new subscriber acquisitions. Distributors’ campaign projects and market share also contributed to the budget allocation.

The amount of handset sales to the subscribers of the Company performed by KVK Teknoloji for the year ended 31 December 2011 is TL 350,554 (equivalent to $185,586 as at 31 December 2011) which is paid to KVK Teknoloji in advance in accordance with certain commitment arrangements and collected from the subscribers throughout the campaign period (31 December 2010: TL 180,922 (equivalent to $117,026 as at 31 December 2010)).

Agreements with Kyivstar:

Alfa Group, a minor shareholder of the Company, holds the majority shares of Kyivstar. Astelit is receiving call termination and international traffic carriage 214 services from Kyivstar.

Agreements with A-Tel:

A-Tel is involved in the marketing, selling and distributing the Company’s prepaid systems. A-Tel is a 50-50 joint venture of the Company and SDIF. A-Tel acts as the only dealer of the Company for Muhabbet Kart (a prepaid card), and receives dealer activation fees and simcard subsidies for the sale of Muhabbet Kart. In addition to the sales of simcards and scratch cards through an extensive network of newspaper kiosks located throughout Turkey, the Company has entered into several agreements with A-Tel for sales campaigns and subscriber activations.

Agreements with Digital Platform:

Digital Platform, a direct-to-home digital television service company under the Digiturk brand name, is a subsidiary of one of the Company’s principal shareholders, Cukurova Group. Digital Platform acquired the broadcasting rights for Turkish Super Football League by the tender held on 15 July 2004, until 31 May 2008 and the broadcasting rights were extended until 31 May 2010 with a new agreement dated 5 May 2005. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

34. Related parties (continued)

Transactions with related parties (continued)

Agreements with Digital Platform: (continued)

On 23 December 2005, “Restructuring Framework Agreement” and supplemental sponsorship agreements was signed between Digital Platform and the Company. Within the framework of the agreement, Digital Platform will pay its liabilities to Company including interest accrued partially in cash and partially by providing sponsorship services until 15 July 2011. On 4 June 2010, Digital Platform notified the Company to annul Lig TV sponsorship agreement, one of the supplemental agreements within the framework of “Restructuring Framework Agreement” and declared that Digital Platform will pay its debt to the Company only in cash according to the payment schedule in “Restructuring Framework Agreement”. With the protocol dated 31 January 2011, the agreement dated 23 December 2005 is cancelled with the mutual agreement of the parties. The remaining receivable balance from Digital Platform was paid in 2 equal installments in February 2011 and March 2011.

In addition to aforementioned agreements, the Company and Digital Platform signed a new agreement on 26 October 2011 regarding Digital Platform providing live content or clips related to Spor Toto Super League and other subjects to the Company to be delivered to mobile telephones and tablet pcs having SIM Card compatibility.

The Company also has an agreement for call center services provided by the Company’s subsidiary Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri AS (“Turkcell Global Bilgi”).

Agreements with SCM: SCM, non-controlling shareholder of Euroasia, obtained loan from Financell. 215

Agreements with Teliasonera International:

Teliasonera International is the mobile operator that provides telecommunication services in the Nordic and Baltic countries. Teliasonera International is rendering and receiving call termination and international traffic carriage services to and from the Astelit.

Agreements with Millenicom:

European Telecommunications Holding AG (“ETH”), a subsidiary of Cukurova Group, holds the majority shares of Millenicom. Millenicom is rendering and receiving call termination and international traffic carriage services to and from the Company.

Agreements with CJSC Ukrainian Radiosystem:

CJSC Ukrainian Radiosystems owned by Vimpelcom provides mobile communications services is rendering and receiving call termination and international traffic carriage services to and from the Astelit.

Agreements with ADD:

ADD, a media planning and marketing company, is a Turkish company owned by one of the Company’s principal shareholders, Cukurova Group. The Company was operating a media purchasing agreement with ADD, which was revised on 1 September 2009 and was effective until 31 August 2010. The purpose of this agreement was to benefit from the expertise and bargaining power of ADD against third parties, regarding the formation of media purchasing strategies for both postpaid and prepaid brands. However, the agreement was annulled effective from 2 August 2010 as a result of the notification dated 28 May 2010. TURKCELL ANNUAL REPORT 2011

34. Related parties (continued)

Transactions with related parties (continued)

Agreements with Hobim:

Hobim, one of the leading data processing and application service provider companies in Turkey, is owned by Cukurova Group. The Company has entered into invoice printing and archiving agreements with Hobim under which Hobim provides the Company with scratch card printing services, monthly invoice printing services, manages archiving of invoices and subscription documents for an indefinite period of time. Prices of the agreements are determined as per unit cost plus profit margin.

The amount of simcard purchases from Hobim for the year ended 31 December 2011 is $1,679 (31 December 2010: $1,420).

Legal restrictions on related party transactions

Conservatory attachments placed by SDIF against Cukurova Holding AS

As per the notification of the Besiktas Taxation Authority received on 13 May 2011, the Company has been informed that a decision of the provisional seizure has been taken due to the debts of Çukurova Holding A.Ş. to the taxation authority. Within this context, the provisional seizure in the amount of TL 1,249,926 (equivalent of $661,722 as at 31 December 2011) was applied to Cukurova Holding AS’s registered assets, rights and receivables pertaining to the Company (including attendance fee and dividend). With regards to the respective notification, provisional seizure had been recorded on the corresponding shares and receivables. However, on 12 April 2012, Besiktas Taxation Authority notified the Company that the seizure has been lifted. The Company will lift the provisional seizure accordingly. 216 As per the notification of the Large Taxpayers Office received on 16 May 2011, the Company had been informed that a provisional seizure in the amount of TL 450,000 (equivalent of $238,234 as at 31 December 2011) was applied to Çukurova Holding AS’s registered assets, rights and receivables pertaining to the Company (including attendance fee and dividend). With regards to the respective notification, provisional seizure had been recorded on the corresponding shares and receivables. On 6 April 2012, Large Taxpayers Office notified the Company that the debt repayment has been made. Therefore, the provisional seizure in the aforementioned amount will be lifted.

Conservatory attachments placed by Sonera Holding BV against Cukurova Holding AS in Holland

Sonera Holding B.V. placed a conservatory attachment on all the goods, amounts and receivables due to Cukurova Holding AS by the Dutch subsidiaries of the Company, in specific on any intercompany receivables that Cukurova Holding AS may have against these companies or which may arise in the future resulting from an existing legal relation, in order to secure and obtain payment from Cukurova Holding AS of an amount of $1,030,400, which refers to the claim amount of Sonera Holding B.V. against Cukurova Holding AS pursuant to the arbitral award rendered by the ICC International Court of Arbitration. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Notes To The Consolidated Financial Statements As at and for the year ended 31 December 2011 (Amounts expressed in thousands of US Dollars unless otherwise indicated except share amounts)

35. Group entities

The Group’s ultimate parent company is Turkcell. Subsidiaries of the Company as at 31 December 2011 and 2010 are as follows:

Effective Ownership Interest

Subsidiaries Country of 31 December 31 December Name Incorporation Business 2011 (%) 2010 (%) Turkish Republic of Northern Kibris Telekom Cyprus Telecommunications 100 100 Turkcell Global Bilgi * Turkey Customer relations management 100 100 Information technology, value added GSM Turktell Bilisim Servisleri AS Turkey services investments 100 100 Turkcell Superonline ** Turkey Telecommunications 100 100 Global Iletisim Hizmetleri AS (“Global Iletisim”)*** Turkey Telecommunications 100 - Turktell Uluslararasi Yatırım Holding AS Turkey Telecommunications investments 100 100 Turkcell Kurumsal Satıs ve Dagıtım Hizmetleri AS Turkey Telecommunications 100 100 Eastasia Netherlands Telecommunications investments 100 100 Turkcell Teknoloji Arastirma ve Gelistirme AS Turkey Research and Development 100 100 Kule Hizmet ve Isletmecilik AS Turkey Telecommunications infrastructure business 100 100 Sans Oyunlari Yatirim Holding AS Turkey Betting business investments 100 100 Financell Netherlands Financing business 100 100 Rehberlik Hizmetleri AS Turkey Telecommunications 100 100 217 Beltur BV**** Netherlands Telecommunications investments 100 100 Surtur BV Netherlands Telecommunications investments 100 100 Beltel Turkey Telecommunications investments 100 100 Turkcell Gayrimenkul Hizmetleri AS Turkey Property investments 100 100 Global LLC Ukraine Customer relations management 100 100 Global FLLC Republic of Belarus Customer relations management 100 100 UkrTower Ukraine Telecommunications infrastructure business 100 100 Talih Kusu Altyapi Hizmetleri AS Turkey Telecommunications investments 100 100 Turkcell Europe GmbH Germany Telecommunications 100 100 Corbuss Kurumsal Telekom Servis Hizmetleri AS Turkey GSM services 99 99 Belarusian Telecom Republic of Belarus Telecommunications 80 80 Fizy Iletisim AS Turkey Music and video broadcasting 70 - Inteltek Turkey Betting business 55 55 Euroasia Netherlands Telecommunications 55 55 Astelit Ukraine Telecommunications 55 55 Azerinteltek Azerbaijan Betting Business 28 28

* Brandname of Superonline Iletisim Hizmetleri AS is Turkcell Superonline.

** Brandname of Global Bilgi Pazarlama Danisma ve Cagri Servisi Hizmetleri AS is Turkcell Global Bilgi.

*** The Group have signed a share purchase agreement in regards to the acquisition of all of the shares of Global Iletisim from its shareholders on 12 August 2011. The transfer of shares has taken place in November 2011. Global İletişim has been merged into Superonline İletişim on 30 March 2012.

**** Beltur BV’s Board of Directors decided to propose to the general meeting of shareholders to convert Beltur BV into a cooperative society with exclusion of liability under Dutch law on 21 October 2011. The proposal was approved in the general meeting of Beltur BV’s shareholders on 26 October 2011. TURKCELL ANNUAL REPORT 2011

36. Subsequent events

1. On 31 January 2012, the Company notified SDIF, which holds 50% of the shares of A-Tel, that the service provider agreement between the Company and A-Tel will be annulled effective from 1 August 2012.

2. As of February 1, 2012, Astelit had debt repayments due to Euroasia in the amount of $150 million and to Financell in the amount of $173 million. Since June 2011, Astelit has not met the payment obligations, which were waived until February 1, 2012. Since that date, the Board of Directors of the Company has not acted to approve or reached a consensus for the extension of repayment dates. As a result, Astelit was unable to meet its repayment obligations to Euroasia and Financell totaling $323 million and defaulted on its loan agreements. As a consequence of Astelit’s default, cross default clauses have been triggered on five loan agreements totaling $554 million (currently decreased to $402 million, following the Company’s $150 million guarantee payment) and waivers were obtained for the aforementioned loans before March 31, 2012. In the context of guarantees, Financell has pledges on shares and all assets of Astelit including bank accounts. Additionally, Financell has a second priority pledge on Euroasia shares held by System Capital Management Limited together with a guarantee and indemnity given by System Capital Management Limited. Financell has rights to commence enforcement of pledges and guarantee under certain conditions.

In the same vein, Euroasia, a Group company that is a 100% shareholder of Astelit, which had previously borrowed $150 million to finance Astelit, also defaulted on its loan on March 30, 2012. As a guarantor, the Company paid $150 million to related banks on April 6, 2012. In relation to the guarantee agreement, a first priority pledge on Euroasia shares held by System Capital Management Limited has been established in favor of the Company. Upon payment of the guaranteed amount, the Company has the right to commence enforcement of this pledge on the Euroasia shares under certain conditions. As a consequence of Euroasia’s default, cross default clauses have been triggered on four loan agreements (the same ones referenced above) totaling $402 million and waivers are being sought for the aforementioned loans. The cross default of the Group’s borrowings as a result of Astelit’s and Euroasia’s defaults have been considered as non-adjusting subsequent events in accordance with IAS 10 Event after the Reporting Period. In this respect, the presentation of 218 aforementioned borrowings in the statement of financial position as of December 31, 2011 is not effected.

With respect to the amounts due to Financell, the Board of Directors of the Company decided to extend a guarantee to Financell in order to perform its obligations with respect to the loans granted by the banks for providing Group financing. The guarantee will be up to $410.7 million principle amount plus interest and any other costs, expenses and fees that may accrue. This guarantee includes the debt repayments of $173 million due under the loan agreements signed between Astelit and Financell, and of the loans that Financell granted to Astelit which have not yet fallen due. Astelit’s debts are denominated in foreign currencies which expose Astelit to foreign exchange and convertibility risks. Turkcell İletişim Hizmetleri A.Ş. And Its Subsidiaries Dematerialization Of The Share Certificates Of The Companies That Are Traded On The Stock Exchange

It was decided by the Capital Markets Board (“the Board”) as per article 10/A included in the Capital Markets Act (CMA) No. 2499 to commence the dematerialization system.

As per the Temporary Article 2 of the Board’s Communiqué Serial:IV No.28 on the “Procedures and Principles of Keeping the Records of Dematerialized Capital Market Instruments”, it is set forth that all of the share certificates of the companies that are traded in ISE shall be collectively dematerialized and the related procedures and principles are regulated in the said communiqué.

Dematerialization of the share certificates has legally and de facto commenced on November 28, 2005.

Beginning from November 28, 2005, it is prohibited for the companies listed in ISE to print new share certificates as a result of capital increases. The new share certificates arising out of capital increases shall be transferred to the accounts of the rightful owners by registration of securities.

It was held obligatory for the share certificates that are not dematerialized and that are kept physically by their rightful owners to be delivered until the end of December 31, 2007 to our company (“issuer”) or an authorized broker for their registration with Central Registry Agency that is under supervision and control of the Board.

Regulation relating to Temporary Article 6 of the Capital Markets Act according which financial rights attached to the share certificates, which were not dematerialized until the end of 31 December 2007, shall be monitored in a dematerialized manner at the Central Registry Agency; in case of dematerialization, related financial rights shall be transferred to the accounts of the rightful owners and management rights for the share certificates that are not dematerialized after December 31, 2007 shall be exercised by Central Registry Agency until the dematerialization process of existing shares shall be over has been modified by Article 157 of the Law No: 6111 published on February 25, 2011 and put into effect as of the same date. Within this framework, rules according which financial and management rights of share certificates that are not materialized could not be exercized by shareholders as published in the General Letter of Central Registry Agency Number 294 and dated January 30, 2008 are no longer in force. Implementation rules regarding new regulation are set forth in the General Letter of the Central Registry Agency Number 551 and dated April 28, 2011. Related notice to our shareholders which is posted on our Company’s website is below.

The share certificate records of our company shall be kept by central Registry agency and the issuer in electronic form, which is formed by the central Registry agency.

NOTICE TO TURKCELL ILETISIM HIZMETLERI A.S. SHAREHOLDERS According to provisional article 6 of Capital Markets Law amended by article 157 of the Law Number 6111 published on February 25, 2011 and put into effect as of the same date, within 219 the framework of General Communiqué of Central Registry Agency Number 551 dated 28April2011;

- All physical shares not delivered to our Company by December 31, 2012 in order to get them dematerialized will be property of our Company by law on that date and all rights of our shareholders on mentioned shares shall be deemed to have spontaneously terminated on the mentioned date. - Our shareholders who still physically hold these shares are required to apply personally to our Company Headquarters as soon as possible in order to get them dematerialized and not to lose their rights. - Until 31 December 2012, any financial rights of our shareholders, who currently hold these physical shares such as dividend paid/free of charge capital increase shall be paid to them without the condition of dematerialization of shares to owners of such rights and our shareholders owning these shares will be able to vote at our general assembly meetings. - Our shareholders who do not record their shares they own on the accounts opened in their names for the purpose of dematerialization will Legally lose all their rights resulted from these shares in case they do not complete dematerialization process until 31 December 2012.

Within the framework of imperative provisions of the Law, we hereby declare that our Company will not be held responsible for loss of rights possible to arise on December 31, 2012, vis-à-vis our shareholders who did not apply to our Company within due time.

Accommodation Of The Share Capital Of The Company And Nominal Values Of The Share Certificates To The New Turkish Lira

As per article 6 titled “share capital” of the articles of association of the company, the code numbered 5083 Regarding the currency unit of Turkish Republic government and the code numbered 5274 Regarding the amendment of Turkish commercial code, the share capital of the company has been made compatible with the New Turkish lira and such resolution was approved at the Ordinary general assembly meeting on april 29, 2005.

Provisions regarding making nominal values of the share certificates of the company compatible with the New Turkish lira are regulated in the temporary article of the company’s articles of association and such article was approved at the Ordinary general assembly meeting on April 29,2005. The temporary article reads as follows:

“As per the code numbered 5274 Regarding the amendment of Turkish commercial code, in order to increase the nominal value of the shares to 1.- (One) New Turkish liras, 1,000 (One thousand) units of shares, each having a nominal value of 1,000.- (One thousand) Turkish liras shall be merged and 1.- (One) unit of share having a nominal value of 1.- (One) New Turkish liras shall be issued to represent such shares. Fraction receipt shall be issued for the shares that could not be complemented up to TRy 1. in relation to such change, the shareholders’ rights arising out of their shares are reserved. concerning such transaction, the 1st, 2nd, 3rd and 4th series of share certificates, which represent the existing share capital, shall be merged in the 5th series. in connection with the transactions of share change and merger of series, the shareholders rights arising out of their shares are reserved. The transactions regarding the change in share certificates shall be commenced by the Board of Directors of the company after the dematerialization of capital markets instruments is put into practice and within the framework of related regulations.” TURKCELL ANNUAL REPORT 2011

To Turkcell İletişim Hizmetleri A.Ş. General Assembly Summary of Audit Report for the year 2011

COMPANY

TRADE NAME : Turkcell İletişim Hizmetleri Anonim Şirketi REGISTERED OFFICE : Istanbul ISSUED CAPITAL : ¨2.200.000.000,00 FIELD OF ACTIVITY : Mobile Communication Services, Phone, Telecommunication and similar services COMMERCIAL REGISTER NUMBER : 304844 FULL NAMES OF AUDITORS : Faika Bozkaya – Ertan Mitap DATE TO REPORT FOR DUTY : August 11, 2011

• Auditors attended all meetings of the Board of Directors they were notified during their period of duty, they have actually participated in meetings of the Board of Directors four (4) times during 2011. Activities deemed necessary within the frame of legal regulations including articles to discuss in the agenda were executed during meetings of the Board of Directors.

• Auditors met during their period of duty in the direction of their duties, arranged twelve (12) meetings of the Board of Auditors and enclosed their minutes of meeting to their reports.

• One (1) application by shareholders were made during the period of, the General Assembly was summoned for meeting in the direction of minority application within the framework of TCC art. 356, one (1) Intermediary Report has been prepared in connection with the minority application and SPK communiqué and such Interme- diary Report was submitted during the Extraordinary Meeting of the General Assembly on 12.10.2011. Documentation and Minutes in connection with the relevant minority application were submitted to the Company and the result of investigation performed by the Board of Auditors were enclosed to the report.

• Procedures done/required to be done by the Board of Directors in connection with questions and complaints directed by shareholders toward the Board of Directors during General Assembly meetings were followed and results related whereto were enclosed in the report.

220 • Corporate Minutes of the Company and Stock Registers were examined, elimination of deficiencies was followed and results related whereto were enclosed to the report.

• Adaptation process to Corporate Governance Principles necessary to comply with as per regulations applicable to the Company was followed, formation and organization charts of relevant units and bodies were studied and results related whereto were enclosed to the report.

• Preparations regarding amendments necessary to be done in Articles of Incorporation within the framework of regulations to which the Company is subject were followed and results related whereto were enclosed to the report.

• Information about important cases to which the Company was a part, processes related to certain important cases was followed at the concerned company units.

• Company cash was counted two (2) times on 09.09.2011 and 27.12.2011 and actual findings were seen to comply with book records.

• All of the company’s accounts, books and documents were examined at regular intervals during the period, additionally necessary studies were done following preparation of trial balances of the previous month at the beginning of each month, some accounts selected by sampling inspections. Declaration Form Related to Goods and Services Purchase (Form Ba) declared monthly were studied, detailed account regarding purchases was requested as required and studied. Temporary Tax Returns submitted quarterly and Balance Sheet and Income Tables in quarterly periods were examined.

• Accounts and operations of Turkcell Iletisim Hizmetleri A. S. for the period of 01.01.2011-31.12.2011 are examined in accordance with Turkish Code of Commerce, Ar- ticles of Incorporation of the company as well other regulations and generally accepted accounting principle and standards. According to our opinion as the conclusion of all examinations conducted, the enclosed balance sheet dated 31.12.2011 of which we agreed the content reflects the financial status of the company as at the mentioned date and the Income Statement for the period 01.01.2011 – 31.12.2011 reflects the results of business activities for mentioned period.

Auditor Auditor Ertan Mitap Faika Bozkaya Forward-Looking Statements

This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this press release, including, without limitation, certain statements regarding our operations, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as, among others, “will,” “expect,” “intend,” “estimate,” “believe” or “continue.”

Although Turkcell believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements. For a discussion of certain factors that may affect the outcome of such forward looking statements, see our Annual Report on Form 20-F for 2010 filed with the U.S. Securities and Exchange Commission, and in particular the risk factor section therein. We undertake no duty to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

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